Wednesday, January 24, 2007

Five years ago, Overland Park had two payday loan stores. Now there are 11, and city leaders don’t want more.

The Kansas City area’s biggest suburb is looking at imposing distance requirements between stores as a way of making it difficult for payday loan stores to locate there, according to The Kansas City Star.

“I don’t want them at all,” said City Council President Terry Goodman.

After saturating low-income areas, quick cash advance operations are proliferating in moderate-income communities where families are piling up debt. And Overland Park isn’t the only government trying to rein them in.

A Kansas lawmaker plans to push a law limiting the number of payday loans per person.

And Friday, newly elected Kansas Attorney General Paul Morrison announced the creation of a task force to investigate predatory lending at payday lenders. The group’s work could lead to legislation, possibly including a ceiling on the interest rates charged — which some say could put the clamps on these cash loan online and in person businesses.

Kansas City and Gladstone also are dealing with the issue. Both cities have placed moratoriums on new payday- and title-loan businesses while they examine industry practices. The moratoriums will end June 30.

Goodman and others believe the short-term lenders prey on financially vulnerable residents with exorbitant fees and cast an image of a community in decline.

The regulatory pressure is nothing new to the industry, said Tom Linafelt, spokesman for Overland Park-based QC Holdings, one of the country’s biggest payday advance lenders.

“It’s an easy industry for politicians to bash because of the lack of understanding,” Linafelt said. “Lawyers and politicians typically have never had to take out a payday loan.”

Linafelt said there was a wide chasm between consumer demand for payday loans and the politicians who want to eliminate them.

“While our customers are telling us we’re a godsend and they love us, legislators are saying we’re the scourge of society. There’s a disconnect there,” Linafelt said.

In Kansas, Democratic state Rep. Melody McCray-Miller of Wichita wants to limit the number of short term payday loans someone can take out at one time. Currently, state law limits each payday lender to three loans within 30 days to the same person.

She said her proposal would prevent consumers going from office to office, borrowing money from one store to pay off loans from another.

“This crosses a continuum,” she said. “Everybody uses these payday loans, not just poor people.”

Industry lobbyist Whitney Damron said the plan would unfairly single out one kind of consumer credit. He questioned putting limits on payday loans when there were no limits on the number of bank loans someone could take out or credit cards for which they could apply.

“We think that any access to credit can be abused by people, whether it’s bank loans, credit cards, and even title loans and payday loans,” Damron said.

Officials said that as much as some Overland Park leaders might want to, they could not ban payday lenders because the stores were authorized by state law.

However, the city is writing a law that would require them to be licensed similar to massage parlors and pawnshops.

Some city officials have mentioned keeping the stores 500 to 1,000 feet apart. Goodman, who first proposed restrictions on fast cash loans last summer, said he would like to keep the offices between a half-mile and a mile apart.

Goodman said he hoped the law would keep the payday loan stores from concentrating in certain parts of town, such as the intersection of 95th Street and Antioch Road, where there are three stores.

“I believe when you see a concentration of payday loans, title loans and check-cashing-type operations it just doesn’t send a good signal about what’s happening in that neighborhood,” Goodman said.

But Linafelt said other retailers clustered together, and he questioned the fairness of what Overland Park was doing.

While its moratorium is in place, Gladstone is looking at how best to deal with an infusion of savings account payday loan outlets, which now number 13.

Among other things, the city is studying how other cities regulate these kind of lenders, as well as their customer makeup, said Assistant City Manager Scott Wingerson.

“Everything is on the table,” Wingerson said.

This entry was posted on Wednesday, January 24th, 2007 at 6:27 am and is filed under Kansas.