If you’re walking in South Arlington, or strolling East Lancaster Avenue in Fort Worth, expect your eyes to be assaulted by signs for payday lending and car title loans.
According to reporting by the Star-Telegram’s Yamil Berard, payday lenders have proliferated around the state in recent years, and Tarrant County is no exception.
As with any marketplace, that’s at least in part because consumer demand for their services is strong.
It’s also because as an industry, payday lending remains largely unregulated.
To their supporters, lenders provide a service to people who need cash immediately and are otherwise unable to secure a bank loan.
But their detractors say that payday lenders prey on poor people, charging exorbitant interest rates if the short-term loans are not repaid within a 14-day window — often, they are not — thereby trapping victims in a cycle of debt.
Attempts to impose regulations on lenders failed in the last legislative session, so many cities have taken action into their own hands. In fact, Fort Worth and Arlington are two of the state’s largest cities that have yet to pass an ordinance restricting payday loans.
Over the years, members of the Fort Worth City Council have largely agreed that borrowers need extra protections, but they have struggled to agree upon exactly who should enforce the regulations and who should handle the monitoring costs.
The answer is quite simple: Financial regulations are the purview of the state. Cities have neither the expertise nor the capacity to enforce the kind of ordinances that would properly regulate the industry. And as other cities have learned, passing restrictions on payday lenders leaves cities open to costly legal challenges. It also has limited benefits. Lenders often just set up shop outside city limits.
Through the Consumer Financial Protection Bureau, the federal government is also considering ways to reign in predatory lenders, although it remains to be seen how successful such efforts will be.
The Legislature should revisit the issue this session.