Arlington is first in Tarrant to regulate payday, auto title loans

Agreeing that it may not be a perfect ordinance, but that it’s a good first step, the City Council approved restrictions Tuesday night on how payday and auto title lenders can do business.

Arlington is the first city in Tarrant County to regulate the lenders’ business practices.

The council took its 9-0 final vote week after hearing from seven speakers, including lay leaders and the pastor of St. Joseph Catholic Church, who described how high interest and fees charged by such lenders have seriously harmed people by causing them to lose their cars, file for bankruptcy and feel shamed.

“It is like walking into a spider web,” said Rozanne Veeser, president of the Fort Worth Diocesan Council of the Society of St. Vincent de Paul. “You just don’t know how difficult it is to pay it back.”

After the vote, about 100 members of Arlington churches, community groups, nonprofits and a volunteer task force of the office of state Rep. Chris Turner, D-Grand Priarie, organized by the North Texas Industrial Area Foundation, gathered outside City Hall to thank the council.

The Rev. Daniel Kelley, pastor of St. Joseph, praised the council for “standing up for our consituents by being the first city in Tarrant County to pass a payday loan ordinance.”

“This is not the end. This is just the beginning,” Kelley said. “We can now work together as a stronger community to do greater things to help our citizens.”

Two industry representatives urged the council to postpone the vote for 30 days, saying the ordinance could be improved.

The ordinance takes effect Jan. 1, although Mayor Pro Tem Sheri Capehart had suggested that the timeline be moved up in hopes of reducing the number of residents who take out such loans for holiday shopping.

Among the restrictions: limiting payday loans to 20 percent of a borrower’s gross monthly income and auto title loans to 3 percent of the borrower’s gross annual income or 70 percent of the vehicle’s retail value.

The business-practices regulations on so-called credit access businesses are based on the Texas Municipal League’s model ordinance, which 27 other cities have adopted. Fort Worth remains the largest Texas city not to have one.

Such lenders have drawn fire from consumer advocacy groups, which accuse the industry of predatory practices that can roll into an ever-deepening cycle of principal, interest and penalties. Industry supporters argue that the lenders serve customers who could not get loans elsewhere because of their income level or credit history.

Councilmen Jimmy Bennett and Robert Rivera pointed out that while the ordinance can help, individual financial education and empowerment are also critical tools.

“Collectively, we as the people of Arlington have to be involved in that,” Rivera said at last week’s meeting, challenging those who had spoken in favor of the ordinance to remain active in the effort.

Other provisions in the ordinance include:

▪ Limiting repayment terms to four installments that each cover 25 percent of the principal.

▪ Prohibiting renewal or refinancing of installment loans.

▪ Making the documents available in Spanish and Vietnamese as well as English.

▪ The businesses must register with the city, maintain loan records for at least three years and provide a list of nonprofit credit-counseling agencies to customers.

Zoning regulations on where such businesses can operate in the city are proceeding on a different track that first goes through the Planning and Zoning Commission, said Jennifer Wichmann, director of the city’s Management Resources Department, who shepherded the ordinance through approval.

Staff writer Robert Cadwallader contributed to this report.

This story was originally published November 17, 2015 at 6:55 PM with the headline "Arlington is first in Tarrant to regulate payday, auto title loans."