Businesses that provide payday loans need to stay away from Des Moines, Iowa, at least for 180 days. The Des Moines City Council on May 13 voted to enact a 180-day ban on new payday loan and pawn shops in the city. This means that business owners who want to open these stores in the city won’t be able to for at least six months. Consider the ban just the latest attempt by municipal legislators to fight back against what they consider the unfair lending practices of payday lenders.
An Unpopular Industry
The providers of payday loans aren’t exactly the most popular people on Earth. A growing number of state and local governments are taking aim at the industry, passing or debating tighter regulations on the way these lenders do business. Legislators are most concerned about the high interest rates – many lenders charge annual percentage rates higher than 400 percent – that payday lenders tend to charge. Others say that the short-term loans prey on consumers who are financially desperate, and willing to overlook the high rates they’re being charged. In Des Moines, there was little debate over the new ban. City Council members voted 6-0 to have their attorney craft a six-month moratorium on payday lenders and pawn shops.
The city council members took action against the payday lending industry after learning that a pawn and loan chain was planning to open a shop in the city. When the council voted to draft the moratorium, community leaders in attendance at the meeting burst into applause, according to a story in the Des Moines Register. Before the vote, activists in the crowd told council members that payday lenders were not examples of economic development, but rather businesses that take money from area residents while providing little in return. Activists in the audience also called on the state of Iowa to pass tougher new regulations on the industry.
Looking For an Interest Rate Cap
High interest rates are the biggest concerns cited by opponents of payday loans. The Iowa state legislature has in the past attempted to pass legislation that would cap payday loan interest rates at 36 percent. That legislation, though, has so far failed to make it into law. It wouldn’t be surprising, though, if Iowa did eventually pass some cap. If it did, it would become the latest state that’s pushed through more restrictions on payday lenders. Payday loans are a financial necessity for many consumers. But it’s hard to argue that their terms aren’t often outrageous. The payday lending industry could do a lot for its public image if it policed itself more carefully.