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Payday zoning requirements should be adopted

BY DI EDITORIAL BOARD | AUGUST 22, 2012 6:30 AM

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The Iowa City City Council has passed proposed restrictions on Iowa City payday lenders.

The measure was brought before the Iowa City City Council and was passed 7-0 Tuesday night during a public hearing.

This regulation on payday lenders will benefit the Iowa City community in incredible ways.

The zoning restructuring includes the ability to force new payday lenders to build in community commercial zones, require a minimum of 1,000 feet between each lender, and separation from areas that may be negatively affected, and only allowing lenders licensed by the state of Iowa to open in the city limits.

There are many facts that should be kept in mind during public debate on issue. Passing these particular set of restrictions against such businesses as payday lenders was not just fiscally responsible, it was a moral imperative.  

Payday lenders are designed to keep low-income households borrowing money — they are literally modeled to keep a person paying until there is not more money.

A favorite report among people against these lenders is a 2008 report released by the Federal Trade Commission that urges consumers across the nation to consider alternatives to payday loans.

These establishments offer short-term loans between paychecks to individuals, charging high interest rates, with annual percentage rates anywhere from 300 to 400 percent, according to a consumer advisory report from the Iowa Attorney General's Office.

To further put this in perspective, 24 percent is considered high for credit cards. And according to the report, almost half of state payday loan users borrow frequently — more than 12 times in a single year.

“Leading to an average of $480 spent on borrowing fees alone per year,” the report said. “Those dollars are down the drain.”

Fiscally, payday loans make no sense to the average consumer, but for individuals who have no food in the pantry and no money in the bank, they become an option.

And this debate should be focused on more than fiscal responsibility, but also on a moral necessity to protect Iowa City’s residents from unethical business practices.

Senior city planner Robert Miklo said studies showed payday lenders’ potential negative effects on surrounding neighborhoods, as reported by The Daily Iowan.

“They tend to be associated with high-crime areas and loitering, therefore having a negative effect on surrounding neighborhoods,” Miklo said.

David Goodner, the Iowa City community organizer for Citizens for Community Improvement, said told Daily Iowan reporters in an interview in July that payday loans lead consumers to a cycle of debt.

Goodner said the recommendations would help the South and Southeast Sides of Iowa City.

“… For years, people have talked about what to do about the South and Southeast — that’s where the payday lenders are located,” he said. “They're all located in those poor neighborhoods. [Lenders] have a business model that preys on and exploits poor people.”

This issue deserves a public debate, along with a weighed and balanced solution. The zoning requirements provide this solution and were properly adopted by the city.


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