Texas Towns Consider Payday Loans and How Best to Serve Citizens

Texas Towns Consider Payday Loans and How Best to Serve Citizens 

There are two schools of thought on the payday loan debate; the arguments are easy to guess, and easy to understand why their proponents feel as strongly as they do. 

On one hand, payday loans are in high demand. When the economy started to falter, people lost their savings and jobs, and banks tightened up. Low income and bad credit consumers where left without options for borrowing money. They turned to short term loans like payday advance products, and have kept coming back ever since. When a government’s job is primarily to serve their constituents, and more importantly, to listen to their input, how do you go against the millions of people who are using payday loans to prevent the interruption of their utilities, to pay off medical bills or rent? And since when does a U.S. government tell people how they can use their money? 

On the other hand, it has been well documented that some consumers have fallen into cycles of lending and have come out worse than when they took out the loan in the first place. Whether it’s due to personal negligence, or the isolated case of an unscrupulous lender, its easy to see why community groups are looking to protect the poor and underbanked from making decisions that might leave them worse off. 

After a few years of blind legislating, where law makers have either accidentally or purposely driven payday lenders out of their states, those governments that originally held off are now ditching the all or nothing approach in favor of colaborative efforts. 

Case in point: Texas. For years regarded as the wild wild west of payday loans, cities like Austin, Dallas and San Antonio have slowly started adopting carefully measured payday lending restrictions. 

Instead of taking the easy way out, (the ever-popular 36% APR cap that 17 states have adopted, which forces lenders to exit stage left) these cities have taken calculated measures like limiting loans to 20% of the borrower’s monthly income. They have also chosen to limit loan rollovers to 4, and require each payment to reduce the loan principle by 25% so borrowers aren’t left simply paying off interest for months without paying off any of their real loan. 

With measures like these, these major Texas hot spots can feel secure that their citizens are protected while still  giving them access to the short term credit products they want and need. 

San Antonio’s city council will make a final decision on these changes in August, while officials in Houston are still weighing their options.