Abilene City Council to consider regulating payday loans
ABILENE, Texas - Abilene City Council members will soon discuss regulating payday loans made in the city.
The issue first came up in February but was tabled and left to the state of Texas. But due to feedback from citizens in Abilene, it is back on the agenda and will be up for a vote on Apr. 27.
Forty cities in Texas have adopted payday lending ordinances which do not prohibit lending, but try to protect the lendee by limiting how much of a person's income can be taken as a loan and how many payments can be made.
"There are people that are rightly concerned about the amount of interest being charged and the amount of dollars that are having to be paid for these loans by some of the most vulnerable members of our community," said Abilene City Manager Robert Hanna. "There's also probably legit business purpose or need, from a payday lending standpoint."
According to Hanna, the industry justifies high interest rates by saying most people who borrow don't repay. Because the risk is greater, that drives the rate up, sometimes up to 500 percent or more.
These types of loans have been known to put lendees in a situation that lets debt spiral out of control.
Sue Thomesen of Abilene Fair Lending is in support of an ordinance after seeing how payday lenders negatively affected young adults she works with.
"One of them had her car repossessed," Thomesen said. "Another one, she finally did get hers paid off but it was very difficult for her to get out from under the loan."
"People don't know what they've gotten into. They don't understand the contract. They don't understand that APR is going to be a very expensive thing to pay back. Sometimes they wind up losing their car because of it," said John Riggins of the Abilene Better Business Bureau.
This lack of understanding is addressed in the ordinance by requiring a referral to credit counseling and requiring that agreements be written in the consumer's language of preference.