Anniston contemplating moratorium on payday lenders
by Patrick McCreless
Feb 03, 2014 | 5383 views |  0 comments | 118 118 recommendations | email to a friend | print
Two cash advance stores sit side by side at the intersection of Greenbrier and Quintard. The city of Anniston is considering passing a moratorium on payday lending stores. (Photo by Trent Penny/The Anniston Star)
Two cash advance stores sit side by side at the intersection of Greenbrier and Quintard. The city of Anniston is considering passing a moratorium on payday lending stores. (Photo by Trent Penny/The Anniston Star)
Anniston could soon close the city off to new payday lenders, businesses that some poverty advocacy groups say create excessive debt for the poor and stifle economic development.

During its work session Monday, the Anniston City Council discussed placing a 6-month moratorium on new payday loan businesses in the city limits. The moratorium, which the council plans to vote on Monday, will give the city time to possibly develop a more permanent way to limit the growth of payday lenders.

Some advocacy groups for the poor say Anniston will be the latest in a string of Alabama cities to pass moratoriums on payday lenders, curbing excessive debt for the impoverished and improving economic development. Meanwhile, state supporters of payday lenders say such moratoriums are an attack on the free market and limit many residents' ability to obtain needed loans.

Mayor Vaughn Stewart said city manager Brian Johnson had requested the moratorium to evaluate the council's need to address the concentration of payday lenders in the city. According to city records, there are about 25 payday loan businesses in Anniston, many of which stretch along Quintard Avenue.

"We've been told by some citizens ... this is something we need to do at this time," Stewart said of evaluating the state of payday lending in the city. "As far as economic development, we'll look at clusters of these businesses around the city and try to make room for more diversity of commercial and industrial development."

Johnson said he will get together with the city attorney to determine what the city could do to possibly limit future payday lending growth. He noted that current payday lenders in the city will not be impacted.

"All we're saying right now is no new payday lending in the city until we figure out how to manage them," Johnson said.

Payday loan stores offer money based on a person's income. In Alabama, payday lenders are allowed to charge 400 percent annual interest rates on their loans, which equates to about $17.50 per $100 loaned. State law limits the loan amounts to $500 per customer.

Shay Farley, legal director at Alabama Appleseed, said if Anniston approves the moratorium, it will be the 18th Alabama city to have such a payday lender block in place. Alabama Appleseed is a nonprofit, non-partisan public interest legal advocacy group that promotes policy reforms that help the poor.

"That sends a major message that local municipalities are being impacted by lenders," Farley said of the moratoriums.

Farley said payday loans keep many residents in a constant state of debt because few can afford to repay the high interest.

"They don't have the money to pay it back and borrow again just to pay back the interest from the earlier loan," Farley said. "They stay in a cycle of indebtedness."

Farley said payday businesses also hurt economic development in cities.

“If an investor drives down Anniston and sees 10 payday lenders, they'll think twice about investing ... because they'll see that the community is so desperate that it can support so many lenders and think, 'How will these people be able to use my services when they're all in debt,’” Farley said.

Max Wood, president of Borrow Smart Alabama, a volunteer organization of 400 lenders in the state that works to educate consumers about payday businesses, said his organization has seen growth in moratoriums on payday lenders around the state in recent years.

"The demand for short period, small loans is pretty great and what they're doing really is limiting the marketplace," Wood said. "We believe it is pretty highly consumer unfriendly and anti-business."

Wood said shutting down local payday lenders will just force many people to use unregulated and more costly online lending options.

Farley said her organization is supporting new legislation in the Alabama Legislature to limit payday lending loans to 36 percent. She said Congress passed a similar law in 2006 that only applied to military personnel.

“We feel if it's good enough for military personnel, it's good enough for Alabama," Farley said.

Wood said the bill, if passed, would destroy the payday lending business in the state.

"Payday lenders are not banks and don't have the volume a bank has," Wood said. "If they got just 36 percent, payday lenders wouldn't be able to even pay their electric bills."

Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.

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