The Fort Worth Star-Telegram recently reported that Arlington’s City Council approved restrictions on how payday and auto title loan lenders can do business in an attempt to help consumers.
According to the news source, Arlington became the first city in Tarrant County to regulate lending service providers. The restrictions limit payday loan limits to 20 percent of a borrower’s gross monthly income and auto title loans to 3 percent of his or her gross annual income (or 70 percent of a vehicle’s value).
Additionally, the new restrictions prohibit the renewal or refinancing of installment loans and require documents to be made in Spanish and Vietnamese, as well as English. The new restrictions will take effect on January 1. The rules are based on suggestions made from the Texas Municipal League’s model ordinance regarding loans, which are used by 27 other cities in the state.
Consumer advocacy groups say that payday and auto title loans often send people struggling financially into deep cycles of debt and despair, as the loans collect high interest fees and have stiff penalties if a debtor falls behind on payments.
In deliberating the restrictions, City Council members heard the testimony of people who work in churches, community groups, nonprofits and task forces who say the high-risk loans greatly hurt the poorest citizens in the area.
According to the Star-Telegram, one in six Texans who take out auto title loans end up losing their cars to repossession.
Bankruptcy for Those Struggling With Debt
It is sad that so many people in Texas fall victim to predatory payday and auto title loans. If you are struggling greatly with debt, remember that bankruptcy may be an excellent option. A bankruptcy filing may allow you to eliminate unsecured debts like credit card debt and medical bills.
If your income meets certain requirements, you may be able to file for Chapter 7 bankruptcy and keep your house and car. In addition to eliminating credit card and other unsecured debts, in many cases, through a Chapter 7 filing, you can also discharge payday loans or other forms of cash advances.
Continue to follow our blog for more Texas financial and consumer lending news.