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Fort Worth Joins Other Big Texas Cities In Regulating Payday Lenders

Fort Worth City Council
Christopher Connelly

Fort Worth has been the only big city in Texas with no payday lending regulations. Tuesday, the City Council put some limits on the industry, though no one seemed particularly thrilled with the result. 

Payday lenders offer small, short-term loans that often carry big interest rates. Critics say payday loans are predatory because they can trap cash-strapped borrowers in a cycle of debt with high interest rates that balloon even higher when they’re unable to pay the loan back. 

Payday lenders and their defenders argue that they offer critically needed emergency credit to people who have nowhere else to turn for quick cash to keep the lights on or prevent a car from being repossessed.

Now, payday lenders in Fort Worth will have to register with the city, keep records on file for all of the loans they issue and give borrowers information for nonprofit credit counseling services. Loans for more than 20% of a borrower’s monthly income are banned. Auto title lenders, who extend credit to consumers using a vehicle as collateral, can no longer offer a loan that exceeds 70% of a vehicle’s value or 3% of a borrower’s annual income. 

“Does this fix the situation? No. But it’s a step in the right direction,” said Councilmember Jungus Jordan.

Councilmember Kelly Allen Gray, whose district includes low-income neighborhoods on Fort Worth’s south and east sides where many payday lenders are located, said the ordinance was a step in the right direction, even if it didn’t go as far as she wanted.

“It really concerns me that we talk a lot about how we move out of poverty, but yet we continue to support businesses that actually keep us there,” she said.

Councilmember Brian Byrd said he had mixed feelings about the regulations. While he was concerned about people getting caught up in a spiral of debt, he questioned whether municipal regulations would be ineffective or force people into more dire circumstances.

“Folks that are needing this cash are going to get it any way that they can,” Byrd said before voting against the regulations. He said he hopes for a market-based solution.

Councilmember Cary Moon said regulating payday lenders, like banks, should fall to the federal government.

“This policy has not worked in other cities that have adopted this ordinance,” Moon said.

A 2012 study of payday lending by the Pew Charitable Trusts found that a typical borrower takes out an average of eight loans of $375 each per year, and spends $520 on interest and about five months a year indebted to payday lenders.

Christopher Connelly is a reporter covering issues related to financial instability and poverty for KERA’s One Crisis Away series. In 2015, he joined KERA to report on Fort Worth and Tarrant County. From Fort Worth, he also focused on politics and criminal justice stories.