The Catholic Diocese of Fort Worth, long an opponent of predatory lending, is formally asking the city of Fort Worth to join other Texas cities in adopting strict regulations on payday loans.
Fort Worth Bishop Michael Olson issued the call to the City Council Tuesday in response to new rules recently proposed by the U.S. Consumer Financial Protection Bureau. It follows action by the Arlington City Council last fall, which passed regulations designed to protect low-income consumers from overusing the high-interest products.
Fort Worth apparently remains the only big Texas city without regulations. About 35 other cities have regulations that limit the size of loans and fees companies can charge, among other things.
We must halt the unscrupulous lenders from targeting the poor and most vulnerable among us.
Bishop Michael Olson, head of the Catholic Diocese of Fort Worth
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“We must halt the unscrupulous lenders from targeting the poor and most vulnerable among us,” Olson said in a statement. “In tandem, good local payday lending regulations and the proposed federal rules will greatly assist those in desperate financial straits from becoming hostages of unscrupulous payday lenders.”
Payday loans are typically small-dollar loans, due for repayment in two to four weeks, made to borrowers who don’t have access to credit cards or traditional lenders. They carry fees that translate to annual interest rates upwards of 300 percent, and can be renewed, which consumer advocates say leads to a cycle of debt.
In May of 2014, then-City Manager Tom Higgins briefed the Fort Worth council on what other Texas cities were doing. But his report suggested that the timing for regulations in Fort Worth was not good and that the council should await the outcome of lawsuits filed against ordinances in other cities.
Since then, the issue has fallen through the cracks. Shortly after issuing his report, Higgins retired. The new city manager, David Cooke, took over on June 30, 2014.
Cooke said Wednesday he has not received a letter from the diocese regarding its request, but added he’d need to do some research regarding what is covered by state and federal law before considering if a local ordinance is needed.
Mayor Pro Tem Sal Espino said he wanted the city staff to look into an ordinance two years ago, but the consensus was to wait and see what the federal government was going to do. Now Espino said he may again consider asking for a staff report on the issue.
Earlier this month, the Consumer Financial Protection Bureau issued proposed rules that would require lenders to make sure borrowers have the ability to repay their loans and stop repeated attempts to debit bank accounts for loan payments. The public can comment on the proposed regulations until Sept. 14.
The Texas Catholic Conference has made payday lending a priority issue since 2009.
In November of 2015, St. Joseph Catholic Church in Arlington, a parish in the Fort Worth Diocese, and the Texas Catholic Conference worked to help Arlington strengthen rules for payday, auto title and other short-term loans.
In Arlington, for example, loans are limited to 20 percent of a borrower’s gross monthly income and auto-title loans are limited to 70 percent of the vehicle’s value, or 3 percent of the borrower’s gross annual income.
Fort Worth is home of Cash America International, the large pawn shop chain that also engaged in payday lending. In April, Cash America agreed to merge with Arlington-based First Cash Financial Services. Both have been backing out of the payday lending business as federal, state and local regulators sought restrictions.
Instead, the new company combined company, to be based in Fort Worth, will focus on their pawnshop operations.