Councilman Jerry Allen leads charge against Dallas payday lenders

Dallas Councilman Jerry Allen doesn’t exactly know how many check cashing, payday lending and car title loan establishments have set up shop in his District 10, which encompasses most of Lake Highlands. He assumes that the total in Dallas ranges from 250 to 300, and that Lake Highlands has “more than our share,” he says. “They’re all over Dallas, but it makes you think you’re neighborhood’s going downhill.”

These types of businesses are formally called “credit services organizations” or CSOs, and are “one of the fastest growing industries in the USA,” Allen says. That disturbs him because CSOs charge 300-500 percent annual percentage rates (APRs) on loans that are generally less than $1,200, he says, and mostly in the $300 to $400 range.

Say someone needs $300, Allen says. A CSO will loan $300 for a couple of weeks, and charge a fee that might be $90. In two weeks, the person comes back, and the CSO will say, “ ‘It’s all or nothing,’ and they usually can’t pay it all, so they come back in two weeks and pay another $90,” Allen says.

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It’s easy to see how this plays out — the money people would use to pay back their loans is spent on fees, and in the time it takes them to pay back the loans, the cost climbs to multiple times the amount of the original loan.

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Allen acknowledges that lower-income residents often need smaller loans than banks typically give, and have bad or nonexistent credit history, making it difficult to obtain loans. “We recognize there’s a need for this type of service; we just do not want our citizens here in Dallas to be taken advantage of. There’s a reason this type of lending is called ‘predatory lending,’ and I did not make that term up.”

The state legislature attempted to tackle the issue earlier this year, and Allen traveled to Austin to testify on behalf of stronger regulations. The legislature wound up passing laws that will require the CSOs to register with the state, contribute to a financial literacy fund and disclose some of their fees — all “positive,” Allen says. However, “at the end of the day, it was really disappointingly weak,” he says. He would have liked to see legislation that capped the fees. “The payday lending is a very strong lobby,” Allen says. “The whole back wall is just made up of lobbyists, and that’s the reason I felt like it was difficult to get any meaningful legislation done.”

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So Allen determined to confront the problem locally.  A few weeks ago, he led city council to pass an ordinance requiring the CSOs to space out — no closer than 1,500 feet to each other, and none within 500 feet of a major highway or within 300 feet of a residential area. (This applies to only future businesses, not existing ones.)

“But the most important part, and the real dagger on this thing, is that every CSO going forward that wants to do business in the City of Dallas has to have an SUP [special use permit],” Allen says.

Obtaining an SUP will require a potential CSO to face the planning and zoning commission, with public hearings involved, and if the commission approves the SUP, it goes before city council.

“You think for a second they’re going to come into District 10 and ever get another one?” Allen asks. “The answer’s no.”

That wasn’t the end of it, though. A few weeks after the original ordinance, Allen worked with council to pass another, again unanimously. This time, regulations were put in place to help protect the borrowers.

First of all, applicants must show proof of income (a pay slip or tax return), and loans can be no more that 20 percent of a person’s gross monthly income. Car title loans are limited to 3 percent of gross annual income or 70 percent of the car’s value.

“For most people, on average, their transportation food and housing budget is 65 percent of their income, so by limiting these emergency-type things, they’re not digging the hole that deep — they can still get out of this hole,” Allen says.

And to keep people from having to pay fees over and over again, “perhaps one of the biggest things that we did was that anytime there is a renewal, there must be at least a 25 percent reduction of principal,” Allen says. “If I borrow $100 for two weeks, when it’s due in two weeks and I can’t pay you, in order for me to renew it, I must pay at least $25, so the new loan is $75.”

The most recent ordinance also requires all existing and any new CSOs to register with the city, and pay a $50 registration fee.

“This will shake up these payday guys. Ain’t nobody come and slapped them like this before,” Allen says. “The message will go out that the City of Dallas will not tolerate their citizens being taken advantage of any longer.”

After the city unanimously passed both ordinances, which will take effect next year, Allen assumed that payday lenders would respond with a lawsuit. He was correct, according to a DMN report. “We’re going to fight it, and we’re going to fight it hard,” Allen says.

Coming soon on Back Talk Lake Highlands: Councilman Jerry Allen’s efforts to provide alternatives to payday lenders, the way other cities are following Dallas’ lead, and why this issue is important to Allen.

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  • Wilson!

    Get that in writing.  Get the manager to say they don’t want your truck, on paper -you can write up something and take it in for him to sign.  Put your account or loan number and the info about your truck on it.  Then prepare for them to file something bad on your credit report.   If they put some kind of GPS tracker in your car, now is the time to pull it out.

  • I got 1,300 hundred dollar car title loan on my 1996 Ford Ranger from a loan company name PLS  in Dallas off spring valley and Coit rd. and I have paid in interest 2,100 dollars. I have told them I could no longer pay them $350.00 interest per month to renew the loan and that I wanted to do a voluntary repossession to end the agreement with them , but the assistant manager there name Derrick  told my wife in person that do not want my truck I guess because its too old . So I am stuck and I don’t know what to do next I cant afford to pay them another $350 dollars plus the $1, get my title back.   

  • Eric

    Many pawn shops also have a separate store front for pay day loans.

    As well intended as these ordinances are, the next legislative session will likely see a bill that amends Texas Finance Code 353 to provide that the consumer credit commissioner has exclusive jurisdiction over pay day and title loans.  What this means is that State law will trump local ordinances.  The amendment will likely come from Representative Vicki Truitt of Southlake who sponsored the watered down bill that passed this year.  To have any effect to further regulate pay day and title loan activities, your state legislators will need to be inundated with input from their constituents in opposition of pay day and title loan companies and their predatory practices.  Light up the phones and email to Senator Corona and Rep Hartnett. 

  • The more I think about this, the more I like it.  But I’m wondering: does this ordinance only govern businesses that are strictly CSOs, or businesses with payday loans as part of their offerings. For example, Cash America offers payday loans at their pawn shops, or at least they have in the past.  Could this be a way to rid our neighborhood of some of them, too?  YAY!

  • Eric

    While I applaud Mr. Allen’s efforts, I think much of the public and many lawmakers don’t totally understand either the product or the user, or both.

    All of these storefronts that you see are just are brokers. That is, they are supposed to be lending on someone else’s behalf. In return, they collect a fee. Usually $20 to $30 per $100 for a 14 day loan as stated in the article. By doing this, the storefront avoids licensing and direct regulatory supervision because they are not the lender. The actual lender may be out of state and not subject to licensing because they charge only 10% interest. I doubt that most borrowers even know or are told who the actual lender is.

    The most common rebuttal from the pay day lender lobby and their lawmaker loyalists to any call for regulatory oversight is that user’s of these loans don’t complain. Let’s think about that for a minute. This is a last chance loan. The last resort. These people aren’t going to complain. They are already bottomed out. First, they don’t think it will result in anything good. Second, they don’t want to hurt their only chance for a loan. And third, since there is no regulatory oversight, they have no one to complain to. (this may change with the recent weak law that was passed)

    The problem with changing any of this is that their lobby is large and donates massively to certain sympathetic or common interest lawmakers thus guaranteeing their survival. Case in point: they were able to strip out any authority of state regulators to cap fees or limit renewals during this last legislative session. Basically, the bill that passed was worthless with regard to immediate consumer protection. As the article stated, the lenders will be required to obtain a license and become subject to regulatory oversight, but that basically means they will pay the state a fee and report some statistics.

    Banks and credit unions cannot help this customer base because the risk is too high. The Feds will not allow banks to carry this risk. There are some alternatives from lenders that are already regulated and provide the needed access to credit. Granted, the rates are still high at 80 or 90% APR but these are actual underwritten loans with some underlying credit criteria. It still may be a cycle of debt, but it is a more manageable one that allows principle reduction and payment plans.

    To eliminate pay day lenders, get rid of the business model (ban brokers). This probably can’t happen. To prevent predatory practices or end the cycle of debt, we must eliminate or substantially reduce broker fees, curtail the number of renewals or refinances (or any other mechanism to hide the continuation of the loan), and/or require principle reduction if the borrower can’t pay in full. But, because of the lobby, the public outcry must swell. The only way to do this is to get information out to the general public.

    Dallas has certainly got the attention of the lobby with the passage of the ordinance. They will fight tooth and nail but I hope it sticks.

  • Raina

    I hope that this will cause some of the payday/title loan places to close down. I think there are at least 4 of them at the intersection of Skillman and Abrams, just outside my neighborhood. I think those places make the neighborhood appear unattractive to the types of retail we would like to see in LH. I know I don’t want to locate my business in a shopping center with a payday loan store, and most of our shopping centers in LH have such stores.

  • LH area teacher

    Agrees 100% with Carol. I also believe that LH’s best days are ahead of us…I hope;)

  • Wilson!

    This is great news, and I had not heard of the city ordinances being passed. Way to go, Mr. Allen!

  • GM

    Finally Jerry Allen does and says something that I agree with. Go get’em Jerry!

  • lh_newbie

    Sounds like Jerry Allen is doing some REAL good with his efforts here. Kudos.

  • Carol Toler

    It sickens me to think of all the efforts by LH churches, civic groups, PTAs and individuals that are wiped out by the predatory behavior of these “businesses.” While Healing Hands Ministries, LH Exchange Club, LH Women’s League and other groups reach out to help hard-working families among us, greedy CSOs are taking their grocery and rent money out of their other hand. Kudos to Jerry Allen for taking the lead in blocking them from LH. Loaning money to people who come up short isn’t the problem, loan shark pricing is.