From
Megan Mahan
Title
Ordinance of the City of Grand Prairie, Texas, amending Chapter 17 of the Code of Ordinances of the City of Grand Prairie, Texas by the addition of Article V, Credit Access Businesses, which sets forth registration requirements and credit extension guidelines for credit access businesses; providing for a fine of up to $500 for each offense in violation of this ordinance
Presenter
Megan Mahan, Assistant City Attorney
Recommended Action
Approve
Analysis
“Our efforts to reform payday lending in the state legislature are at a stalemate. To make progress at the state level, we must act locally by encouraging our city leaders to pass city ordinances regulating predatory lending.” -- Rep. Mike Villarreal (D - San Antonio), Chairman of the Texas House Committee on Investments and Financial Services
While many other states have enacted laws to restrict predatory lending practices, meaningful reforms have failed to pass the Texas Legislature in the last three sessions. Free of any statewide cap on lending fees, limits on loan rollovers, and other restrictions, the number of payday and auto title loan stores in Texas has exploded, with over 2,000 new storefronts opening in the last six years. In the absence of state action, Texas cities are stepping up to adopt ordinances to protect their citizens from some of the worst predatory practices of this industry.
Payday lending is a practice where a person can walk into a store, typically located in a strip mall, and take a cash advance on his or her next paycheck. Most such businesses offer a similar cash advance with a car’s title as collateral. The interest rates on the loans are very high. In fact, legal loopholes used by the lenders exempt them from the state’s usury laws.
Interest rates, when fees are included, often exceed 500 percent APR. Fifteen states limit the APR to 36 percent. The products are marketed as two-week or one-month loans, but the vast majority of borrowers refinance...
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