Fort Worth Payday Loans Unchecked

Inside Subprime: Nov 28, 2018

By Lindsay Frankel

Unlike other cities in Texas, Fort Worth currently has no zoning or regulations for payday loan firms, making it the last remaining major Texas city that hasn’t put legislation into effect to protect borrowers. While state law requires data collection, licensing, and legal disclosures, attempts at curbing interest rates have failed in the legislature.

Predatory payday loans are most used by low-income families who lack traditional access to credit. This same group is at risk for falling into a debt trap when payday loan interest and fees pile on top of regular bills. Ann Badour of Texas nonprofit Texas Appleseed said that lenders target financially desperate people. “It’s expanding into the middle class — teachers, students, those with temporary job loss,” Baddour said. “It was already a problem but it’s getting bigger.”

One Fort Worth resident, Rebecca Anthony, took out a payday loan when she was struggling to feed her family. Her $490 loan will end up costing her about $1,700 once she’s paid the entire principal, interest, and fees. Anthony admits she got in over her head, but this is not uncommon with payday loans. It costs borrowers an average of $701 to take out a $300 payday loan in Texas for five months, according to 2016 data from Pew.

Almost 115,000 payday loans and title loans were issued in the Fort Worth area in 2017, according to the Texas Office of Consumer Credit Commissioner. This figure is down from 156,000 loans in 2014, but the drop is likely due to the regulation of payday lenders in neighboring cities. The area studied included Arlington, which passed a 2015 ordinance limiting payday and title loans. The ordinance included a restriction prohibiting payday loans that exceed 20 percent of a borrower’s gross monthly income. And since Dallas became the first city to regulate payday lenders in 2011, more than 40 other cities have followed suit, either by enacting business regulations, zoning restrictions, or both, according to the Texas League of Municipalities.

But Fort Worth has yet to enact legislation that would curb payday lending, and Councilwoman Kelly Allen Gray said it’s time for a change. “We owe it to the citizens of Fort Worth to have this conversation,” she said, noting that borrowers living paycheck to paycheck have few alternatives to payday loans. Gray said she’s not yet certain about which actions the city should take to protect consumers.

Rob Norcross, spokesman for the Consumer Service Alliance of Texas, said, “These ordinances limit access to credit to those who need it,” arguing that payday lending ordinances do more harm than good for low-income consumers. The industry says that local limits on payday lending only cause people to take out more loans or drive to another city to obtain access to the credit they need.

Most cities in Texas place limits on the number of payments and number of renewals allowed. Fort Worth could also opt to use zoning and land-use permitting to dictate where future payday lending storefronts can and can’t open, but this wouldn’t affect current businesses.

A state law would supersede local regulation (last year, proposals threatened to override cities’ limits on payday lending), and the Consumer Financial Protection Bureau will release a revised payday lending rule in 2019 that may carry some protections for consumers. In the meantime, Fort Worth residents should be cautious about using payday loans, and should seek alternatives whenever possible.

For more information on payday loans, scams, and cash advances and title loans, check out all of our Texas Financial Resource Guides including ArlingtonAustinDallasEl PasoFort WorthHoustonIrvingKilleenMcAllenPlanoRound RockSan AntonioTyler, and Waco.

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