City Council Passes New Ordinance Regulating Payday and Auto Loans
Today, the Corpus Christi City Council voted to enforce stricter guidelines for payday and auto title loan businesses. The new ordinance is aimed at reducing abusive and predatory lending practices and will require annual registration and oversight of credit access business. The guidelines include:
- Keep records of loans for three years.
- Make records available for inspection.
- Mandates a payday loan could not be more than 20 percent of an individual’s monthly income.
- The amount of an auto title loan may not exceed the lesser of three percent of the consumer’s gross annual income or 70 percent of the retail value of the motor vehicle.
- Limits installment loans to a maximum of four installments. Requires any installment payment to be used to repay at least 25% of the principal.
- Lump sum loan repayments cannot be refinances or renewed more than three times. Proceeds from any refinance or renewal must be used to repay at least 25% of the principal.
According to the state’s Office of Consumer Credit Commissioner (OCCC), Corpus Christi had about fewer than 60 auto title and payday lending businesses operating within city limits. In 2014, in the three county Corpus Christi Metropolitan Statistical Area (MSA) (Aransas, Nueces, and San Patricio Counties) there were 761 vehicles repossessed for non-payment – 2.97 vehicles repossessed for every 100 active auto title loans.
“I think it is wrong because many people who take out these loans get trapped and end up losing everything, it sets them up for failure. We are going to protect those who we were elected to protect.” Mayor Nelda Martinez said.
Corpus Christi becomes the 26th city in Texas to enact the credit access business registration and regulation ordinance. With the passage of this ordinance, approximately one-third of the entire population of Texas now reside in cities with credit access business ordinances.