Waco: Council approves payday lending ordinance

Tuesday night the Waco City Council voted for the first time on a possible ordinance limiting payday lenders in the Waco area in an effort to protect borrowers. The council voted 5-1 in favor of the new ordinance which, if passed for a second time in a future city council meeting, would go into effect on August 16, 2016.

The ordinance describes the payday lending businesses as “credit access businesses.” Stating that certain businesses “engage in abusive and predatory lending practices, offering easy money to those members of the community who are in a tight spot with onerous terms and fees.”

Alexis Christenson is a member of the local grassroots organization, “Citizens for Responsible Lending,” which has been pushing for the city to adopt ways to regulate the payday loan industry in Waco for over two years.

"We know this isn't the silver bullet to end poverty but when things work in tandem we do see communities change," Christenson said. “I really think the council heard the community and acted upon it.”

Roughly 31 Texas towns have already passed similar ordinances.

"The way the ordinance (is worded) is you would have to consider each individual’s ability and capacity to pay back the loan, so it’s limited to a percent of the income or a percentage of their assets if it was a car,” Waco Mayor Malcolm Duncan said.

Specifically, the ordinance states cash advances in the form of a deferred presentment transaction “may not exceed 20 percent of the consumer’s gross monthly income.” Additionally, cash advanced in the form of a motor vehicle title loan “may not exceed the lesser of either three percent of the consumer’s gross annual income or 70 percent of the retail value of the motor vehicle.”

But some people like Ignacio Flores who use the loans on a regular basis do not think they should be limited by the City of Waco.

"I don't really think people should have a limit to how much they can take out. You know, I feel like it’s their money,” Flores said.

John Kinnaird was the only City Council member who voted against the ordinance stating the regulation should be handled at the state level, which is something Duncan said they had, at one point, anticipated.

"We had hoped that the legislature would take this on, but they didn't. So we think that it is time to consider it on a local level,” Duncan said.

The ordinance will need to pass a second vote before it is adopted. Until the next vote, Christenson said the city needs to work to develop alternative ways for citizens to borrow by “making sure that there are other loan products out there that are not predatory that people can access who may have issues with credit.”

The ordinance only limits the amount a person can borrow at an individual “credit access business.” Meaning, if a person’s borrowing was limited to $500 by the ordinance, they could still borrow $500 from as many “credit access businesses” as they desired.

Advocates for the ordinance say it is not free of loopholes but it is a step in the right direction for the City of Waco.