Fingers crossed we see some social justice at city council tomorrow

City Council will tomorrow, hopefully, finally enact the payday lender ordinance that was originally passed a year ago, but put on hold in July. Designed to protect the most financially vulnerable — who, without credit to their name, must resort to payday lenders for short-term loans that frequently become long-term vortices of debt — the ordinance will cap interest rates and the number of times a loan can be rolled over. Payday lenders will also have to have to register with the city.

The ordinance is virtually identical to ones previously enacted by Austin, Dallas, Houston and San Antonio because they felt the state’s laws didn’t go far enough to protect consumers. Indeed, payday lenders, who typically charge fees that add up to upwards of 500% in yearly interest, have found a loophole in Texas Constitution (which caps loans at 10% in yearly interest) by classifying themselves as “credit service organizations” that purportedly help improve consumers’ credit. What typically happens instead is that consumers are ruined by these loans as they get trapped in a cycle of high-interest debt.

Because such usury is forbidden by the Bible, Texas’ Catholic bishops, Baptist ministers, and other faith-based groups have pushed for socially just payday lending reform, but have received no such succor from the Legislature. In fact, in some Texas counties, payday lenders have enlisted justices of the peace and district attorneys as pseudo-collection agents, who threaten debtors with arrest and jail time to work off what they owe. (The practice is verboten, the state agency in charge of regulating payday lenders advised in October. But we already know about the fox-in-the-henhouse who is in charge of that agency.)

The state’s inaction is why cities like El Paso must resort to regulating payday lenders themselves, despite charges it’s not city business or lawsuits from payday lenders. Here, Carl Starr filed a lawsuit against the city (which he later dismissed because the ordinance was put on hold) arguing the city overstepped its authority. But Texas cities that have enacted payday lending ordinances appear to be winning in the courts, though several suits are still pending.

El Paso’s city attorney told the Times she does not foresee the ordinance being repealed tomorrow. However, it should be noted that Eddie Holguin and Carl Robinson voted against it last January. And that’s what’s hard to understand, since I don’t get how voting against an ordinance intended to help protect the poor from usurious lenders jibes with the “social justice values” Holguin says he was raised on (Robinson, too, I would imagine). So I’ll be interested to see if Holguin’s vote tomorrow in particular matches with his stated faith and candidate platform, or if he’ll instead use the threat of lawsuits against the city as an excuse to put taxpayers last and abandon the poorest of his constituents.

UPDATE: Despite comments that indicated he thought it wasn’t the city’s job to regulate borrowers’ financial choices, Holguin did vote for the ordinance at this morning’s meeting, which passed 6-1; Robinson did not attend. In fact, the only no vote came from Larry Romero who, though he rarely speaks at meetings, commented that the ordinance was the beginning of some sort of slippery slope where the city will start limiting everything including citizen’s alcohol intake: “Is the city going to step in for all the social ills?” Only when the state doesn’t and there’s a clear public interest to do so, Larry. That’s the role of municipal government in Texas and is why the City of El Paso was incorporated in the first place.