The payday loan industry is regulated by individual states. Most of them set rules that limit to a certain extent how much a payday lender can loan to a customer. Many states also set maximum interest rates. Others outlaw certain lending practices or procedures as well.
The city of Houston, Texas, imposed some of the stricter rules and regulations on Houston payday loans. The result? As expected the payday lenders predicted the demise of many companies. They also painted the specter of a mass exodus of payday loan stores from the city.
Has it happened? Hard to say. But at the time the new payday lending rules took effect in Houston, there were approximately 361 payday and auto title lenders in Houston. We actually counted way over 400 on a web site in 2015. But we could not date the site exactly. Nevertheless, Houston city officials say there were 361. A total of 309 payday lenders registered before or on the day the new ordinance took effect. The status of the remaining 59 was not known when the ordinance became law. In the worst case scenario those 59 closed, moved outside city limits or shifted to online lending only. That’s only about 20 percent.
Benefits of new Houston payday loan rules? The new Houston payday loan ordinance limits the amount of payday loans to not more than 20 percent of the monthly gross income of a borrower. Auto title loans cannot exceed 3 percent of the borrower’s monthly gross income or 70 percent of the value of the car.
A one-time payday loan is limited to no more than three extensions/rollovers. Installment loans are limited to four installments. Regardless of the type of payday loan, the loan sum has to drop at least 25 percent with every rollover or installment.
Considering the potential dangers of unfettered payday loans, Houston payday loan restrictions are not unreasonable.