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.