Council committee considers limits on payday lenders

Panel asks Community Development Department staff to draw up proposed regulations

April 1, 2014 | 1:04 am

CEDAR RAPIDS — A City Council committee has decided to look at regulating where new payday-loan shops can locate and how far apart they should be.

At the same time, the Development Committee put off any discussion about toughening the ordinance that prohibits the sale of alcohol and tobacco within 300 feet of a church or school.

The alcohol and tobacco issue has surfaced in recent days with a request from the Cedar Rapids school system. District officials want the council to prevent the Kum & Go convenience store chain from building at 1420 Mount Vernon Rd. SE near McKinley Middle School, in part, because it sells alcohol and tobacco. The location satisfies the current distance requirement.

In focusing on payday-loan shops, the three-member committee asked Community Development Department staff to draw up proposed regulations.

Chairwoman Monica Vernon suggested that payday-loan businesses can be predatory operations that harm a city’s residents. The owner and president of Vernon Research Group said she had a young employee in the past who borrowed money from a high-interest payday lender and then had a difficult time paying the loan off.

Committee member Pat Shey said the city ought to try to differentiate between payday lenders and pawn shops, saying the latter are akin to secondhand stores. Colleague Scott Olson, a realtor with Skogman Commercial, agreed but cautioned against overly demanding regulations designed to eliminate payday-loan operations from most of the city.

Olson suggested that the owners of storefronts in older commercial areas of the city can depend on businesses like tattoo parlors and payday-loan shops to rent their storefronts.

“We need to see where we’re going in the long run,” he said of any regulations.

Thomas Smith, a planner in the development department, provided the council committee with information on five Iowa cities that have restrictions on payday-lending stores: Des Moines, West Des Moines, Clive, Ames and Iowa City.

Des Moines and West Des Moines don’t permit such stores within one-half mile of each other, and Iowa City, Ames and Clive require such stores to be 1,000 feet from residential zones, schools and day cares. Clive and Iowa City also require the businesses to be 1,000 feet from churches and parks, Smith said.

In a report to the committee, Smith states that the five cities have justified the restrictions based on “the link between payday lending and the economic distress of individuals and the neighborhoods located near the establishments.”

Existing payday lenders can remain if new regulations are put in place, though the stores would be subject to the regulations if they change ownership.

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