Help to Dallas Borrowers Vaults Suit by Lenders

     DALLAS (CN) – Title and payday lenders cannot sue Dallas over its tough regulations that seek to protect borrowers, a Texas appeals court ruled.
     Consumer Service Alliance of Texas, a title and payday lender trade group, sued the city in 2011. The suit came after Dallas passed an ordinance requiring such businesses to register with the state every year, to adhere to recordkeeping and inspection requirements, and to restrict extensions of consumer credit. Dallas imposes penalties of up to $500 for each day of violations deemed to be a separate offense. The restrictions sought “to reduce abusive and predatory lending practices.”
     Lenders TitleMax of Texas Inc. and ACE Cash Express Inc. later intervened in the suit.
     The 14th District Court in Dallas granted the city’s plea to the jurisdiction last year and tossed the suit. A three-judge panel with the 5th District Court of Appeals agreed and affirmed dismissal Friday.
     There is no basis to argue that the ordinance stopped CSAT’s members from doing business as lenders, the court found.
     “Appellants contend they have property, such as business plans, existing customer lists and loan portfolios, forms, websites, and business methods, that will be affected by the ordinance,” Justice Robert Fillmore wrote for the court. “However, they do not argue that the ordinance forbids them from engaging in the lending business – nor can they, since the ordinance on its face only regulates the terms under which appellants may offer their services. Appellants, therefore, cannot establish that the ordinance harms their vested property rights, as necessary for the trial court to have equity jurisdiction to entertain appellants’ suit.”
     The lenders likewise failed to show that the city’s failure to enforce the ordinance so far leaves them without a way of challenging it.
     “The city has informed appellants of its intention to enforce the ordinance,” the 18-page opinion states. “There is no evidence that TitleMax, Ace, or any other member of CSAT has violated the ordinance or that the city has failed to file an enforcement action based on any alleged violation of the ordinance. We cannot conclude, on this record, that the city has deliberately chosen not to enforce the ordinance.”
     CSAT spokeswoman Julie Hillrichs said Wednesday the group is “obviously disappointed.”
     “We are still reviewing the ruling and have not yet determined whether we will appeal to the Texas Supreme Court,” she said.

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