Texas Payday Loan Regulation Controversy at Local Level

Inside Subprime: Oct 01, 2018

By Kerry Reid

A proposed ordinance regulating payday loan businesses in Bay City, Texas, wasn’t voted on by the city council at a meeting on Thursday, September 27. But a local businessman believes that the ordinance was crafted specifically as “retaliation” for criticism of Bay City Mayor Mark Bricker. The move alone may indicate that being involved in the payday loan industry can be used as a political liability.

According to a September 30 article by Jimmy Galvan in the Bay City Tribune, Jerry Evans, a payday operator and a former Bay City councilman, believes that Mayor Bricker put the ordinance on the agenda as payback for Evans’ involvement with challenging changes to the Bay City Charter.

Bay City, located on the Gulf of Mexico, is the county seat of Matagorda County. According to a Bay City Tribune article by Allen D. Fisher published June 8 of this year, Evans, chair of the original charter commission, objected that proposed changes in the charter had been done in violation of existing ordinances requiring that voters approve such changes.

According to Galvan’s report, Evans said at the September 30 council meeting “This is an ordinance that would put my family business out of business and it is being considered and I can’t even speak on it. … This is retaliation because I am the driver behind the legal action by Bob Head on Bricker over the charter.”

Head, a Bay City resident, filed a lawsuit against Bay City officials related to the charter changes. According to another Bay City Tribune article by Fisher, published August 6, Judge Ben Hardin of the 23rd Judicial District dismissed a motion for dismissal of the lawsuit and upheld the standing of the plaintiffs.

Bay City resident Bill Key, who presented the proposed payday-lending ordinance, noted that several other Texas cities, including Houston, San Antonio and Dallas, have enacted legislation aimed at regulating the industry. Council member Jason Childers, according to Galvan’s report, pointed out that “Those are all metro cities with tons of options. … A lot of banks in this town don’t do any small loans. If we run these businesses out of town, then these people are going to have to turn to loan sharks and that is inviting the devil into our community.”

This isn’t the first time an ordinance aimed at payday lending has been proposed for Bay City. As reported by Galvan, it was originally proposed in October of 2014, right as Evans was announcing his Bay City grand opening for payday loan storefronts. There are two other locations in Clute and Rosenberg.

Overall, Texas has some of the loosest regulations on payday lending. State laws do not set any maximum loan amount, and there is no cap to finance charges or annual percentage rate (APR), which averages 410%. There are also no restrictions on the maximum number of loans a borrower may have at one time.

Whether the proposed Bay City ordinance originated in real concern for the welfare of payday borrowers or, as Evans claims, retaliation for unrelated governmental disputes, it is indisputable that dozens of Texas cities have indeed started passing ordinances aimed at regulating the payday industry. Whether Bay City will join them remains to be seen. As of now, there are no reports of future action on the proposed legislation.

For information on predatory payday loans in your area, check out our Texas Subprime Report.

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