Payday lenders prey on poor people, the argument goes, charging interest rates as high as 400 percent and trapping victims in a cycle of debt.
Lenders emphasize that they provide a service to people who need short-term loans and have no collateral to offer as security.
So far, state lawmakers have been unable to get past the argument stage. Payday loan industry opponents say cities must step up with their own regulations.
Fifteen cities in Texas have taken the bait. Now Councilman Joel Burns, who has resigned and will leave in July to start a master’s degree program at Harvard Kennedy School, is pushing Fort Worth to adopt regulations.
Awkward as it may be to not follow the crowd, even those council members who believe payday lenders are bad actors in the world of personal finance must see that city regulation is the wrong approach.
Regulation involves much more than saying what lenders should or should not do. That’s meaningless without an enforcement mechanism, which the City Council must design and finance at the same time it adopts regulations.
Regulation also means setting up ways to incorporate change, to adopt new rules when they are called for. No business can survive if it must remain static, so the council would need procedures to address reasonable changes requested by payday lenders.
And what good does it do Fort Worth to regulate if its Tarrant County neighbors do not? Business flows easily across city boundaries.
If there is a need to regulate payday lenders, it should be through a statewide system.
Past legislative failures are no good reason to opt for expensive and inadequate local regulation. City leaders who feel action is necessary are fully capable of pressuring local lawmakers to act.