On July 1, 2025, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s denial of a preliminary injunction sought by several short-term lenders challenging amendments to the City of Dallas’s short-term lending ordinance.
Dallas first adopted a registration scheme for credit-access businesses in 2011. In 2021, the City amended the ordinance to capture all credit-services organizations. It also imposed new restrictions on short-term lending including a (1) fee cap provision, that said unsecured loans cannot exceed 0.1% per day of the outstanding balance of the loan; and (2) a title-loan repayment provision where loans secured by vehicle titles must be repaid in no more than four installments (or no more than three renewals for a single-payment, title-secured loan), with each payment reducing principal, fees, charges, and costs by 25%. Dallas stated in its pleadings that these amendments were in part “designed and intended to limit and control the excessive ancillary credit charges and fees charged by credit brokers, credit arrangers, and credit enhancers.”
A lender challenged the law alleging the city (1) exceeded the powers of a Texas home-rule city; (2) impermissibly acted to regulate a subject matter preempted by state statutes; and (3) deprived the lender of the due process of law. The Court disagreed, stating it had no evidence that the ordinance effectively ended the short-term lending industry in the city. In addition, because the ordinance did not prohibit short-term lenders from operating, but rather regulated their business model, the lender had not shown the city’s regulations conflict with a state statute or state laws.
Putting It Into Practice: The Fifth Circuit’s decision reinforces the authority of cities to impose detailed restrictions on credit terms and loan structures, provided they do not outright prohibit lawful lending. Dozens of Texas cities have adopted similar CSO ordinances, and others may follow suit. Lenders should reexamine compliance frameworks for local fee and installment restrictions and prepare for increasing municipal oversight.
