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The city of Waco is discussing a proposed payday lending ordinance similar to regulations adopted in other Texas cities.

A draft ordinance to regulate payday and auto title lenders is headed for the Waco City Council next month after it won strong support at a public meeting Tuesday.

About 75 people attended the forum, mostly favoring limits on the terms of short-term loans, though a handful objected. Mayor Malcolm Duncan Jr. said the public interest in the ordinance justifies “real consideration” by the council.

The ordinance mirrors others that have passed in some 28 cities around Texas, with provisions that so far have withstood lawsuits by the industry. The ordinance does not cap interest rates, which often amount to more than 500 percent per year, but it limits the size of the loan based on income and limits the number of times it can be renewed.

Alexis Christensen, who helped organize the local group Citizens for Responsible Lending around the payday issue, said the group is pro-business.

“But we do not want to see businesses predicated on the failure of customers,” Christensen said.

Proponents of the regulations, including bankers, professors, ministers and nonprofit workers, said the payday industry traps people in a cycle of debt and impoverishes the whole community.

Taking advantage

Elaine Seeber of Waco said payday lenders take advantage of “financial desperation” that comes when someone’s basic needs for shelter, clothing, utilities and food are unmet. Seeber said she found herself in that situation about 20 years ago as a single mother.

“The only question on your mind is ‘how can I ethically, legally and morally get some money?’ ” she said. “You don’t think about the consequences. All you see is the chance to have some groceries and a warm home. I’ve been there more than once with fear, desperation and loneliness.”

Steve Bradley, an associate professor of entrepreneurship at Baylor University who has studied “microcredit” programs, said he doesn’t especially like payday loans, but traditional lenders aren’t serving the niche of people who take them.

“My concern is that by us trying to do good by getting rid of these lenders that encourage bad habits, what’s going to happen when you pull credit away from the poor?” Bradley said.

Mark Reynolds, a regional president for Extraco Banks, agreed financial regulations can have unintended consequences, but he wanted to make his support for the ordinance “loud and clear.”

“It’s a step in the right direction, and it will drive a more reasonable interest rate that allows people to get out of debt quicker,” Reynolds said.

Lisa Dickison, a political activist aligned with the tea party movement, opposed the ordinance.

“I don’t believe it’s the proper role of government to protect a person from their own improper decisions,” Dickison said. She also objected to others who called payday lenders “predatory.”

“A predator seeks out and hunts their prey,” Dickison said. “People who take out these loans don’t do so involuntarily. It’s not something foisted on them. I’ve been a customer of these places in the past, and they don’t take your hands and make you take out these loans. I don’t think it’s helpful to remove these options.”’

Dickison said she took a $700 loan once so she could repair her car, which allowed her to keep her job.

Financial ruin

But Lori Latimer, a Family Abuse Center case manager who works with homeless people, said she more often sees payday loans themselves as a cause of financial ruin. She recounted the story of one client who took an auto title loan to repair her vehicle, then got her car repossessed and lost her job.

“I’m very familiar with the devastating consequences of title and payday loans,” Latimer said.

City of Waco officials have been discussing payday loans for several years and have been part of a new nonprofit alternative to payday loans. The Community Loan Center recently started offering city and Waco school district employees lower-interest short-term loans and is expected to spread to other employers.

But in recent weeks, Councilman Dillon Meek has urged the council to go further and regulate payday and auto title lenders.

Christensen said she and others concerned about payday lending visited with city officials two years ago but were told the council would like to see a grass-roots effort before moving forward with an ordinance.

“You all are part of that grass-roots movement,” Christensen told the crowd Tuesday night. “I think the constituents have spoken. The people who make Waco great have spoken.”

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