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 are not quite as fortunate.
The city of Dallas recently moved forward with plans to regulate credit service organizations, passing an ordinance restricting access to certain small, short term loans (see Addendum Item # 28). There are questions about the legality of this ordinance; however, there are none about its ramifications.
This ordinance will restrict consumer access to short-term loans and ultimately cause prices of loans to rise, thus harming the citizens that this ordinance is 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 Dallas, and will only serve to harm Dallas consumers.