Arlington council OKs land-use restrictions on payday lenders

The Arlington City Council Tuesday voted unanimously to restrict where payday and auto-title lenders can do business.

The measure, which needs a second vote to finalize, would create a new land-use designation, alternative financial establishment, that would include requiring new businesses to stay certain distances from residents, major highways and each other.

The zoning action would complete a two-pronged approach to rein in payday and title lenders, accused by advocacy groups of predatory lending practices that ensare lower-income people in cycles of high-cost refinancing and suffocating debt.

On Nov. 18, the council adopted controls on how payday lenders do business, which took effect Jan. 1. They include limiting loans to 20 percent of a borrower’s gross monthly income, limiting repayment terms to four equal installments and forbidding renewing or refinancing of installment loans.

Also, payday lenders have to register with the city and keep loan records for at least three years and provide their customers with a list of nonprofit credit-couseling providers.

Under the new regulations, auto-title loans would be limited to 70 percent of the vehicle’s value or 3 percent of the borrower’s gross annual income.

The limits on business practices follow those in a litigation-tested template created by the Texas Municipal League.

The zoning restrictions backed by the council Tuesday would separate payday and auto-title lenders from banks, credit unions and other traditional financial institutions, and also would require them to seek a specific-use permit from the council.

“The standards would serve to limit the conglomeration of these uses as well as establish parameters with regards to the distance from residential neighborhoods and controlled access freeways,” a staff report said.

The petty-loan industry counters that it lends to people who don’t have the creditworthiness or income to do business with traditional lenders.

Councilwoman Sheri Capehart said before the meeting that she didn’t realize the extent of the problem until she heard from church leaders.

“People were coming in and saying ‘I did this loan and I can’t pay my bills,’ so they go to their church and ask for help,” she said. “It was putting significant drain on the churches.”

Council Jimmy Bennett said, “I think we’re dealt with them fairly.”

The restriction would apply only to new businesses. Existing lenders, as is the case in most zoning changes, would be grandfathered in except for certain situations. Among them, if a business were to be more than 50 percent damaged by fire, it could not rebuild at the site if forbidden by the new ordinance.

The Planning and Zoning Commission voted 8-1 to recommend the council approve the new lender classification.

This story was originally published January 26, 2016 at 7:51 PM with the headline "Arlington council OKs land-use restrictions on payday lenders."