The Des Moines City Council voted 6-0 today to impose a six-month moratorium on new payday lending operations and pawn shops.
City leaders will spend the next 180 days examining long-term zoning regulations on such businesses. The action was taken partly in response to concerns voiced by neighborhood leaders and business owners.
Plans to open new Pawn America shops on Merle Hay Road and SE 14th Street prompted the City Council to act. Ideally, Iowa would have enacted stronger regulations on the payday lending industry long ago, because the industry’s business model depends on trapping borrowers in cycles of debt. Some Iowa Democrats tried to pass new regulations on payday lending during this year’s legislative session, but unfortunately the bill didn’t have the votes to get out of subcommittee before the first “funnel” deadline.
After the jump I’ve posted Iowa Citizens for Community Improvement‘s reaction to today’s news. Iowa CCI was one of several organizations that urged the legislature to act to protect consumers from payday lenders.
It’s not yet clear whether payday lending restrictions will be part of the federal financial reform legislation Congress is now considering.
Des Moines City Council passes moratorium on licenses for Payday Lending, Pawn Shops
CCI members work with council to consider tough zoning ordinances over next 6 months
Des Moines, IA – Today the Des Moines City Council voted 6-0 in favor of a 6 month moratorium for the zoning and licensure of new payday loan and pawn shops.
“These payday lenders are taking advantage of the most vulnerable people in our community,” said CCI member Mike McCarthy of Des Moines, “Enough is enough. This sort of usury is intolerable. We’re excited the city council took action today to crack down on predatory lenders.”
The vote, coming after a hearing last Thursday, is a needed first step at taking action to prevent the spread of this predatory business. The moratorium will allow Des Moines’ City Attorney and the Planning and Zoning Commission to study what other cities across the nation have done to crack down on payday lending. It will also allow time for CCI, the City Council, and other concerned citizens to draft strong regulations to address the density and distance within which payday lenders can operate.
Iowa CCI members have developed a three prong strategy to address payday lending, starting with payday lenders. CCI has demanded that payday lenders voluntarily cap interest rates at 36% – not the 400% they currently charge – and to offer extended payback periods rather than the 2 week loan period they currently demand.
CCI is also calling on banks like Wells Fargo and Bank of America to make emergency credit more accessible and affordable, rather than offering lines of credit to payday lenders. The third prong of CCI’s strategy is to win payday lending interest rate caps of 36% at the State Legislature. Legislation capping interest rates was killed during the 2010 session, but legislative leaders have indicated it will be addressed again in 2011.
5 Comments
How are payday loans that much different
from the credit card , automotive, and mortgage debt most Americans carry at this point, anyway?
Most credit card companies have predatory lending rates that, with overdue and overdraft fees can exceed the rates established by usury laws in most states.
I’m afraid Mr. Potter from “It’s a Wonderful Life” had great prescience when he said, “What we need is a thrifty working class.” All the Bailey Savings and Loan ended up doing was creating urban sprawl and the ensuing housing bubble, which coupled with subprime lending helped create the recent collapse in the market economy.
Maybe this might sound a bit harsh, but NO you can’t have that new LCD big screen HDTV if you can’t pay cash for it.
Buy a house in the city and you won’t have to take that second job to pay Countrywide’s excessive mortgage fees. Take those hours you aren’t working at the second job in question and put some sweat equity into your home.
And then there are the fees and interest charged by the World Bank and International Monetary Fund, which are basically usurious “payday” loans guaranteed against the
GNP or natural resources of an entire country.
I appreciate setting limits locally, but don’t we need to connect the dots at some point?
eltondavis Tue 18 May 2:44 PM
the payday loan rates are worse
even than the ridiculous credit card rates. Payday loan rates can be 300 to 400 percent, easily. No one is paying that kind of interest on a mortgage. But I agree with you, the “respectable” financial institutions are also sometimes preying on customers who will get trapped in cycles of debt.
desmoinesdem Tue 18 May 2:52 PM
Not sure if this is a good thing or not
Payday lenders are generally scum, but people should have the right to spend their money there. I hope they aren’t shut down.
moderateiadem Tue 18 May 5:58 PM
restricting them to 36 percent interest
is more than reasonable. No one is talking about the government “shutting them down.” There’s a chance they will close their doors if they aren’t allowed to keep charging 400 percent interest, but that’s not a reason not to regulate to protect consumers.
desmoinesdem Tue 18 May 8:10 PM
I mostly agree
I guess I’m just reminded of this article:
http://www.theonion.com/articl…
Not trying to make light of anything really, we should regulate pay day loan companies, but I really do think we need a more vibrant private sector a smaller public sector in many ways and this isn’t the way to go.
moderateiadem Tue 18 May 11:17 PM