Surely city of Toledo officials have the mettle to limit more payday and short-term lenders from opening here.
These outfits woo customers who need a few hundred bucks to get through a tough spot. Loan recipients are then hooked when they cannot meet payment deadlines, and when more fees are added, they are plunged further into debt.
Toledo needs no more predatory lenders. Zoning authorities and city council must use their muscle to stem their growth here.
Proposed zoning changes would significantly impede predatory lenders from popping up in the city. An attorney for Advocates for Basic Legal Equality, George Thomas, has written a proposed zoning change to limit the lenders to one for every 30,000 residents and require no fewer than 2,000 feet between them.
Right now there are 37 such lenders in our city, which comes out to about one for every 7,630 Toledoans. If the proposal, sponsored by Councilman Cecelia Adams, becomes law, existing payday lenders would not be affected. But any that close could only reopen under the new rules.
Given the adverse effect payday operations have on the most vulnerable citizens, it is reasonable to establish stricter guidelines. And when Toledo passes this measure, it will join other Ohio cities that have acted on behalf of residents who are most likely to be taken advantage of. Cleveland only allows one payday lender for every 20,000 residents, and they must be at least 1,000 feet from another business. Xenia officials impose a 5,000-foot distance between them. Xenia’s population is about 26,000. Cuyahoga Falls permits one for every 10,000 residents and requires 1,000 feet between them.
Toledo’s proposed plan is tougher than those other cities’ laws, and that’s a good thing. After all, payday lenders do great harm to the people — usually residents in low-income areas — they say they want to help. A borrower taking out a $300 loan is slapped with a $15 fee for each $100 in the loan. At the end of two weeks, $345 is due. When borrowers cannot pay, they get a loan extension, but incur more fees, and two weeks later, $390 is due. “The borrower cannot afford these quickly escalating fees,” Mr. Thomas said. Consequently, the borrower faces “a vicious cycle of debt.”
That scenario validates what the Consumer Financial Protection Bureau found two years ago, when a study revealed that 80 percent of payday loans that are rolled over or renewed, like the $300 example, result in higher rates and fees. And though the state of Ohio capped the payday loan interest rates at 28 percent in 2008, loopholes in the law allow businesses to wiggle out from under restrictions and slap consumers with expensive “fees.”
Mr. Thomas’ proposal has been sent to the Toledo plan commission. Surely it will act in favor of what’s best for the city of Toledo and its citizens. City council should also affirm this reasonable limit.
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