El Paso City Council approves new regulations for payday lenders
El Paso City Council on Tuesday approved new regulations for payday lenders. City Representatives say they’re trying to curb predatory lending but payday lenders say they’re legitimate business owners already being monitored by the State.
The prior City Council last year passed the ordinance and the new Council, upon reviewing it, on Tuesday voted to implement it this month.
Some of the major provision of the ordinance requires payday lenders to register with the City of El Paso and pay a $390 registration fee and maintain records for three years and make the records available to the City upon request. The ordinance also regulates loans and loan payments. It limits loans to less than 20% of the consumer’s gross monthly income and an auto title loan may not exceed 70% of the retail value of the vehicle. The loan has to be paid off within four payments and 25% of the principal must be retired in each payment.
If it’s a singly lump sum repayment, then it may not be refinance of renewed more than three times and the proceeds from each refinancing or renewal must be used to repay at least 35% of the principal amount. The payday lenders will also now be required to provide a form referring consumers to credit counseling and all information related to their loan must be written in the consumer’s language of preference. If the customer cannot read, payday lender employees are required to read aloud the agreement and every disclosure in the consumer’s language of preference.
“I’m for regulation of this industry but we need a further discussion,” Saul Frank, owner of Benny’s Payday Advance told City Council on Tuesday. Frank had turned in amendments to the Council earlier in the week, including changing the part of the ordinance that requires customers to pay their loan in four payments. “you wouldn’t be required to pay your credit card in four payments with 25% of your principal in every payment. It would be better for our customers if they had more payments with 10% of the principal being paid off in each payment,” said Gabriel Frank of Benny’s Payday Advance.
Council had postponed implementing the ordinance in July of last year and the City Representatives were ready for a decision on Tuesday. “Their business tactics are unfair, they’re predatory and our citizens are being harmed by it. So I don’t have any heartburn at all in stepping in and giving some regulation to this industry,” said City Rep. Michiel Noe.
Only City Rep. Larry Romero voted against the ordinance saying loans were a personal matter. “You know alcohol consumption is a problem. So are we going to tell people how many times they can go to a bar in a week, in a month, is it really the city’s job to be telling people what they can and cannot do as far as their personal lives.”
If a payday lender violates any of the rules, the city can fine them up to $500 per infraction. Austin, Dallas, Houston and San Antonio all have similar ordinances. Cities have set these ordinance because saying the State is not doing enough to regulate the industry.
