Yesterday the El Paso City Council voted to pass the Payday Loan Ordinance for the second time (did it last Jan also). This is another case where Consumer Advocate groups have dominated the conversation and as a result more regulation is put into place that takes away options for consumers. I am concerned that this ordinance will actually result in more defaulted payday loans and auto title loans.

By limiting the # of payments consumers can make on these loans, you lock them into higher payments, and without the option to refinance any longer the loans will go into default with higher frequency. Defaults result in NSF fees at the bank, and also in repossession of the vehicle in case of auto title loans. El Paso caved to pressure and put something into place that is half-baked. Just because other cities have done similar does not make the passage of ordinances the final solution. Will see how it impacts the businesses, they will move outside of El Paso city lines, or come up with a product that is outside of the rules within the ordinance. Consumer demand will be met.

Let me hear from you on this, every client I know is flexible on regulations but the project needs to be based on data and definition of the true problem. The industry and consumers would be better suited by one set of rules set by State lawmakers.

Michael Brown is a President of CAB Consulting and Brokerage; he specializes in the Payday and Auto Title Loan Industry, call or email him anytime! 214-293-8676 or Michael@CreditAccessBusiness.com.