• Fri. Sep 23rd, 2022

Payday Lenders Checking Out San Antonio

ByCindy J. Daddario

Mar 9, 2021


Borrowing money has not been easy for the payday and auto title lenders operating in San Antonio in recent years.

As a result, some of these lenders are closing deals and in some cases dropping out of short-term lending altogether. Figures from the city show that there has been a net loss of more than 60 payday and auto title rental businesses since early 2013. And with the recent disclosure by Austin-based EZCorp. and some smaller lenders, who are also withdrawing them, the net decline will exceed 100 deals. That would correspond to a decrease of more than 40 percent in 2½ years.

Figures from the state show that payday and auto title lenders operating in the San Antonio metropolitan area saw 20 percent fewer loans last year compared to 2013. The dollar value of these loans has now fallen nearly 27 percent.

“They just aren’t as profitable as they used to be,” said Juan Salinas, a former district manager for a payday lender. The decline in loan volumes is likely to continue as more stores close.

A variety of factors can explain the downturn, industry watchers say. Perhaps the most important reason is the city’s ordinance, which went into effect in 2013, capping the amount of payday loans and car title loans.

Lenders “got a lot more money back when there were no income requirements or restrictions,” Salinas said.

Also, oversight will only increase if a relatively new federal agency – created after the financial collapse – is ready to impose stricter restrictions on payday lenders. That, along with regulation by San Antonio and other cities, has scared some businesses.

Too much competition in the industry is also cited by some for consolidation. Although the number of stores has declined sharply since 2013, more are open in San Antonio today than in 2004, when 109 were still open. At the same time, the payday loan on the internet is increasing.

A recovering economy, with unemployment at its lowest level in years, may also mean consumers will have to resort to less of these subprime lending to get out of a tight spot.

The trend isn’t limited to San Antonio either. The state Office of Consumer Credit Commissioner reported that Texas had 2,958 payday and auto title rental offices last month, down 15.5 percent from 3,502 two years earlier. In addition to San Antonio, Austin, Houston, and Dallas have regulations regulating lenders. Still, the current number is more than double the 1,300 stores that were operational in 2004.

The various municipal bylaws and pending regulations proposed by the Consumer Financial Protection Bureau (CFPB) have “created an environment where it is very difficult, if not impossible, to keep working,” said Michael Grimes, advisor to Consumer Service Alliance of Texas, representing operators in the industry. The regulated product “is defective in that it cannot be offered to a consumer and made economical for these companies”.

It was a different story for State Representative Diego Bernal, who, as a city councilor, introduced rules for so-called “credit access transactions” in 2012.

“The business model depends largely on people’s desperation,” said Bernal. “The longest would be for people to enter into these contracts and have no way out. You would pay fees and interest and never come to the client. Our regulation required that the client was paid out at short notice. And because we created a fairer environment, (companies) have realized that (it) is nowhere near as lucrative. “

San Antonio sought to end what the regulation calls “abusive and predatory lending practices” by some companies that keep consumers trapped in a cycle of high-interest debt. The ordinance limits cash advances to a maximum of 20 percent of a borrower’s gross monthly income. Car loans are capped at either 3 percent of the borrower’s income or 70 percent of the vehicle’s value, whichever is lower. Loans are also limited to three renewals or renewals.

Cash America International Inc., based in Fort Worth, was one of the first to stop offering payday loans in San Antonio. In October, the company announced to the city that it would be shutting down stores in 20 locations, as part of its plan to “single out” the loans in more than 350 locations across the country, company spokeswoman Yolanda Walker said in an email. Cash America has focused on its core business with pawnbrokers.

“After the ordinance was passed in San Antonio, the payday loan product was phased out in the places governed by the ordinance,” Walker said. “We believe that the elimination of a short-term loan product due to local regulation leaves customers without an essential solution to their financial needs.”

EZCorp announced in July that it is closing 480 locations across the country offering payday and auto title loans, as well as other lines of credit. This includes about 30 stores in San Antonio which, according to notices to the city, operated under the names EZMoney and EZPawn. The closings should be completed by the end of next week. EZCorp will focus on its deposit business and its international activities.

EZCorp officials did not respond to requests for comment. However, on a conference call with securities analysts in July, chairman Stuart Grimshaw said the decision to close was driven by regulation, competitive pressures and the company’s own “major skill deficits”.

“In my experience, regulation always drives consolidation, and it takes size to be successful,” said Grimshaw. “We would have to invest a lot in order to restore efficiency in this business. … The close option was the only optimal option. “

Grimshaw added that outstanding rules from the CFPB are “detrimental” to the industry. In March, the federal agency announced various proposals that would “end payday debt traps”. These include requiring lenders to determine in advance that a consumer can repay a loan when it is due, and limiting the number of consecutive loans a borrower can take out over the course of a year.

The rules could lead to a reduction in payday loan volume by more than 70 percent, the credit bureau Clarity Services Inc. predicted in May.

Suffice it to say, we don’t know of any retail company that can survive a 70% drop in sales when it comes with the significant fixed costs of an extensive branch network and associated payroll, “the Clarity report said. The report was written by Rick Hackett, a former CFPB regulator who was unavailable for comment.

Other lenders who, according to the city and the company’s website, have closed stores or completely given up the payday or auto title rental business in San Antonio include:

Texas Car Title and Payday Loan Services Inc., seven stores;

First Cash Advance, six stores;

Speedy Cash, four stores;

Check ‘n Go, a deal; and

TitleMax, although the number of its store closures could not be confirmed. An official from parent company TMX Financial said she was not commenting on the media.

Some payday lenders have set up shop just outside the city limits.

“I haven’t contacted myself personally from a company and said, ‘We’re moving or closing because of city ordinances,'” said Marion Gee, who was the city’s deputy finance director until the beginning of this month.

Meanwhile, a handful of payday lenders operating in San Antonio have been criminally charged with violating the ordinance by failing to register with the city and denying city officials access to their books and records. Some of the cases will go on trial in December. Late last year, a manager of the Power Finance business on Blanco Road was found guilty of violating the regulation – the first such case to be brought to trial. She has appealed.

When Bernal pushed for consumer protection a few years ago, he said he started with the idea of ​​putting payday and auto title rental companies out of business. But he said it occurred to him that there was a place for “small dollar loans.”

“I just wanted things to be fairer,” said Bernal. “I didn’t necessarily have a campaign of revenge against the industry, I wanted to make sure that our residents … were treated fairly by these companies.”

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