COSA’s payday lending ordinance in the clear, for now
For the past week, Sen. John Carona (R-Dallas) has sounded like a tired, battered man.
Carona found himself in the middle of a proverbial firestorm on the Senate floor last Thursday while trying to bring up for a vote his SB 1247, which would toughen state-wide regulations for payday and auto title lenders. After a number of ugly exchanges with colleagues – in which Carona suggested some of his GOP colleagues were “shills” for the payday loan industry – Carona delayed the vote until this week, warning that Republicans risked becoming known as “the party that is backed and bankrolled by payday lenders” if they blocked reform.
Much can change over a weekend.
By Monday, Carona came to the Senate floor ready to pass his bill with nine amendments which, he insisted, could be swallowed by all parties involved – including some cities and nonprofits that decry what they call predatory lending practices, and the payday lenders themselves (who would prefer we call them “credit access businesses”).
As we told you last month, cities that had passed their own payday restrictions limiting loan amounts bristled that Carona’s original bill would have killed their local regulations, some of which, like San Antonio’s, are stricter than Carona’s proposed state-wide rules.
District 1 Councilman Diego Bernal, who championed the local payday regs that COSA passed last year, said he was willing to consider what he called the “Senate 9” compromise Carona negotiated over the weekend, which would have pre-empted local regulations for just two years before sunsetting next legislative session. If those regulations didn’t work for San Antonio, the city could always revert back to its local ordinance after two years, Bernal said this week.
But on Monday, after Carona got through his nine amendments, the tweaks just kept coming from Senate Democrats. After some grandstanding, in which he said the payday industry would “continue to rape and rob the people of Houston,” Sen. John Whitmire (D-Houston) passed an amendment that stripped the pre-emption clause. According to the Texas Observer’s Forrest Wilder, “a stampede of payday lobbyists” exited the Senate gallery after Whitmire’s amendment passed.
By the end of debate, the Senate approved an amendment capping interest rates at 36 percent APR, which, according to Sen. Wendy Davis (D-Fort Worth) effectively kills the payday lending industry in Texas. “A 36 percent interest rate cap across all these lending products would put the payday lending industry in Texas out of business,” said Davis, who, while voting for the amendment, insisted she wasn’t confident the cap would survive the Texas House.
Carona called the amendment “a vote to shut the industry down,” and by the end of floor debate, called the bill an “ugly baby” and conceded, “I just wanna go home and feed my cat.”
There’s obvious speculation that the bill, which passed the Senate 26-4, is now essentially doomed. That the regulations in Carona’s “ugly baby” are so strong that the Senate has effectively paved its road to failure in the more conservative House, where the bill heads next.
As it stands, COSA’s ordinance is sitting pretty. San Antonio’s ordinance caps payday loans at 20 percent of a borrower’s gross monthly income, including fees and interest, and mandates that loans must be paid back in four installments, with 25 percent of each payment going toward the principal.
And whether Carona’s bill soars or bombs in the Lege, it’s now of no consequence to COSA. The local ordinance stands, at least for now.
Two payday lending groups sued the City in December, court records show, asserting the local ordinance conflicts with standing state law and is therefore un-enforceable. In a strange twist of fate, one was filed by former D1 Council member Bobby Perez, a local lobbyist and attorney who represents the Consumer Service Alliance of Texas (CSAT). In February, CSAT and COSA abated the lawsuit until June 1, court records show, presumably to see how things shake out at the Lege. Perez didn’t return calls for comment.
The other lawsuit against COSA was filed by lenders Cash Station and Rapido Dinero, which operate under the dba Power Finance, and Texas Loan Brokers. In that lawsuit, the plaintiffs claim COSA officials called payday lending tactics “abusive and predatory lending practices” in some “anti-business publications.” (It’s not clear what “anti-business” publications they’re talking about). John Dwyre, a local attorney representing those payday lenders, wouldn’t comment when reached by phone, except to say, “I don’t try my cases in the press.”