BROWNSVILLE, September 1 - Bishop of Brownsville Daniel E. Flores has thrown his weight behind a payday lending reform ordinance being considered by the City of Brownsville.
Brownsville leaders are slated to take up the issue at a workshop Tuesday evening.
Under the ordinance, proposed by Brownsville City Commissioners John Villarreal and Ricardo Longoria, Jr., payday loans would be capped at 20 percent of the borrower's gross monthly income while auto title loans would be limited to the lower of either 70 percent of the vehicle's value or three percent of the borrower's gross annual income.
Here, in full, are Bishop Flores' remarks:
"As the Bishop for the Diocese of Brownsville, I want to strongly encourage Mayor Tony Martinez and the city commissioners to pass the payday lending ordinance before them this Tuesday.
"Across Texas, but particularly in Brownsville, these “ready cash” lenders are charging anywhere up to 600 percent in annual percentage rates and fees on short-term loans. That’s too high a price to charge someone who is often unexpectedly stuck financially and is merely looking to pay the rent, buy groceries, or get a medical prescription filled. At such rates, it only takes one bad choice for families in the Rio Grande Valley to be consumed by a crippling, never-ending cycle of debt.
"In June, I hosted a community dialogue about the impact of payday and auto-title loans in our community. In this discussion, I learned that some of our non-profit assistance programs in Brownsville are seeing as many as 75 percent of their clients who are trapped in these loans.
"For the past three legislative sessions, the Texas Catholic Conference has worked to urge lawmakers in Austin to impose stronger consumer protections. However, even with the help of legislators like our own State Senator Eddie Lucio, Jr., the predatory lenders have succeeded in blocking reform by spending millions of dollars and hiring expensive lobbyists. That is why I support the Brownsville City Commission in demonstrating leadership through this ordinance which helps protect our families in Brownsville from predatory lending practices.
"Change happens at the local level. More than 18 cities like Dallas, San Antonio, Austin, and Houston have passed zoning and regulatory ordinances in order to provide some basic protection for consumers. The restrictions on expansion and extension of consumer credit are critical for our residents."
The fight to get a payday lending ordinance passed by Brownsville City Commission has been led by United Way of Southern Cameron County. Traci Wickett, its president and CEO, penned a blog on group's website on July 14 titled 'Payday and Auto Title Lending Hurt Cameron County.'
"Over $10.6 million is drained from the Cameron County economy each year because of payday and car title loan fees. How does it happen? Consider these facts: Texas is one of the few states that has not taken action to rein in these loans. As a result, payday and auto title loans in Texas cost almost twice as much as they do in other states. A Texan who takes out a $500 payday loan pays $110 in fees, while a borrower in Florida would pay $55.
"Fees are completely unregulated and result in annual percentage rates of over 500 percent. Borrowers pay about $140 in fees for every $100 borrowed. 420 cars were repossessed by auto title lenders in Cameron County.
"These lending practices create a cycle of debt from which families have tremendous difficulty emerging."
Wickett noted that 18 cities in Texas, including Dallas, El Paso, San Antonio, Houston and Austin, have adopted an ordinance regulating payday and auto title lending.
"What the ordinance does is to limit loan size according the borrower's ability to pay, limit the number of installments, rollovers or renewals, dictate that the proceeds from each installment or renewal must reduce the loan principal by 25 percent and defines rollovers and renewals as any extension of credit made within seven days of the previous extension of credit."
Wickett urged Brownsville residents to support United Way of Southern Cameron County by encouraging Brownsville City Commission to "thoughtfully consider this ordinance as their first order of business in their new fiscal year, beginning October 1." She also asked residents to call on their city commissioner "to protect consumers by adopting the same ordinance eighteen other cities have passed."
The border leader who has been most vocal on the issue of payday lending reform for many years has been former state Sen. Eliot Shapleigh, a Democrat from El Paso.
At a summer retreat in Weslaco in June, 2013, Shapleigh urged the RGV Equal Voice Network to take up the issue.
Shapleigh asked Equal Voice leaders if they could guess the interest rate of a payday loan in Texas over the course of a year. He said it is 1,158 percent. The payday lending industry lobbyists in Austin that seek to keep the status quo are very powerful, Shapleigh said. He said when he tried to pass reform legislation his colleagues would not even have the conversation with him.
“That is what happens when you get to Austin. The only way to make that not happen is someone has to get up, take the values you have in this room and take them to the Capitol. That way, we can make the difference. The change you want to see is in you. You have got to go there,” he said. He added that if Equal Voice knows which legislators are getting $40,000 in campaign contributions from Cash for America they will at least know not to waste time going to the offices of those legislators.