Lenders File Lawsuits Against Austin, State Law Allegedly Violated
Lenders File Lawsuits Against Austin, State Law Allegedly Violated
In the previous week, the latest rules of the City of Austin concerning credit lending are being targeted as two companies filed separate lawsuits against the city. This ordinance was passed by the City Council in the month of August last year.
The said ordinance obliged payday lenders to register with the city, restricted the amount of cash advance offered to borrowers by payday lenders, limited the number of times a loan can be refinanced by a borrower, and barred where payday lenders can carry out their business.
The first company that filed a lawsuit last Tuesday was TitleMax, a car title loan provider in Delaware, and followed by foreign limited liability company Rubicon Equity Partners LLC last Thursday. Both companies allege that the ordinance imposes strict limits on the conditions of loans and might almost forbid their companies from carrying out its business as allowed by state law.
According to the City of Austin Law Department, the claims are not true. Moreover, they are completely ready to stand up against the lawsuits and stay positive that the ordinance is legally sensible.
In the month of January, the ordinance already became a law but was not implemented until May, since a lawsuit was previously filed against it by the Consumer Service Alliance of Texas for the same reason as the lawsuits of TitleMax and Rubicon. However, the suit was stopped early June. Rob Norcross, spokesperson of the alliance, said that the city question whether they had status to file such a lawsuit.
The critics of the ordinance said that the high interest rates and fees charged for short-term loans have become a huge problem for low-income borrowers. On the other hand, supporters said that they offer loans for those who need emergency cash and not for those who are not eligible for the usual loans.
Steven Camp of Gardere Wynne Sewell LLP, which is Rubicon’s representative company, said that Rubicon will entirely aim to pursue the lawsuit.
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