payday loanA Dallas city ordinance regulating payday lenders caused about 70 of them to close, and a nonprofit is entering the market to fill the gap.

Austin-based Business and Community Lenders of Texas recently gained approval to open in Dallas.

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Payday and auto-title lenders charge as much as 400 percent interest, and even with more regulation, Dallas still has a big problem with them. There are more than 100 high-interest lenders in Dallas. Last year, they charged about $247 million in interest, and auto-title lenders repossessed about 7,800 cars in Dallas.

Business and Community Lenders of Texas aims to prove that there can be affordable alternatives for workers who have no credit or bad credit and find themselves in financial emergencies. The nonprofit would offer loans of up to $1,000 at no more than 18 percent interest. The loan is amortized, with predictable payments every month for a year.

Employers can enroll with the nonprofit and then their employees can receive loans with no credit check. The loan payments are taken directly out of the employees’ paychecks.

Business and Community Lenders of Texas presented their model to members of City Council Monday.

City Councilman Sheffie Kadane questioned whether a lender charging 18 percent interest should be considered a nonprofit.

But the organization’s president and CEO, Rosa Rios Valdez, explained that proceeds go back into the lending pool. The nonprofit also offers credit counseling to help borrowers plan budgets and repair their credit.

The leading argument against payday loan regulation is that there is no other legal alternative for people who lack credit or have bad credit, City Councilman Jerry Allen said.

“A lot of people have a hard time getting their head around 18 percent,” he said. “The alternative is 400 percent.”