Payday and title loan stores in Dallas face new regulations intended to help customers pay off the loans after an unanimous City Council vote Wednesday.
Dallas and several other North Texas cities already had zoning restrictions to limit the distance of payday and title loan stores from one another.
The Dallas zoning rules come after an estimated 300 of the stores have already opened, and those existing business will be allowed to stay.
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Dallas City Council members expected the Texas Legislature this year to limit extremely high interest rates charged by the businesses, but lawmakes did not.
“They chose to take a very limited action, and we chose to do the most we can at our city level,” said Councilman Jerry Allen.
Borrowers have complained of payments that amount to 500 percent interest on loans from some stores.
“Vultures is being mild, I’d say. They are like the devil,” said resident Alberto Tenireilo.
Tenireilo said he uses them to wire money but never to borrow.
“The interest rates are ridiculous. People don’t realize that. They’ll give you credit and all that, but you have to give them your title, your car. And if you don’t make the payments back, you loose your car,” he said.
Allen said only the state can regulate the amount of interest or fees charged on loans.
But the new Dallas ordinance restricts the amount of money a store can lend to a customer based on the customer’s income so people can't take out loans they would never afford to repay.
And the Dallas rules require stores to apply a portion of customer payments to the original loan amount instead of just applying payments toward fees piled on top of the loan, as some customers commonly complain happens.
“This is as strong a teeth that we can put into this, and it sends a message that we will not tolerate our citizens being taken advantage of,” said Allen.
The new Dallas law also includes registration of payday and title loan businesses and record keeping on every loan issued. It takes effect January 1.
A spokesman for a lender trade group said Dallas is making it difficult for customers to obtain the money they need.
Rob Norcross of the Consumer Service Alliance of Texas said fees on bounced checks and missed credit card payments are even higher than the fees charged by payday and title loan stores.
“This runs the risk of hurting people in Dallas by driving them to more expensive forms of consumer credit,” he said.
Norcross said the trade group is considering a lawsuit to block the new Dallas law.
Allen said the city is also working with credit unions and banks to arrange better borrowing options for people with poor credit.
“This continues to be the beginnings of one of the toughest ordinances in Texas, and I suspect other major cities will follow us,” said Allen.