In Texas and across the country, the payday and auto title lender industry has grown dramatically.  The Texas Office of Consumer Credit Commissioner (OCCC) reports that there are an estimated 3,000 payday lender locations in Texas alone.  With the proliferation of the payday and auto title lending industry has come increased concerns about the harmful effects of Texas citizens entering a cycle of debt and dependency.  As a result, both the state legislature and a handful of Texas cities have taken steps to regulate this industry.

In 2011, the legislature addressed some of these concerns by passing legislation that both requires payday and auto title lenders to provide consumer disclosures regarding their loan products, fees, interest charges, and percentage rates, as well as requires them to obtain a license with the OCCC (operating under the oversight of the Finance Commission of Texas), who in turn has some ability to examine these businesses.  Some Texas cities viewed the 2011 legislation as insufficient to address the growth in the payday and auto title lender industry in their communities, and have since adopted ordinances that place additional restrictions on these businesses.  The ordinances that have been adopted include zoning restrictions, substantive business regulations such as a limitation on the total amount of the loan, or both.

At a recent interim hearing of the House Pensions, Investments and Financial Services Committee, it was brought to the League’s attention that the Finance Commission of Texas adopted a resolution requesting the legislature to limit the ability of cities to regulate payday and auto title lenders by clarifying the need for uniform laws governing these businesses.  The League has obtained a copy of that resolution, which can be accessed here:

The stated purpose of the Commission’s resolution is to request that the legislature pass legislation prohibiting local officials from adopting any further regulations so that payday and auto title lending businesses are not required to comply with different requirements throughout the state.  What is most striking (besides the agency’s attempt to influence the passage of legislation, which is specifically prohibited by state law if appropriated money was used) is that the resolution seeking to protect the industry was adopted by the very state agency tasked with the responsibility to provide licensing and oversight of the affected businesses.  Further, one could question what business a state agency has arguing for preemption of city ordinances when the legislature chose not to specifically limit cities’ ability to regulate in its recent 2011 legislation. At the very least, the resolution gives the perception that—with regard to the regulation of payday and auto title lenders—the regulatory agency is now more attentive to the industry being regulated than it is to the issue at hand.

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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