Bank On Dallas trying to reduce need for Texas payday loans

Check cashing and payday lending serve two different groups, but they are often lumped together. Image: Flickr / denverjeffery / CC-BY-ND

In Dallas, Arlington and Irving, Texas, a new program is trying to undercut payday lenders. Called Bank On Dallas, the program is trying to open traditional banking to new customers. Texas lawmakers are also considering new limits on payday loans.

The basics of Bank On Dallas initiative

Bank On Dallas is a bank and credit union program based in the Dallas area of Texas. It tries to encourage banks and credit unions to give “starter” bank accounts to residents of the area who do not have bank accounts. This group of people, called “unbanked,” is a group that often uses check-cashing storefronts. The “Bank On Dallas” initiative is supported by many groups that are also trying to pass new regulations on the payday loan industry in the Dallas and Irving, Texas, area.

Debating payday loan limits in Texas

A coalition of community groups are currently lobbying Dallas-area lawmakers for more regulations on payday loan stores. Dallas officials point out that car title and payday loan stores are more common in Dallas than Whataburger and McDonald’s stores. Currently in Dallas, payday lending is limited to “credit service organizations.” Dallas lawmakers want to limit the interest rates and terms that credit service organizations can use, claiming that they take advantage of their customers.

Differentiating between underbanked and unbanked

The Dallas organizations that are trying to open banking up to unbanked customers are claiming it will also reduce customers available to payday lenders. The problem is, however, that unbanked customers and underbanked customers are two different groups. Unbanked customers often use check cashing locations and other alternative banking locations. Underbanked customers, on the other hand, are the ones who tend to use payday lending and other options for short-term cash because most payday lenders require that customers have a bank account. The new regulations for payday lenders in Dallas have not yet been written, but the City Council is still considering changes to the regulations.