The Decatur City Council will soon consider zoning regulations that could limit where payday and title loan businesses are located.
The move is a good step, but it would be unnecessary if the General Assembly did its job.
Decatur has 24 title and payday loan businesses within its city limits. Many of them are near the downtown area and in older parts of the city. The businesses don’t help the city’s image.
In a plan approved last week by the Decatur Plan Commission, existing businesses would be allowed to stay where they are. But any new businesses of this type would have to be at least 1,500 feet from each other and only in area zones as B-2 Commercial Districts. Currently, these businesses and pawn shops are not defined in the zoning ordinance. The measure would adopt definitions that are consistent with the way the state defines these businesses. There are three licensed pawnbrokers in the city limits.
The payday and title loan businesses are the real target of this ordinance. Although a date hasn’t been set, at some point, the city council will have to consider the plan commission’s recommendation.
While there is certainly a market for short-term loans, these businesses are allowed by the state to charge exorbitant interest rates. Illinois People’s Action, a faith-based volunteer group that opposes the payday and title loan business, gave examples of nearly 400 percent interest on a $200 payday loan. Another example presented was a $995 title loan that would cost more than $6,000 if the individual made all 24 payments on time.
The interest rates are well-documented, and consumers need to understand the interest rates and other ramifications of any loan.
But it’s state government that has failed to do its job in this case. Many states limit the interest rates such businesses can charge. The rates are still higher than what consumers can expect from other financial institutions, but they have reasonable limits. That idea has been proposed in Illinois but has gained little traction. These businesses have a substantial lobbying effort and donate to candidates’ campaign coffers. So far, the General Assembly hasn’t seen fit to limit the rates these businesses can charge.
That lack of action by state government leaves the decision to local governments that have few options. Assistant City Manager Billy Tyus told the plan commission that the approved proposal was within the city’s legal rights. But he also warned that going further could invite legal challenges.
The council should enact this measure, even though the immediate effect will be minimal. But the real issue lies with the state, which can regulate interest rates.