As the groundswell of resentment to all things associated with debt grows, some communities are taking action to prevent payday lenders from setting up shop in their neighborhoods.
Galveston City Council last week denied its finance committee chairman a permit to allow a payday loan company to operate on land he owns on the city's seawall.
Don Mafrige and a company representative addressed the council members during a public hearing in which they sought a specific-use permit to operate a "retail lending facility" at 6600 Seawall Blvd.
Because the property is in a redevelopment zone, the application would need a change-of-use waiver to allow its use as a pay-day loan shop.
Mafrige asked the council members to vote for jobs and grant the application but saw it go down in a 4-3 vote after Councilwoman Elizabeth Beeton told the meeting such businesses can charge as much as 450 percent annual percentage rates under a loophole in Texas state law.
Beeton said Advance America is a credit service operation and, as such, operates under a loophole in Texas law that does not subject it to rules that other lenders, such as banks, have to follow.
"Texas payday loans are the most expensive in the United States," she said.
"Essentially, they are able to engage in predatory market practices. Their trade association itself says frequent use of their services can seriously affect income.
"They routinely offer loans at 450 percent APR. I'm suggesting we do not change our zoning laws to allow such applications."
The city council also argued that the payday loan shop would not serve the needs of the community and because of this should not be allow a permit to operate their business. If that argument is successful, then it could possibly be made in any community in this country. Payday loan lenders are not offering any type of important or valuable service to any community especially the poor. What payday loan lenders do offer is an opportunity to for debtors to sink themselves deeper into a financial black hole that only bankruptcy could dig them out of. We could see more communities take action to at a local level to lock payday loan lenders out of their neighborhoods.