A proposal in the Legislature to rein in the nearly unregulated payday lending industry fell flat this session and local councilmembers are split on whether to take action themselves.
College Station Mayor Nancy Berry said the city will wait until the 2015 legislative cycle for help while Bryan Councilwoman Ann Horton entertained the idea of local controls.
Area officials, along with several of their counterparts across the state, had called on the Legislature to put in some form of uniform statewide controls.
According to the United Way of The Brazos Valley, which has spearheaded the local push for reform, the 13 local lenders have had a detrimental effect on moderate- to low-income families. Out of the approximately 14,000 local payday loan transactions between January and June 2012, borrowers paid $1.3 million in fees, about 75 percent of borrowers refinanced, and 101 vehicles were repossessed. The number of local payday and title loan lenders nearly doubled between 2004 and 2012.
Opponents of additional oversight do not want government interference with the business model of the creditors and say the lenders provide a valuable resource to people without the credit to borrow elsewhere. In Texas, the principal and interest of the loan is required to be repaid at the same time. If borrowers are unable to repay, the entire loan is rolled over and continues to build interest. Most states control the cap for payday loan rates. With the absence of control measures in Texas, Austin, Dallas and San Antonio passed their own ordinances to cap loan renewals within their city limits, and all have been hit with lawsuits.
Bryan and College Station's city councils passed resolutions prior to the legislative session calling for a general tightening of regulations to the lenders in the area. The cities did not specify what changes they wanted from Austin, but railed against the local lenders with strongly worded resolutions.
The Bryan resolution called the lenders "patently exploitative, if not predatory" and said that they have "recently proliferated in the city." College Station lawmakers called to "end the practices of credit access businesses that hurt our communities and struggling Texans by charging usurious rates and fees."
Texas Rep. Mike Villarreal, D-San Antonio, and Sen. John Carona, R-Dallas, filed identical bills aimed at placing restrictions upon the largely unregulated quick-loan industry, such as limiting the size of a loan based on a consumer's income or vehicle value, limiting the number of times a loan can be refinanced and mandating extended payment plan provisions.
But the bill died in committee, leaving the local councilmembers' pleas unanswered.
United Way of The Brazos Valley President/CEO Andy Martin said his organization, which was one of the primary drivers for local reform, will not actively pursue changes until the next legislative session.
"As we continue to do our quarterly community impact updates and as we continue to have community dialogues, this will just continue to be part of that conversation and to increase awareness and potential solutions," Martin said.
Berry similarly indicated that College Station would not make changes for two years.
"We don't regulate those businesses beyond our current zoning ordinances," Berry said. "Cities that have tried to do so have found themselves in legal battles, and it's clear how our residents feel about lawsuits. ... We'll just wait for the Legislature to pass it. Unfortunately, I think that's the only way we're going to get it."
Horton said she hoped to see some sort of changes in Bryan sooner, to restrict what she called predatory lending.
"I don't know really where we're going to go from here right now," said Horton, who has been a primary advocate for reform. "I don't think we're going to let it die, but this is all really recent. I think we will probably visit it again."
Horton said she would like to see city staff look into controls that other Texas cities have implemented.
"I'm not saying we're going in that direction, but it's something we can research to find something that could work here," Horton said.
Jason Fikes, a minister at the A&M Church of Christ, is one of several local leaders who would like to see Brazos County families find financial stability. His church started a faith-based financial stability class last fall, and he said payday lenders hurt the community.
"Predatory lending affects all of our community," Fikes said. "It places people in financial debt that they can never get out of. They're good, hardworking people who are quickly buried."
The payday lenders are strategically located in the more impoverished parts of town, he said.
"They know where their clients are, and they're hunting them; It's a hunt," Fikes said. "You can just drive down Texas Avenue and see."
Fikes said many of the community members he has worked with don't understand the intricacies of the lending system and feel that they don't have other options when they take out the loans. Legislation from state or local lawmakers would help break the cycle of debt, Fikes said, but he added it is paramount that the residents be financially prepared and work together.
"It would be great if the free market worked itself out, but you shouldn't have so many people who are crushed before that happens," Fikes said.