Dallas Payday Lender Rules Avert Challenge

     DALLAS (CN) – A judge tossed a lawsuit that challenged tough regulation of payday and title lenders, or other “credit access businesses,” enforced in Dallas.
     While Texas law empowers credit access businesses to assess whatever fees they reach with borrowers, the Dallas city council adopted an ordinance in 2011 that monitors these businesses “to reduce abusive and predatory lending practices.”
     The ordinance requires such lenders to register with the state every year, to adhere to recordkeeping and inspection requirements, and to restrict extensions of consumer credit.
     Dallas passed the law within days of amendments signed by Gov. Rick Perry to the Texas Finance Code regarding the licensing of and regulation of credit access businesses.
     The ordinance imposes penalties of up to $500 for each day of a violation deemed to be a separate offense.
     Consumer Service Alliance of Texas, a trade group, filed suit, arguing that the city has no power to regulate and that the ordinance would put its members out of business.
     It also said the law “would create a virtual prohibition on the type of business in which they currently engage, even though state law expressly permits that type of economic activity.”
     The city flatly disagreed.
     In its plea to the jurisdiction filed in December, Dallas said the amendments to the Texas Finance Code expressly allow for “other laws” to regulate the fees charges by a credit access business.
     The city also argued that the ordinance is penal, not civil as the plaintiffs claimed, divesting the court of subject-matter jurisdiction on claims for declaratory and injunctive relief.
     “The ordinance is penal and not preempted by state law,” the city argued. “Plaintiffs cannot show a waiver of the city’s governmental immunity.”
     Because the penal code expressly allows conviction without establishing mental culpability for crimes punishable by fines up to $500, Dallas said violations are punishable criminal offenses even if no mental state is required for conviction.
     Judge Eric Moye granted the city’s plea to the jurisdiction last week and dismissed the case
     TitleMax of Texas Inc. and ACE Cash Express Inc. had intervened in the suit.

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