Payday Loans Policy

November 10, 2006

The practice of short-term high interest loans has become a major industry in Kansas City. It seems a new loan shop appears every other block. Rates and policies vary, but the common practice is to issue a loan in cash, with the due date being set for the borrower's next payday. It is not uncommon for rates as high as $20 for every $100 borrowed.

Arguments of individual responsibility while valid, do not address the general nuisance the presence of these businesses cause to the surrounding area. The presence of these types of businesses depress property values and give a general impression of an area in decline.

Cities are not allowed to regulate interest rates. Usury laws are the responsibility of the State. Some loan shops avoid these regulations by originating the loan in another state where the usury laws are less restrictive.

While municipalities cannot establish laws regarding interest rates, there are other constraints put in place across the country that have seriously curbed predatory lending institutions.

I will propose local ordinances which restrict loan activity by allowing customers to rescind their loans within 24 hours, requiring repayment of at least 25 percent of a loan before it is renewed and allowing only one renewal of any loan.

I will also work with the city’s Planning Commission to adopt an ordinance that amends the existing zoning codes making it more difficult to open convenient cash stores in the city. By defining convenient cash business in their own category we can establish minimum distances between stores to restrict their locations and numbers.