Payday Lending Ordinance

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Payday Lending Ordinance

  1. 1. Community Development Services Payday Lending Ordinance February 27, 2014
  2. 2. Community Development Services Overview • Background • Local Impact • Ordinance Overview • Enforcement • Questions/Direction
  3. 3. Community Development Services Credit Access Businesses (CAB) • Defined in Section 393.601 of Texas Finance Code • Offer payday and auto title loans • Create cycles of debt
  4. 4. Community Development Services Previous Action • “Call to Action” received from United Way Financial Stability Committee • Council passed Payday Lending Resolution calling for State level action on Jan 10, 2013 • State Legislature passed no significant regulation this past session
  5. 5. Community Development Services Local Impact - 2012 • Over 31,000 loans for metro area • $2.4 million in fees • 269 vehicles repossessed
  6. 6. Community Development Services Ordinance Background • Crafted from model provided by the Texas Municipal League • Other Cities have adopted similar legislation • 6 month delay in implementation
  7. 7. Community Development Services Ordinance Overview • CAB must apply for certificate of registration from City • CAB must maintain records of all loans made for three years, making them available to inspection upon request • Amount of payday loan cannot exceed 20% of borrowers monthly income • Amount of auto title loan cannot exceed the lesser of 3% of borrowers annual income or 70% of value of the vehicle
  8. 8. Community Development Services Ordinance Overview • Installment loans may not have more than 4 installments – 25% of each installment must be used to repay principal amount of loan • No renewals or refinancing of installmentpayment loans are permitted • Loans with single lump sum repayments may not be refinanced or renewed more than 3 times – proceeds from each refinance must pay at least 25% of loan principal
  9. 9. Community Development Services Ordinance Overview • Required to ensure borrower understands the terms of any agreement • CAB must provide borrowers with referral sheet to consumer credit counseling agencies and other financial education. • Not more than $500 fine for each offence
  10. 10. Community Development Services Ordinance Enforcement • At first on a complaint basis • Citizen education • Develop standard monitoring procedures
  11. 11. Community Development Services Questions? ----------------------Direction?
  12. 12. Community Development Services Non-profit Partners • Bank on Brazos Valley • Financial Fitness Center

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