Sunday, Aug. 03, 2008

City set to limit where payday lenders can open

Plan would keep new, existing businesses at least a half-mile apart

Columbia officials are working to impose tougher restrictions on where payday lenders can locate, a move designed to keep new businesses from clustering in poor communities.

A majority of City Council members say they support a proposed ordinance that would prohibit future payday lenders from opening within a half-mile of existing businesses. They say the industry’s tendency to congregate in poor areas of the city encourages a cycle of debt that many people can’t escape.

“When they are grouped together, they keep creating a cycle ... (and) nobody gets out of that cycle,” said City Councilman Daniel Rickenmann, who owns Mo Mo’s Bistro and a few Ben and Jerry’s stores. “I personally have bailed a few (of my) employees out from that situation.”

Payday lending businesses have come under scrutiny nationwide in the past few years and have been banned in some states, including North Carolina and Georgia. Critics contend the lenders prey on people who are financially vulnerable.

Community leaders say clusters of payday lenders lead to the perception that a neighborhood is struggling and drive away other development.

“I don’t want to put an upscale restaurant on a block where there are four payday lenders,” said the Rev. Wiley Cooper, who leads a committee that will present the proposed ordinance to City Council on Wednesday.

But lenders say restricting where they can operate is a veiled attempt to shut the industry down. They say the city doesn’t prohibit banks or pharmacies from opening across the street from one another.

“That is simply an argument that critics use to paint this industry in a negative light,” said Jamie Fulmer, spokesman for Advance America, the Spartanburg-based company that is the nation’s largest payday lender. “It ignores the fact that thousands of South Carolinians use this product every year.”

Seventy-four payday loan and 26 car title loan outlets have a Columbia address, according to the state Board of Financial Institutions, which regulates the industry. About half of those are in the city limits, according to an analysis by The State newspaper.

Most of the lenders are clustered around the commercial corridors of Fort Jackson Boulevard and Garners Ferry Road in the city and Two Notch Road and Decker Boulevard in the county.

Under the proposal, new businesses could not locate in those areas. But council could consider an even tougher ordinance, like the city of Greenville’s, which requires existing businesses located within a half-mile of other lenders to move once their lease expires.

Mayor Bob Coble said council members will consider all options.

Some business leaders say the city’s proposed ordinance could push new businesses into the unincorporated areas of the county.

“That would put them closer to some of the people (the city) is trying to avoid them being exposed to,” said Ike McLeese, president of the Greater Columbia Chamber of Commerce.

County Council Chairman Joe McEachern said the county has considered restricting payday lenders before but has some legal questions.

“I wish (the city) well, and if they do (pass the ordinance), we will be right on their heels of passing legislation (that’s) very similar,” McEachern said.

‘FALSE HOPE’

The highest concentration of payday lenders in Columbia is in the triangle at Fort Jackson Boulevard, Garners Ferry Road and Rosewood Drive. That area has 14 payday and three title loan outlets, all within a half-mile of each other.

“When you see so many of them in one neighborhood, it gives the wrong impression of that neighborhood,” City Councilman E.W. Cromartie said. “I think that’s a problem.”

In addition to Rickenmann and Cromartie, council members Sam Davis and Mayor Bob Coble support the ordinance.

Councilwoman Belinda Gergel said she was “open to” the proposal but didn’t want to commit her vote.

Efforts to reach Councilman Kirkman Finlay were unsuccessful.

Rosewood community leaders say the payday lending businesses don’t look good and hinder the area’s growth.

“When you have a business that operates only as a last resort and brings in the same people over and over again, I think it’s almost false hope,” said Travis Wheeler, president of the Rosewood Community Council. “I don’t see how it in any way can help Rosewood to have a bunch of those.”

But Fulmer said Advance America locations are “professional in appearance” and are in high-traffic areas to increase their visibility.

“Any retailer that exists in the marketplace likes to be located in high-traffic retail areas. That’s how customers find you,” he said.

Payday loans are small, short-term loans that lenders say can help pay unexpected expenses until a worker’s next paycheck. Because of the riskiness of the borrower and the short-term nature of the loan, interest rates are much higher.

If a customer borrows $100, for example, he would owe the lender $115 by his next paycheck. That’s equivalent to a 391.07 percent annual percentage rate.

Some states have regulated the businesses by making higher interest rates illegal.

State law prohibits people from taking multiple loans from the same lender. But nothing prevents them from taking out multiple loans from multiple companies.

Payday lenders have a tendency to cluster together, with many in Columbia in the same shopping center.

Critics say that makes it easier for people to borrow from one to repay another, getting them deeper into debt.

But Fulmer denied those allegations, saying Advance America has taken steps to work with customers who get in over their heads.

“They can pay off their obligation to us in a longer period of time, up to 10 additional weeks, at no additional costs,” he said. “It’s a very simple, straightforward product for consumers.”

GREENVILLE MODEL

This year, state lawmakers failed to pass legislation tightening how payday lenders operate.

That has led cities, including Greenville and Rock Hill, to pass zoning restrictions on where the lenders can locate.

“All of the municipalities, you get to the point where, ‘OK, how long can we wait?’” Greenville City Councilman David Sudduth said. “With payday lending, we knew it was going to get a lot worse before it got better.”

Rock Hill, which passed its ordinance in 2007, limits payday lenders from locating within 1,000 feet of each other. But the ordinance did not affect existing lenders that are already in place.

Greenville’s ordinance, which passed in 2006, limits payday and title loan lenders from locating within 3,000 feet of each other, but includes all lending locations. When a lender’s lease expires, it cannot renew it if it is within 3,000 feet of another lender. Since 2006, the ordinance has cut the number of Greenville’s payday and title loan lenders in half to 24 from 46, Sudduth said.

Any Kind Checks Ca$hed has sued Greenville over the ordinance, saying it is not being treated the same as other businesses, according to assistant city attorney Deborah Gammons. The case recently was sent to state court from federal court.

Columbia’s proposal is more like Rock Hill’s in that it would not affect existing businesses. But Columbia City Council members could decide to make the ordinance more strict, like Greenville’s ordinance.

“This is repeal or elimination of the industry disguised as reform,” Fulmer said.

But Coble said the ordinance wouldn’t rid the city of payday lenders — just spread them out.

“We’re not trying to outlaw them,” he said.

Reach Beam at (803) 771-8405.