Yesterday's editions of The Dallas Morning News published this opinion essay from the paper's editorial staff. It is gratifying to see the work of CitySquare's public policy team and those of our growing number of partners have good results in affecting public values and opinion. Much work remains to be done on the issue of predatory lending, but we're making progress! Thanks, Gerald and team for your hard work.
I've posted the editorial statement below.
08 July 2012 10:38 PM
The free-enterprise advocate in us says that payday lenders should operate wherever the market takes them. It’s a business, after all. If people don’t want the product they sell, the market will show them the exit door.
The problem is that quick-cash lenders don’t operate under normal market conditions. Their market, in fact, operates exactly the opposite — enticing desperate people away from what should be their very first option, economizing in every way. When you are short on money, you buy cheaper food, find a lower-rent apartment.
Banks make their services scarce for people in trouble. There’s no cheap, off-brand place to shop. For many consumers, the only choice is to seek out a title lender, who will accept a car or house title as collateral on a short-term, high-interest loan. Like a shark hunting wounded prey, the companies profit by exploiting the customer at his weakest moment.
Texas, which has some of the loosest regulations in the country for payday and title lenders, is witnessing an explosive expansion of these businesses. Oversight is nowhere near what it should be as some lenders charge usurious amounts. Effective rates of 300 percent or more are common, and when the customer can’t pay, his car or house becomes the lender’s property.
In a recent study by Texas Appleseed and the Anti-Poverty Coalition of Greater Dallas, 37 of the 241 short-term lenders in the city were surveyed on their effective rates and the legally required loan information they make available to clients. As Gerald Britt Jr., vice president of public policy at CitySquare, noted on our Viewpoints page last week, 41 percent of outlets surveyed did not abide by legal requirements and offered misleading information about the risks of quick-cash loans.
They get away with it because lawmakers who seek tighter oversight run into an extremely well-funded lobby. Quick-cash lenders donate heavily to politicians and intimidate city governments with the threat of expensive litigation.
Fort Worth-based title lender Cash America International is the No. 1 contributor to Dallas GOP Rep. Pete Sessions. Rep. Jeb Hensarling, R-Dallas, ranks No. 10 in the House for contributions from the payday loan lobby, according to OpenSecrets.org.
The industry donates generously to Democratic and Republican legislators alike at the state level. Dallas Mayor Mike Rawlings previously sat on the board of directors of Ace Cash Express and has defended such services as necessary, particularly in southern Dallas, to serve the “under-banked.”
What about protecting the over-exploited? As this newspaper noted in a Points special section last October, there is a lopsided presence of quick-cash loan shops in the poorest neighborhoods of southern Dallas and an unusually strong concentration of these loan shops in Dallas’ biggest crime hot spots — both north and south. We do not need more of them.
If legislators won't to stand up to this powerful lobby, reject their donations and impose tougher regulations, the least Dallas and other local governments can do is ensure that existing laws are enforced vigorously.
Stop treating the financially vulnerable as shark bait.
Follow the money
A sampling of campaign donations by members of the quick-cash loan industry from 2008 to present:
Recipient / Donor / Amount
Rep. Pete Sessions, R / Cash America Int’l / $37,500
Rep. Jeb Hensarling, R / Cash America Int’l / $24,500
State Rep. Helen Giddings, D / Cash America Int’l / $5,750
State Sen. Royce West, D / Cash America Int’l / $5,000
State Rep. Raphael Anchía, D / Cash America Int’l / $3,500
State Rep. Marc Veasey, D / Cash America Int’l / $2,500
Texans for Joe Straus / Ace Cash Express / $34,000
Texans for Rick Perry / Ace Cash Express / $22,000
Mexican-American Legislative Caucus / Consumer Service Alliance of Texas* / $20,000
Texans for Greg Abbott / Ace Cash Express / $12,500
SOURCES: Federal Election Commission, Texas Ethics Commission