The Texas Payday Loan Ordinance suffers another blow, this time Abilene voted it down.

by The CAB Man Texas on May 12, 2017

Down goes another “payday down city ordinance! On Thursday, April 27th. 2017 the Abilene City Council did right thing and voted “NO” on the so-called “payday loan city ordinance.”

Things do not seem to be going very well for the payday loan city ordinance these days the truth is really starting to get out that it is not even being enforced and the courts have decided (in two separate cases) that it is pre-empted by State Law!

So, let’s talk about how this latest defeat of the payday loan city ordinance went down in Abilene.  First, I must say that I have been to many city council meetings to participate in the payday loan ordinance conversation and I have never seen so many customers turn out to tell a city council to stay out of their personal finance decisions.  Not only did they turn out in droves to the meetings but those who could not attend inundated the city council email in-boxes and phone lines with a strong voice saying – vote “NO” on the ordinance.

Dozens of customers attended both the city council meetings the week of the “NO” vote wearing white t-shirts with “Stop the Ordinance” on it, inside the shape of a big red stop sign.  Supporters of the ordinance had to have been very impressed by the sea of white t-shirts streaming into the council chambers while cameras were rolling.  I think there was a grand total of (1) customer who attended the meetings that supported the ordinance on the other hand.  But, our anti-ordinance customers stood tall and proud when they approached the microphone.  Nearly (30) anti-ordinance supporters attended in their “Stop the Ordinance” gear, and the total for the two meetings had to have been way above that.

Those payday and auto title loan borrowers in attendance were there to tell the council to vote “NO,” to share their reasons for borrowing, and to vent their frustration that they could be possibly have their financial choices severely damaged by a reckless city ordinance that is a complete failure in 41 other cities in Texas.  In the end, it was the voice of those customers that stood proud and tall to defend themselves that swayed the city council to refuse to pass the ordinance.  I can remember the moment Councilman Shane Price held up the stack of comments he received and printed out from his email.  The vote “NO” stack was inches thick and the stack of comments from those who supported the ordinance was quite light.  In the end, he said that is what mattered.

What an empowering experience for many of these folks to go down to the formal and intimidating City Hall and have their voice heard.  The customers stood strong in the face of Newspaper reporters, TV cameras, and the breathless consumer advocate groups who were there to insult them and suggest they were not intelligent enough to manage their own finances.

I could see how those supporting the ordinance began to place pressure on city council, how they began to burden the council with solving the much larger issue that is at the core of the need for short term small dollar loans.  That is the fact that many Americans simply do not have enough money saved to fall back on in the event of an emergency or other problem in life.  70% of Americans do not have over $1,000 in their bank account – this is the problem.  The supporters of the payday loan ordinance were trying to sell the council and get them to pass an ordinance that would raise payment amounts, close businesses, and do nothing to impact that core issue.

I was talking with a customer of ours at the meeting and we were joking and wondering if the next ordinance to be rolled out would restrict Whataburger from selling hamburgers with meat in them so the Abilene City Council can end all heart attacks in city limits. Can you imagine this?

“Hey, Whataburger, yeah, we are not saying we want to put you out of business, but um, yeah we can’t allow you to actually put meat on your burgers anymore, because, you know, it uh, causes heart attacks and you are a terrible person too by the way, but we just want to protect our citizens from your predatory burger making practices with some thoughtful restrictions on fast food hamburgers…oh and burgers can still be sold at real restaurants though, they can still sell hamburgers it is just your kind of hamburgers that we don’t like, yeahhh.” 

It was hilarious, but quite honestly from our standpoint the payday loan ordinance is just as absurd.  The payday loan ordinance is a misguided disaster that is going to continue to unravel.  What the consumer advocate groups and church groups cannot grasp is the fact that the city ordinance does not achieve what they say they want.  It is a gigantic lie that has been perpetrated in 41 cities.  Their (mostly Texas Municipal League and Texas Appleseed) technique to get the ordinances passed has worked in those cities where council members do not do their homework, believe in a lot of regulation, or just want the businesses to go away.  But, their tired argument has grown stale, the final blow appears to be that cities are losing court cases over it, and cities are now voting it down.

Consumer advocates and church groups have their hearts in the right place but are choosing wrong vehicle to help solve what is a much larger problem than the short term small dollar loan industry.  I mean, unless you just did not do the math on how the 25% rule in the ordinance works, how can you ask the city council to approve an ordinance that will raise a borrower’s payment amount?  That fact alone should have caused the ordinances to get dumped in the trashcan two minutes after Texas Appleseed comes strolling into a city council person’s office.

Texas Appleseed – did you know payday transactions have hovered at the same level statewide even with a 41% decrease in stores?  Is the ordinance really the ideal vehicle for your cause?  If you want to do some more good, why not help communities apply for for a $30,000 grant from the Texas Educational Endowment Fund (http://occc.texas.gov/consumers/texas-financial-education-endowment-tfee-grant-program) to start financial education in the schools in your town instead?  This fund is completely funded by Credit Access Businesses to the tune of $400,000 per year (roughly).

The bad news regarding the TFEE is that Texas Appleseed and TML’s efforts resulted in the closure of 1,400+ locations which caused contributions to the TFEE to fall through the floor.  In 2013, the annual contribution amount was more like $700,000 per year.  $300,000 less per year is an insane amount of money that they took away from some groups that could have made a difference for the same people you are trying to help.

Also, the OCCC has taken a huge hit on licensing revenue that they could have used to hire new examiners to enforce the regulations already in place statewide.  Licensing fees are $600 per year per location, with 1,400 less locations in 2017 versus 2013 that comes to $840,000 less in licensing revenue per year.

Between the loss in TFEE contributions and the loss of OCCC licensing revenue that adds up to millions of dollars you have caused to evaporate from places that could have helped the consumers you are trying to protect.

To Churches and other groups besides TML and Texas Appleseed that have chosen to pile onto this issue when the issue comes up at city council meetings – why not just payoff all the loans that people take out with your own money?  Or why not just offer them a loan at 10% APR yourselves?  Stop asking the city fix the problem with a lousy ordinance and fund some loans yourself!

Long blog and I could go on about this for days, but I am going to wrap this up and save my energy for the next city that wants to look at the payday loan city ordinance.  I will conclude with another thank you to all the people that worked hard in Abilene to get the “NO” vote and again say how much we appreciated the opportunity to tell our side of the story to a city council who really committed to doing their research on this issue.

If you would like to read about what happened in Abilene here are a couple links to news on the “NO” vote that we were so thankful for:

http://www.reporternews.com/story/news/local/2017/04/25/payday-loan-debate-rages-abilene-city-council/100906592/

http://www.ktxs.com/news/citizens-voice-opinion-about-payday-lending-ordinance/449890488

http://www.bigcountryhomepage.com/news/abilene-city-council-rejects-regulating-payday-loan-businesses/700635585

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.

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