Post Session Update:

City Regulation of Payday and Auto Title Lenders


“Our efforts to reform payday lending in the state legislature are at a stalemate. To make progress at the state level, we must act locally by encouraging our city leaders to pass city ordinances regulating predatory lending.”

-- Rep. Mike Villarreal (D – San Antonio), Chairman of the Texas House Committee on Investments and Financial Services

While many other states have enacted laws to restrict predatory lending practices, meaningful reforms have failed to pass the Texas Legislature in the last three sessions.  Free of any statewide cap on lending fees, limits on loan rollovers, and other restrictions, the number of payday and auto title loan stores in Texas has exploded with over 2,000 new storefronts opening in the last six years.  In the absence of state action, Texas cities are stepping up to adopt ordinances to protect their citizens from some of the worst predatory practices of this industry.

Cities contemplating the adoption of an ordinance regulating the lending practices of credit access businesses should consider adopting substantially similar regulations to those already adopted by six cities.  If Texas cities that wish to regulate in this area continue to adopt essentially uniform ordinances, credit access businesses will not be able to argue that city ordinances vary from city-to-city if the industry seeks preemption legislation in 2015. 

The League will be issuing the following press release shortly:

TML to Help Cities That Want to Regulate Predatory Payday Lenders

AUSTIN – The Texas Municipal League (TML) has created a clearinghouse to assist Texas cities interested in adopting ordinances regulating payday and auto title lending after the legislature failed, once again, to pass a law to address predatory lending practices.

“Because the legislature can’t or won’t deal with this problem, some Texas cities are stepping forward to adopt ordinances aimed at ending the cycle of debt and making it more likely borrowers can pay back their loans,” said TML Executive Director Bennett Sandlin.

“Many other states have imposed limits on interest rates and outlawed some of the abusive practices of this industry.  Because of our legislature’s inaction, these companies are free to prey on Texans who may be in dire straits by charging interest rates exceeding 500 percent per year and locking borrowers into a cycle of debt that’s reminiscent of indentured servitude,” Sandlin said.

In response to requests for assistance from cities across the state, TML has set up a website providing background information on payday and auto title lending, an example ordinance similar to the one already adopted by six Texas cities, and copies of the pleadings in lawsuits payday lenders have filed against cities to try to stop enforcement of the new rules on their business practices.

The six Texas cities that have passed similar ordinances on payday and auto title lenders as of this spring are Austin, Balcones Heights, Dallas, Denton, El Paso, and San Antonio.  Payday lending companies have filed lawsuits against all of these cities except Balcones Heights which has delayed enforcement of its ordinance pending the outcome of the litigation against other cities.  The lawsuits challenge the authority of cities to regulate payday lenders.

“We’re not talking about drastic governmental regulation here,” Sandlin said.  “These ordinances don’t even attempt to limit the interest rates and fees charged by payday lenders.  The main things they do are limit the size of a loan to a percentage of the borrower’s income and limit the number of times a loan can be rolled over.”

As major cities adopt these ordinances, Sandlin said payday lenders are scurrying out into suburbs and smaller cities that may not have the resources to fend off industry lawsuits.  The purpose of the TML clearinghouse is to provide a resource that saves taxpayer dollars by sharing information.

The clearinghouse is available on TML’s website at

City officials should be aware that adoption of any ordinance regulating credit access businesses will likely cause stakeholders representing the payday and auto title lending industry to file a lawsuit.  To assist cities that may wish to move forward anyway, the League’s online “payday lending clearinghouse” includes the pleadings in each lawsuit that has been filed.  In addition, the website includes an example ordinance that consolidates the features of the similar city ordinances, as well as additional information.

Each city should consult with local legal counsel prior to adopting any ordinance.  That is particularly true in this instance.


TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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