When you need a quick loan, the easiest way to get it if you have less than perfect credit, is to take out a payday or car title loan. In order to obtain a payday loan, you show the lender your most recent pay stub. Based on how much you make per week or per month and how much you need to borrow, is calculated to give you a loan amount with interest. Similarly, car title loans allow you to receive a loan, by giving the lender the title to your vehicle, assuming you own the car. Because these types of lenders do not tend to look at credit and focus more on current income and property, it is a popular choice for those who might need some quick cash. Many believe it is a trap for low income individuals and for this reason, the Arlington City Council in Texas has voted to restrict where payday and car title lenders can do business.
Vote in Arlington
Arlington City Council officials will have to take a second vote to finalize the new restriction. The measure would create a land-use designation, in which new lender businesses would have to stay a certain distance from residents, highways, and other lenders. In doing this, lenders who are involved in shady business practices and offer clients high-cost refinancing options will not be as widely available to the lower income populations. These new zoning requirements would completely separate payday and car title loan lenders from more reputable loan sources, such as banks, credit unions, and other financial institutions. New restrictions would also only apply to new businesses being opened in the Arlington area. Existing lenders would be considered grandfathered in, except in certain situations. For example, if a fire were to cause more than 50% damage to a lender’s location, they would be unable to rebuild in that exact location if it does not meet the specific zoning requirements.
Recent changes to how lenders do business
Arlington City Council members met on November 18th of last year to develop new ways in which payday lenders can do business. These new laws went into effect on January 1st, and are very similar to how car title loans work in San Antonio, Texas. Now in both Arlington and San Antonio, payday loans are limited to 20% of a borrower’s gross monthly income, loans are limited to no more than four equal installments during the payback of the loans, and it is forbidden to either renew or refinance installment loans. Auto title loans are limited to whichever is lesser, 3 percent of the borrower’s gross annual income or 70 percent of the vehicle value. Payday lenders are also required to keep loan records saved for three years minimum, and provide any customer who receives a loan a list of nonprofit, credit counseling providers.
How new zoning helps borrowers
Council member Jimmy Bennett said that he believes payday and car title lenders were dealt with fairly. People in the area would take out a loan without thinking about the amount they would need to pay back, including interest, and fail to pay back their loans on time. This helps regulate loan amounts and locations, which can be a benefit for poorer communities.