Amarillo's payday, title lenders face new rules

Payday and auto title lenders in Amarillo who have been documented to charge what amounts to more than 300 percent on loans will be regulated by an ordinance that goes into effect Nov. 1.

After three meetings to get public comments, Amarillo City Council members voted unanimously Tuesday to approve regulations of what the state classifies as credit access businesses.

The ordinance cites the Center for Responsible Lending as saying "loan rates for a car title are typically 20 to 30 times that of rates charged by credit card issuers ... On a $500 title loan, this average customer will pay back $650 in interest over eight months."

The ordinance requires the business to register with the city and to keep business records to be audited. The city will likely first hire a contractor to audit those records for compliance, including limiting the number of times a loan can be rolled over to three. Other requirements are documentation of a borrower's income, fees charged, written agreements in Spanish or English and providing referrals to financial education agencies.

The regulations also limit loan amounts and require payments at renewal to reduce the loan's principal by 25 percent.

Councilwoman Lilia Escajeda, retired from Amarillo National Bank, spearheaded the city's effort, and participates in community groups trying to improve consumer financial knowledge.

"This is the sort of thing when you went into public service you hope to be able to do, to help people being taken advantage of," said City Councilman Brian Eades. "Councilwoman Escajeda certainly has done that."

The ordinance is intended to fill gaps in state law regulating credit access businesses while recognizing the businesses as allowed by state law, City Attorney Marcus Norris said.

There are about 24 such businesses in Amarillo, and the new rules do not prescribe where they can operate and don't apply to businesses such as pawn shops and auto dealers.