Nacogdoches taking firm stand for payday lending reform

LaTonya Christopher is a payday lender customer is paying back interest total twice of what she borrowed. (Source: KTRE Staff)
LaTonya Christopher is a payday lender customer is paying back interest total twice of what she borrowed. (Source: KTRE Staff)
Nacogdoches City Attorney Jeff Davis holds a resolution the City of Nacogdoches wrote requesting an end to predatory lending practices. (Source: KTRE Staff)
Nacogdoches City Attorney Jeff Davis holds a resolution the City of Nacogdoches wrote requesting an end to predatory lending practices. (Source: KTRE Staff)
Rev. Kyle Childress says two ministerial alliances support alternative forms of lending that doesn't financially hurt poor people or those short on cash. (Source: KTRE Staff)
Rev. Kyle Childress says two ministerial alliances support alternative forms of lending that doesn't financially hurt poor people or those short on cash. (Source: KTRE Staff)

NACOGDOCHES, TX (KTRE) - The payday lending industry continues to be scrutinized as entities nationwide, including here in East Texas work toward reform.

Meaningful reform is being requested by city leaders and ministers in Nacogdoches.

Latonya Christopher, a student of occupational therapy, needed some extra cash for car insurance. She became a payday lending customer.

"I borrowed $400," said LaTonya Christopher, a payday lender customer.

When she was asked how much she will have to pay back, Christopher laughed nervously and replied, "Almost $800."

It was a nervous laugh over a very serious situation.

"There's been a real proliferation of these businesses throughout the state," said Jeff Davis, Nacogdoches' city attorney. "Some estimate over 3,000. Nacogdoches is not immune to that. Our unofficial count shows somewhere in the neighborhood of 12 payday lending businesses."

Davis said a city resolution is requesting that proposed reform on the federal and state level be maintained and enforced.

"And to help prevent people from falling into these hopeless debt cycles that they currently find themselves in with these practices we see," Davis said.

A financial topic has evolved into a social issue. Nacogdoches ministerial alliances are concerned.

"Here in Nacogdoches some of these lenders will lend to people at 400 percent interest," said the Rev. Kyle Childress, a Nacogdoches minister. "It is hurting poor people in this town. It's hurting church members. This is true about white churches, black churches, brown churches. Everybody is being hurt by these predatory lending institutions."

Ministers and attorneys empathize with people short on cash. They just believe reform or alternatives to payday loans could provide an easier way out.

"And maybe some creative ways that our community can do lending itself without predatory lenders," Childress said.

Christopher plans to use her income tax return to pay off the interest twice what she borrowed. Then provide some advice of her own.

"I'm trying to stay away from this," Christopher said. "At all possible stay away from it. If you can, stay away from it."

East Texas News reached out to several payday lenders in Nacogdoches, but no interviews were granted.

There are lenders that will not issue title loans, and say they're regulated by the state. Their interest rates are higher than banks and they have fewer rules than banks.

The Texas Organization of Financial Service Centers (TOFSC) reached out to East Texas News after the initial story aired Tuesday night.

Here is the full text of the organization's statement.

We are disappointed that the City of Nacogdoches didn't speak to people who actually use short-term credit in its city or attempt to get an industry perspective before passing this resolution. More than 30 percent of Texans do not have access to traditional bank credit and do not have savings to fall back on in case of emergencies, such as needed repairs to a car that gets them to and from a job. 

Credit-access businesses provide a private-sector solution for millions of Texans who need short-term credit. According to a Harris Poll, 98 percent of customers who use these services are satisfied with their experience and less than one percent of all complaints made to the Consumer Financial Protection Bureau were related to the short-term lending industry. 

Every credit-access business in Texas is already regulated, licensed, and routinely audited by the Texas Office of Consumer Credit Commissioner. The resolution adopted by the City of Nacogdoches seeks to support federal regulations virtually eliminates the short-term lending industry, which will leave millions of Texans with no choice but to incur much more expensive overdraft fees, utility shut-off fees, and late charges. While you can regulate an industry, you can't regulate demand. More onerous regulations only will shut down these businesses and force consumers to turn to unsavory credit options, such as unregulated off-shore Internet lenders or criminal enterprises.  

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