Rebecca Anthony needed a little help putting food on the table.
She’d already received assistance from a church and friends, but it wasn’t enough to put whole meals together for her mother, two daughters and boyfriend, she said. So last month she went to an ACE Cash Express, a payday loan store, for $490. That small loan will cost her about $1,700, she said, by the time she’s done paying fees, interest and the principal.
“We pretty much had no food in the house. We wanted to just get a little but, but we also wanted to be able finish paying our bills,” she said. “We ended up getting a little over our heads, I think.”
The loan was the third she has taken out this year. The other two — $1,000 in January to make ends meet after her mom lost her job and $600 in April to help buy a car that she later couldn’t afford — came from online payday loan firms. She expects to pay about $5,000 for the just over $2,000 she initially needed.
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With a payday loan, borrowers take out a short-term loan for generally less than $500, with payment due on the borrower’s next payday. Depending on the lender, borrowers pay a fee, about $10 to $30 for every $100 borrowed. If the loan is rolled over or renewed, fees are charged again. Texas doesn’t limit fees.
Fort Worth remains the last major Texas city without regulation or zoning for payday lending storefronts, often called credit access businesses, like the one in Bedford where Anthony borrowed $490. State regulation requires licensing, data collection and legal disclosures, but laws addressing the cycle of debt facing people like Anthony have fallen apart in the legislative session.
These loans are attractive to those with low income and those who struggle to get credit through traditional means. That’s the same population at risk of being caught in a cycle of debt, said Ann Baddour, with the Austin-based nonprofit Texas Appleseed.
Baddour said the loans “feed off desperation.”
“It’s expanding into the middle class — teachers, students, those with temporary job loss,” Baddour said. “It was already a problem but it’s getting bigger.”
But representatives of the payday loan industry say the loans provide needed cash to an undeserved population, and tougher regulation only hurts low-income families.
“These ordinances limit access to credit to those who need it,” said Rob Norcross, spokesman for the Consumer Service Alliance of Texas.
Payday loans in Texas
In Texas, the payday loan storefront acts as a broker between the borrower and an out-of-state bank. Texas laws prevent borrowers from paying more than 10 percent to the third party, but a loophole allows the payday lender to charge uncapped rates and fees. Texas is now the only state with this loophole, Baddour said.
“Texas is becoming more and more an outlier across the country in terms of payday loan oversight,” she said, calling Texas “a black hole.”
Without statewide laws, it is up to municipalities to regulate payday lending, Baddour said.
In 2017, nearly 115,000 new payday or auto title loans were taken in the Fort Worth area, which includes Arlington, according to the Texas Office of Consumer Credit Commissioner. New loans that year were valued at nearly $121 million, down from about $189 million in 2014 when about 156,000 new loans were taken out.
The drop in payday lending activity around Fort Worth is likely the result of neighboring cities enacting regulations, Baddour said. Arlington passed an ordinance in 2015 with Hurst, Euless and Bedford following in 2016. Grand Prairie, Flower Mound and Weatherford have ordinances along with Austin, San Antonio, Houston and El Paso.
Dallas became the first Texas city to rein in such businesses in 2011. The regulation cut the number of payday loan storefronts from 220 in 2011 to 65 in 2017, according to the Dallas Morning News. The city was sued shortly after the ordinance went into effect. The ordinance made it up to the Texas Supreme Court, which let the city’s payday loan restrictions stand.
Now, more than 40 cities have adopted businesses regulations, 16 have enacted zoning or land use restrictions and six have done both to regulate payday lenders, according to the Texas League of Municipalities.
Fort Worth has been a holdout in regulating payday loans, but it’s not clear why, Councilwoman Kelly Allen Gray said. Gray wants to see that changed, and when the city council meets again Dec. 4 she plans to discuss what steps Fort Worth can take.
“We owe it to the citizens of Fort Worth to have this conversation,” Gray said, noting that she’s not yet sure what regulations the city should put in place. “For single parents, families living paycheck to paycheck, payday loans have been answer, but what else can we do? We have to help them in ways that are not just rhetoric.”
Fort Worth’s options
Most cities require payday lenders to register with the city, limit the number of payments to four and limit the number of times a loan may be renewed or refinanced. Some ordinances classify a new loan made within seven days of a previous loan being paid off as a renewal. In most cases, the business is required to provide credit counseling information.
Another option is for the city to limit where payday loan stores can open through zoning and land-use permitting. Unlike business regulations, zoning would only impact future businesses, not current storefronts. Such zoning could limit storefronts along major roads or in low-income areas or bar multiple stores from opening near each other.
Norcross said the payday loan industry doesn’t oppose fair zoning, but draws the line with municipal ordinances.
The industry argues, he said, that regulation on the size of the loan or on how many installments can be made wind up costing people more. Borrowers will simply take out multiple loans, drive to another city or borrow online, which can carry higher interest rates and fees, he said.
At the state level, new bills are introduced each session regarding payday lending that, if passed, may supersede local regulation.
At least one city ordinance, Austin’s, is in the midst of litigation.
Meanwhile, the federal Consumer Financial Protection Bureau is expected to release payday lending rules next year.
“What the ordinance has done, ironically, is hurt those it’s designed to help,” Norcross said. “I don’t know why we’d want to pass an ordinance with these other things looming.”
Gray said she would encourage city staff to continue researching options, which could include using the League of Municipalities model or drafting a specific one for Fort Worth.
Regardless, Gray said the council should also focus on what can be done to help residents living paycheck to paycheck.
“We have to figure out, if we’re saying no to payday loans, what are we putting in place to help working families when they’re up against a wall,” she said.
Help for those in need
For Anthony, who works in housekeeping at Texas Health HEB, the loans have crippled her finances. Before the initial loan, she said she and her family had been saving small amounts of money every month, but now they have payday loan bills on top of her student loans and traditional bills.
Anthony pays about $580 per month on her two outstanding payday loans. With help from Catholic Charities, she’s hoping to pay off the remaining balance before next spring. She also owes several thousand in student loans.
“We’ll make it work,” she said. “It’s going to be hard. It’s harder now than it was before I got the loans.”
The Catholic Diocese of Fort Worth, and other faith groups, have been at the forefront of helping low-income families.
The church first noticed a cycle of debt from those they help about five years ago, said Jennifer Carr Allmon, the executive director of the Texas Conference of Catholic Bishops. People would seek assistance, either through the parish or from Catholic Charities, for anywhere from $100 to $300 to cover bills while owing $400 or more to a payday lender, she said.
A survey around that time found a third of those the church aided needed monetary assistance at or greater than the amount they owed to a lender. Millions of dollars have likely been drained from charitable organizations helping people with payday loans.
“If they didn’t have the loans, they wouldn’t need our help,” she said. “If these loans are creating a dependence on charity, we need to end it.”
Anthony said she regrets the payday loans, but didn’t know where else to turn.
“Weigh your options,” she said. “If you can get help anywhere else, do it.”