City Name: Austin, Texas
Population: 961,855
Region: Southwest
Partner: Community Loan Center of Austin
Problem: Enforcement of city regulations regarding predatory lenders in Austin led to the realization that city employees were among those being victimized by payday and auto title loans that charged high rates and pulled borrowers into endless cycles of debt.
Solution: In addition to 2011 regulations governing the terms and conditions short-term lenders could put on loans, Austin began offering alternative lower-interest short-term loans of $1,000 or less to its 14,000 employees in 2018 through a partnership with the Community Loan Center of Austin.
Outcome: The program provided 7,781 small-dollar loans between January 1, 2019, and March 31, 2025, totaling $7.7 million to help employees with emergency car repairs, rent, utility payments, and other expenses.
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Background
Credit Access Businesses (CABs) like payday and car title loan companies often charge exorbitant interest rates that trap borrowers into a cycle of loan extensions and additional loans that become increasingly difficult to pay off. Low-income workers and people with poor credit who are unable to access bank credit often turn to these businesses to help with emergency expenses and find themselves deeper and deeper in debt as a result. The three-party model under which Texas payday and auto title loan businesses operate allows them to evade state interest and fee caps that typically apply to consumer loans, resulting in uncapped Annual Percentage Rates. As a result, the City Council of Austin in 2011 passed an ordinance to regulate the terms and conditions of their loans in the city to reduce predatory lending practices.
Problem
In the course of enforcing the law, city regulators learned that some of the people caught up in cycles of debt with CABs were city employees. Debt like this can lower employees’ credit rating, making it difficult for them to access affordable credit to purchase cars or homes, and can add stress to those affected
Solution
City leaders worked with the Community Loan Center of Dallas to open an Austin office to administer alternative, lower-interest loans to city employees. Repayment of the loans is facilitated by payroll deduction, assuring the lender that they will be repaid promptly. In addition, the city and the Community Loan Center offer free financial and credit counseling to any employee to help them avoid the need for short-term and emergency loans in the future.
Outcome
The program is revenue-neutral to the city but has made a huge difference to the employees who now have an alternative to high-interest, predatory loans when they have a financial emergency. A commercially available short-term loan of $1,000 costs an average of $775 in interest and fees and must be repaid in one month, according to the Community Loan Center of Austin. Many borrowers must take out additional loans to pay the first, resulting in a spiral of increasing debt. In contrast, a City of Austin employee loan of $1,000 costs an average of only $120 in interest and fees and can be paid back over 12 months.
The Community Loan Center now also works with other employers in the city to offer affordable loans to their employees.
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