A proposal from city council members in Arlington, Texas would impose stronger restrictions on payday and auto title lenders, including limiting where and in what type of buildings they can do business. 

The city council is set to review a proposed two-pronged approach to new regulations on Tuesday. The other point deals with business practices such as loan terms, although that could be delayed pending the Consumer Financial Protection Bureau finalizing its own regulations.

The CFPB has not previously addressed land-use zoning issues. Instead, those concerns - including how far such lenders must be from residential neighborhoods and high-visibility areas - have been left up to cities to address.

City officials identified 70 payday lending businesses in Arlington. Most are concentrated along major thoroughfares and the city’s development code has no location standards. New rules would make it difficult, or impossible, for existing businesses to move within the city - although they would get grandfather protection if they stay put. New businesses would likely be shut out. 

Supporters of such short-term lending operations argue that the lenders provide opportunities for people who otherwise would not be able to obtain loans because of their income level or credit history. Still, cities nationwide have been cracking down on the industry.

Under the city's proposal, new businesses would have to win council approval of a specific-use permit to operate in the city - and only in heavy commerical and industrial sectors. Lenders would be limited to using stand-alone buildings and would not be allowed in shopping centers. They also would have to be at least 1,000 feet from any other alternative financial establishment, 200 feet from residential-zoned property and 500 feet from a controlled-access freeway.

 

The discussion on regulating actual business practices ultimately could be delayed for up to a year while the CFPB continues public hearings and eventually finalizes rules for the industry. Such regulations likely will limit loans to 20% of gross monthly income, stop renewal or refinancing of installment-paying loans and impose set fines per violation.

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