By David Tuma
The Belton Journal
In order to help protect its citizens, the City of Belton passed an ordinance last week that clearly defines types of quick loans, referred to as ‘alternative financial services,’ and how the businesses should be zoned.
The ordinance will allow the city to regulate where a business that offers quick loans, including car title loans and payday advances, is and is not allowed to locate within city limits.
Texas has the most lax laws dealing with business that make loans for car titles and pay days. Austin, Brownsville, San Antonio, Dallas, College Station and a host of other cities in Texas have enacted legislation dealing with these institutions. However, the state has failed twice to deal with what is considered by many a growing problem.
“Sometimes it is limited in what you can do as a city. This is a partnership between non-profit organizations and government,” said Public Information Officer Paul Romer.
In a study done by the Baylor University School of Social Work, researchers found that these loans typically require the full amount paid at once for people who use their services. In 2004 there were 1,300 of these types of loan companies in Texas. Today there are 3,400 of them. Typical fee per $100 borrowed is $20-$24 for two weeks.
What these companies are doing is not illegal. There was an effort in 2011 to address the high fees in the Texas legislature, but it failed twice. Texas is a state that allows single-repayment loans with Annual Percentage Rates (APRs) of 391 percent or higher.
“They charge fees, not interest rates, so they go unregulated for the most part,” Rucker Preston, Executive Director of Helping Hands, said. “If you can’t pay the entire amount, you are in trouble. There are people who need money fast for auto repairs or some unexpected expense. Paying back the entire amount at once is what gets a lot of people.”
Over 2 million Texans took out a short term loan in 2012. Of the younger population, 47 percent took out a payday loan and 39 percent took out a title loan. Over 37,000 vehicles were repossessed and $1.4 billion in fees were paid in 2012 according to the study. These are Texas numbers, not national numbers.
“What we are seeing is that more middle class families are getting dragged into these types of loans,” Preston said. “Texas and Utah are the least regulated states. This industry is the third biggest lobbiest in Texas. The council is taking care of an issue the state of Texas won’t. Belton is the first city in Bell County to address this issue.”
For more information, contact the city at (254) 933-5800.