The City Council put payday lenders on notice Tuesday, moving to limit where they may be located and indicating it may seek to force 13 existing payday lenders to move.
Following the lead of other Iowa communities, city staff recommended payday lenders – also known as delayed deposit services – be located no closer than 1,000 feet from each other as well as any child care center, educational facility, park or recreational facility and religious institution.
Although there is no direct link between payday lenders and those areas, city staff member Thomas Smith told the council, those are typical features of strong neighborhoods.
He described payday lenders as businesses licensed and regulated by the state. They offer loans that critics say can cost borrowers an annual interest rate of as much as 400 percent.
“Cash-strapped consumers may become locked into repetitive borrowing cycles with these types of businesses, pushing individuals and families even further into debt,” he wrote in a memo to the council.
Options, he said, would be to borrow from banks that offer short-term loans at lower interest rates or from family and friends.
While the city cannot ban payday lending businesses, the proposed ordinance would put Cedar Rapids on par with the other cities that have enacted payday lending regulations, Smith said. Des Moines has had a 17 percent decrease in the number of payday lenders since changing its ordinance.
The 13 current payday lenders are clustered around Westdale and Lindale malls, and Edgewood Road, city staff said. Under the ordinance change, they would be allowed to continue, but the locations where future payday lending businesses would be permitted include the Collins Road-First Avenue area, Westdale and along Wright Bros. Boulevard, he said.
Two residents spoke in favor of the restrictions on the businesses and council members indicated they may go further in the future.
Councilwoman Monica Vernon called for approving the restriction on future lenders and then look at the possibility of giving the existing lending businesses a finite time -- three years, perhaps – to relocate.
City Attorney Jim Flitz advised there could be “consequences” if the council attempts to make a legal business illegal in certain location.Comments: (319 398-8375; firstname.lastname@example.org