Corpus Christi Passes New Law Regulating Payday and Auto-Title Lenders

Consumer advocates from across the state celebrated the Corpus Christi City Council’s passage of a payday and auto-title lending ordinance on August 11.

Modeled on similar ordinances passed by 25 of the largest municipalities across the state, the Corpus Christi ordinance looks to “reducing abusive and predatory lending practices” by payday and auto title loan companies by requiring annual registration, oversight, and reform of local credit access business practices.

The ordinance was strongly endorsed by the Diocese of Corpus Christi and Catholic Charities of Corpus Christi, with Diocese of Corpus Christi Bishop Michael Mulvey in attendance at the council meeting.

The ordinance approved by the Corpus Christi Council will require payday lenders to:

• Limit payday loans to 20 percent of an individual’s monthly income;

• Limit auto-title loans to either 1) less than 3 percent of the borrower’s gross annual income, or 2) 70 percent of the vehicle’s retail value;

• Limit installment loans to a maximum of four payments, and requiring that payments are earmarked repay at least 25 percent of the principal;

• Keep loans from being refinanced more than three times;

• Maintain records of transactions and loans for three years;

The Catholic Bishops in Texas —and across the nation—have sought prudent reforms at both the state and municipal levels to counter the proliferation of payday and auto-title lenders.  Storefronts have flooded low-income neighborhoods with promises of “easy” cash to families in tough financial circumstances. Unfortunately, borrowers find this “easy” cash is not easy at all.  Catholic Charities report increasing number of families seeking help because they needed to cover an unexpected expense, but got trapped into paying interest and fees at annual percentage rates of more than 500 percent and now struggle with greater financial distress than before.

The Church is concerned about the morality of these usurious practices and the impact on the poor and vulnerable. Catholic teachings often warn about usury and exploitation of people.  Lending practices that, intentionally or unintentionally, take unfair advantage of one’s desperate circumstances are unjust.  Catholic Social Teaching demands respect for the dignity of persons, preferential concern for the poor and vulnerable, and the pursuit of the common good.  These principles coupled with our teaching on economic justice animate call for reform of the current practices.

In the coming year, the Texas Catholic Conference will again host a series of roadshows across the state to inform policymakers and communities about impact of usury practices and encourage citizens to mobilize to promote reforms at the state level.

For more information about payday and auto-title lenders, please go to the Texas Catholics for Fair Lending website athttp://www.txcatholic-fairlending.org.