Pay Day Loan ordinance fails at city council - KCBD NewsChannel 11 Lubbock

Pay Day Loan ordinance fails at city council

Source: L. Scott Mann, KCBD Source: L. Scott Mann, KCBD
Source: L. Scott Mann, KCBD Source: L. Scott Mann, KCBD

The Lubbock City Council has voted 5-2 against a city ordinance that would regulate the Pay Day Loan industry.

Dozens of citizens signed up to speak to the Lubbock City Council at Thursday night's meeting, encouraging the council to pass an ordinance restricting the activities of pay day lenders. The meeting was standing room only.

Many citizens spoke of what they called "predatory" practices that "trapped" borrowers into a cycle of borrowing at interest rates in excess of 90 percent.

Members of West Texas Organizing Strategies encouraged the council to pass the ordinance that was similar to ordinances in 39 other Texas cities. WTOS members also spoke of two local banks willing to make "micro-loans" that would give borrowers an alternative.

The only citizens who spoke against the ordinance were employees of a pay day lender business.

The ordinance would restrict an otherwise unregulated industry in the following ways:

  • A credit access business must apply for and receive a certificate of registration from the city.
  • A credit access business must maintain complete records of all loans made by the business for at least three (3) years and make the records available to the city for inspection upon request.
  • The amount of a payday loan may not exceed 20 percent of the consumer's gross monthly income.
  • The amount of an auto title loan may not exceed the lesser of 3 percent of the consumer's gross annual income or 70 percent of the retail value of the motor vehicle.
  • Any loan from a credit access business that provides for repayment in installments may not be payable in more than four (4) installments, and the proceeds from each installment must be used to repay at least 25 percent of the principal amount of the loan.  No renewals or refinancing of installment-payment loans are permitted.
  • Any loan from a credit access business that provides for a single lump sum repayment may not be refinanced or renewed more than three (3) times, and the proceeds from each refinancing or renewal must be used to repay at least 25 percent of the principal amount of the loan.
  • Any loan made to a consumer within seven (7) days of a previous loan has been paid by the consumer constitutes a refinancing or renewal.

The ordinance was authored by Councilman Juan Chadis.

"If one person is preyed upon by these lenders it is one too many. Ethically it is wrong. Morally it is wrong. I am all in favor of Lubbock being business friendly to businesses that are friendly to Lubbock," Councilman Chadis said.

Councilwoman Karen Gibson disagreed, saying, "This is a consumer choice."

"I do not believe it is our job as a city council to tell our citizens how to handle their finances," Councilwoman Gibson said.

"Many of you have said this is morally and ethically wrong. I can't disagree with that but that's not what we do. We can't legislate moral or ethical behavior. If you really want someone to do something you really need to be talking to your state legislators," Councilwoman Latrelle Joy said.

"For that reason, I can't support this," Councilwoman Joy said.

Lubbock Mayor Dan Pope said, "If we were to pass something like this how would we enforce it? We have a hard time, in fact I would say we don't enforce our codes."

"We're not in the business of growing this government. That's not what citizens want us to do," Mayor Pope said.

All council members praised Councilman Chadis for his work bringing the matter before the council. Chadis has worked with city staff and citizens on this issue since his election in June. All encouraged alternative lending sources and additional consumer education.

Earlier, the Mayor announced that the Noise Ordinance had been pulled and would be reconsidered in February.

"We've learned that we need to do a better job of listening on this before we consider it," Mayor Pope said.

In other business, the council approved the construction of phase 2 of the northwest drainage project. The funding of the $35 million project is through a zero percent interest rate loan through the Texas Water Development Board representing a savings of almost $15 million over the payback period of 25 years.

The city also awarded the Construction Manager at Risk contract for $25,000 to Lee Lewis Construction to begin the bid process for Citizens Tower formerly known as the Omni Building.

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