The city is going to set the restrictions on the places, where auto loans and payday loans lenders will be able to set up their offices and shops. The city council meeting should consider the zoning amendment this week.
In case it passed the following regulations will be introduced: the lending institutions, pawn shops among them should not be situated nearer than within 1000 feet from one another, 300 feet from residential areas and 500 feet of any freeway.
What are the Limits?
The companies will be forbidden to operate in shopping centers or as a part of some other business, like grocery store or gas station. However the businesses currently functioning would not suffer as the regulations will be implemented to newly open lending services and pawn shops.
Like the restrictions in some other areas , new limitations in El Paso are aimed to get the loan business away from the areas where people with low income reside, place them far from schools and the freeway. Claudia Ordas, city Rep. also hopes the “municipalities in the county take the initiative to limit their presence out there as well.” Due to the fact that her parents have once got into the debt trap, the issue is personal for her.
Payday loans, as well as installment loans and unsecured personal loans are small cash advances, provided for a term of 2 weeks or 1 month. Their characteristic feature is high interest rates and fees. The consumer can just pay the charges on the loan and renew it, the balance will than stay the same.
The car loans are provided on terms that the auto is used as collateral and can be seized by the lender if the borrower fails to cover his obligations.
El Paso has already limited payday loans to 20% of the gross monthly income of an individual applying, and the auto-title loans to 70% of the car value or 3% of the borrower’s annual earnings. The consumers are now able to renew the loan not more than 3 times.
The new regulations were introduced after 6 to 1 council meeting vote in January. The main aim of the introduced ordinance is to avert the citizens from a debt trap.
The representatives of the local Pancho’s Title Loans Company and Benny’s Pawn Shop have already opposed the regulations, claiming the measures were not only hurting the businesses, but the citizens as well. At present they do not comment the situation.