District 1 Councilman Diego Bernal said the reason he wanted to devise a plan to help people pay off their loans is because of the vicious debt cycle that the practice creates.
He said payday lending companies create an almost impossible way for people to get rid of the loan because of high interest rates.
In an editorial on the community blog site, the Rivard Report, Bernal said, “The harm that befalls the hard-working and well-intentioned people of our city is not uncommon, and certainly not imaginary.
"In Texas,” he said, “75 percent of people who take out a payday loan are unable pay it back by the due date, and thus are forced to roll it over, meaning the entire debt remains despite money paid."
Bernal is hoping his colleagues will put into place the most aggressive ordinance in Texas. It would limit payday loans to 20 percent of the borrower’s gross monthly income, limit payments to no more than four installments and each payment must apply at least 25 percent toward the principle, and it would require a contract in both English and Spanish.
Bernal admits it should be the state’s job to regulate this industry, “but it hasn’t,” he said in the editorial.
He recognized State Rep. Joe Farias - Dist. 118 for his efforts in taking the issue to Austin, but he said in the last legislative session, the industry spent more than $8 million to dispatch powerful lobbyists to destroy any law that would regulate it.
He praised the city council, each by name, and said, “This group will get it done.” If it passes, the city ordinance would take effect January 1st.
