Payday lending measure advances

Wesley Lewis, right, one of about 150 mostly seniors, waits to clear security Wednesday afternoon Aug. 15, 2012 so he can attend the City Council's Governance Committee meeting to show show his support for a proposed payday lending ordinance. less Wesley Lewis, right, one of about 150 mostly seniors, waits to clear security Wednesday afternoon Aug. 15, 2012 so he can attend the City Council's Governance Committee meeting to show show his support for a ... more Photo: William Luther, San Antonio Express-News Photo: William Luther, San Antonio Express-News Image 1 of / 5 Caption Close Payday lending measure advances 1 / 5 Back to Gallery

More than 150 people packed City Hall on Wednesday in a powerful show of support for a proposed initiative to tamp down predatory practices of payday lenders.

The City Council's Governance Committee voted to send a proposed ordinance that would regulate payday and auto-title lenders to the full council, possibly later this month.

The ordinance, spearheaded by Councilman Diego Bernal, would limit the amount of a payday loan based on a borrower's income and the amount of an auto-title loan based on the lesser of annual income and a percentage of the vehicle's value.

It also would limit the number of installments on a loan and mandate a minimum reduction of the loan principal with each payment.

“As an industry, they've been negligent and cavalier about what can happen to people,” said Bernal, who sits on the committee.

“And for those folks who can get trapped in an ongoing cycle of debt, I believe that's where we step in,” he said.

Wednesday marked the second time the Governance Committee has discussed the legislation. At the first meeting, in June, employees of several payday lending companies filled the committee's large conference room. They wore stickers that read, “I serve my customers,” and audibly scoffed at Bernal's remarks, which included an expressed sense of duty to protect the city's most vulnerable residents.

This time, supporters of Bernal's initiative came out in droves — so much so that the meeting was moved from the conference room to council chambers, where most seats were taken. They wore decals that read, “Texas Deserves Better. Stop Predatory Lending.”

If the council adopts the proposed ordinance, San Antonio would join other Texas cities in placing local restrictions on the industry. Dallas and Austin have already instituted ordinances, which have both been challenged in the courts.

Bernal said San Antonio's version is more aggressive, more restrictive and requires the businesses to do more.

In both Dallas and Austin, payday lenders have sued over the local ordinances, City Attorney Michael Bernard told the committee. Neither city has been blocked from enforcing its ordinance as the legal challenges move forward, he said.

Bernal, a lawyer, and other officials have said they expect San Antonio will be sued, too. That's no reason to stall, he said. “I believe one of the functions of city government is to protect the most vulnerable among us,” Bernal said. “And some of the arguments that I've heard as we started this process is that ‘this doesn't solve a problem or help everybody.' That's probably true, but it doesn't make it any less right and it doesn't make it something that we shouldn't pursue.”

Bernal said the city faces two choices: to craft legislation that would eliminate the payday lending industry altogether, which the city doesn't have the authority to do, or to recognize that the industry offers a service that people may need at times and provide relief “to people who need it most.”

Under the ordinance, payday and auto-title lenders would have to:

limit payday loans to 20 percent of the customer's gross monthly income;

limit auto-title loans to the lesser of 3 percent of the customer's gross annual income or 70 percent of the vehicle's retail value;

limit the number of repayment cycles to four. The proceeds from each payment must reduce the principal amount by at least 25 percent;

limit the number of times a single lump-sum repayment can be refinanced or renewed to three. The proceeds from each refinancing must pay down at least 25 percent of the principal.

Payday lenders also would have to register each individual location with the city, pay an annual $50 licensing fee for each site and maintain certain business records — and make them available to the city during business hours.

They'd also be required to provide written documentation in the customer's preferred language. For a customer who can't read or write, the lenders would have to read aloud (in the customer's preferred language) the entire document before the customer signs, agreeing to the terms.

Councilwoman Ivy Taylor, who also sits on the Governance Committee, thanked the people who came to the meeting by the busload Wednesday. Though there was no public input, the crowd sent a clear message, Taylor said.

“Your presence definitely made an impact,” she said.

After the committee approved sending the proposal to the full council, it won a standing ovation from the audience who chanted as they left the chambers: “Hey! Hey! Ho! Ho! Loan sharks have got to go!”