The Texas Legislature decided this year not to pass stringent regulatory controls over credit service organizations. While that is a big victory for most Texas consumers, Dallas residents, and now Austin residents, are not quite as fortunate.
Citing the City of Dallas’ recent plans to regulate credit service organizations by passing an ordinance restricting access to certain small, short term loans, Austin has decided to follow suit.
The City Council members conceded that they were aware of litigation pending against the City of Dallas regarding the passing of its ordinances, but decided to move forward anyway. While there are clearly questions about the legality of these types of ordinances, there are none about its ramifications.
These ordinances will restrict consumer access to short-term loans and ultimately cause prices of loans to rise, thus harming the citizens that these ordinances are designed to protect.
As we concluded in our research paper, Evaluating Consumer Access to Short-Term Lending, consumers understand that that a competitive and vibrant short-term credit market provides them choice and access to needed financial services. There is and will continue to be a market demand for small, short-term loans. Restricting access to these needed services has caused more bounced checks, Chapter 7 bankruptcies, and greater difficulty with lenders and debt collectors.
After evaluating the burdens and benefits of increased regulation, the Texas Legislature voted “no.” These burdens are the same in Austin, and will only serve to harm Austin consumers.
– Ryan Brannan