For years, low-income residents and soldiers have struggled to pay back loans to payday and auto title lenders in Killeen. It appears, however, that the City Council may be ready to do something about it.
At a Dec. 1 workshop, the council received a presentation detailing the strategies lenders use to make money and force those who are most vulnerable into a spiral of debt.
According to Jennifer Carr Allmon, associate director of the Texas Catholic Conference, because the state restricts fees related to the loans, the size of the loans or require lenders to consider a person’s ability to pay back a loan, lenders charge exorbitant fees that compound quickly and make it difficult, and sometimes nearly impossible, for a person to pay back their loan.
For a $500 loan, Allmon said, borrowers pay an average of $1,300 in fees plus the $500 they owe for the loan. Borrowers often find they have paid, hundreds, even sometimes thousands of dollars, in fees before they even begin paying back the principal.
In a Sept. 13 Herald story, a spokeswoman for the Consumer Service Alliance of Texas, a trade association that represents 85 percent of payday lenders, said lenders provide a service that can help people.
“If you consider the fee charged on typical short-term loan services, $20 on a $100 transaction over a period of two weeks,” the spokeswoman said, “it is certainly reasonable in comparison to a $30 bounced check fee at the bank and a $30 bad check fee at the store.”
However, the spokeswoman failed to address how the lenders will charge that $20 repeatedly without any limits.
Because of Killeen’s large military population, soldiers often find themselves the target of lenders. There are 51 lenders in the Killeen-Fort Hood area, Allmon said, while Belton has only one licensed payday lender.
According to Allmon and previous Herald reports, Congress has passed legislation prohibiting lenders from lending to active-duty soldiers and their family members at rates above 36 percent, but Allmon said when she visited local stores and said she was a military dependent, she found rates of more than 500 percent.
Allmon said soldiers might not choose to make complaints with the federal Consumer Finance Review Board because they are embarrassed by their finances or have concerns they might face consequences for receiving a loan that violated federal law.
Allmon proposed the city consider adopting the Texas Municipal League’s unified ordinance, which 28 other cities previously adopted. On Thursday night, the Temple City Council adopted the ordinance and Waco will likely adopt it in the next couple of weeks.
Councilwoman Shirley Fleming got the discussion item placed on the agenda, and along with the rest of the council, directed staff to prepare a draft of the ordinance. While the draft will not be ready until a future workshop, approving the ordinance seems like the right move.
The League’s ordinance forces stores to register with the city and places restrictions on fees and rollovers and requires credit checks.
While some, including the store owners, may not like the government restricting business, sometimes the government has to take steps to protect its citizens.
Councilman Juan Rivera suggested at the workshop going a step further: “People who do not have a heart in business and take advantage of our people’s money, they have no place in our city as far as I’m concerned.”
While the ordinance does not kick out the lenders, it does provide a middle ground that places restrictions on lenders while still allowing them to make money.
The residents need protection, and it seems like the council is ready to take the appropriate action.