Racine moves to limit payday loan stores

By Paul Sloth

Friday, June 30, 2006 2:12 AM CDT

Racine - A plan to restrict the location of payday loan stores in Racine is headed to the City Council next week.

The effort would put the city in league with other communities throughout the country - and cities closer to home such as Milwaukee and Superior - that are curtailing the lending businesses.

On Wednesday, the city's Plan Commission approved adopting an ordinance that amends the existing zoning codes making it more difficult to open convenient cash stores in the city.

The commission approved amendments that define what a convenient cash business is and establish a distance between stores to restrict their locations.

It's something Alderman Greg Helding said should have been done a long time ago. Helding, a Plan Commission member, and Alderman Aron Wisneski pushed the issue onto the agenda.

"Essentially, they're bad," Helding said. "All indicators I have seen show them to have a detrimental effect on neighborhoods, especially when they cluster."

Helding said payday loan stores are a lender of last resort for people who are already on the edge financially.

There will be a public hearing during the City Council meeting July 5.

Helding said he has been surprised at the lack of opposition by members of the City Council. He said he also hasn't heard any opposition from payday loan store owners.

There are 16 payday loan stores currently in Racine. City Development Director Brian O'Connell created a map illustrating where the payday loan stores are located throughout the city. "The city is pretty well saturated, which is why we really are supporting the idea of this ordinance," O'Connell said.

Helding said the state's inaction on the issue of regulating payday loan stores has made it difficult for cities such as Racine to control them.

"Wisconsin will be damn near the last state to try to tackle this issue," Helding said.

Previous attempts to regulate payday lenders have stalled at the state level. The most recent crack at drafting legislation failed to make it past Gov. Jim Doyle's desk. He vetoed a bill in 2004 that he said was too weak.

Wisconsin is one of only a few states that do not have stricter regulations on the payday-lending industry. The average maximum amount across other states with payday lending laws is around $500, according to the state's Department of Financial Institutions.

The bill Doyle vetoed included a maximum loan amount of $5,000 and a limit on loan rollovers, but not an enforcement mechanism for that limit or a limit on the number of loans a borrower may have out at one time.

Currently, payday lenders are subject only to the state's loan licensing statutes. Carrie Templeton, an executive assistant with the state's Department of Financial Institutions, said Wisconsin has some of the weakest laws in the nation in terms of consumer protections from payday lenders.

Even if states do not ban the businesses outright, many have capped usury rates - the amount of interest charged on loans. Wisconsin abolished its cap on usury rates.

Some states that have payday loan stores also have caps on the number of times a customer can roll a loan over.

"We're interested in stopping consumers from getting into the spiral of debt," Templeton said. "We don't want to outright ban payday lenders. But we feel it can be done responsibly without taking advantage of consumers."

While the city can't ban the businesses, which are legal, it can use its zoning laws to restrict where they operate. In fact, Milwaukee, Madison and many other cities across the country have created guidelines for where payday loans and similar businesses can operate.

This move gives city officials time to consider other steps they may take in the future in terms of restricting the businesses.

"What this will do is slow the proliferation of these stores and prevent any further clustering," Helding said. "The clustering pushes out more traditional retail and businesses that are better for the economy."

On The Net: Regarding payday loan stores: http://www.paydayloaninfo.org http://www.responsiblelending.org

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