Payday Lenders Grouse About Proposed Ordinance

By Andy Meek

PRESSURE TACTICS: Lobbyists for a variety of fringe lending businesses, including payday lenders and auto title loan shops, are pressing members of the Memphis City Council and the Shelby County Board of Commissioners not to approve a proposed zoning change, which could curb the growth of the industry in the city and county. -- PHOTO BY ANDY MEEK

Lobbyists representing check-cashing businesses, payday lenders and auto title loan shops are meeting with Memphis and Shelby County lawmakers to voice their concerns over a proposed zoning ordinance designed to curb their growth.

Representatives of businesses such as title loan shop TitleMax have approached council members over the past few weeks in response to new zoning guidelines that, if passed, would prevent those businesses from operating within 1,000 feet of each other. The new rules could become official soon if the proposed rule change is approved by the Memphis City Council and the Shelby County Board of Commissioners next month.

Cluster buster

As The Daily News first reported last month, city council member Bill Morrison came up with the idea for the legislation in an effort to break up what he says is the cluster effect those businesses produce.

In parts of the city, they line the street like collections of oversized neon ATMs, each of which hawks the alchemy of turning a debtor’s worthless post-dated check or the title to a car into instant pocket money.

The business owners who run those short-term lending enterprises have a variety of reasons they’re pushing back against Morrison’s proposal.

“The reasons they’ve given me is, No. 1, they say they create jobs,” the freshman council member said. “Which we can argue that they don’t. Another one of the arguments they’ve used is they’re taking over vacant buildings in neighborhoods. No. 3, they’re talking about how they’re already regulated and that this infringes on their right to compete.

“But we can argue about that, because I don’t think (being) 1,000 feet from each other infringes on anyone’s right to compete. We’re not regulating their fees. That’s not a conversation we’re having with them. This is a zoning ordinance.”

The language of the ordinance reads: “It shall be a violation of this development code for a person, corporation, or other legal entity to operate or cause to be operated any check-cashing, payday loan, or title loan establishment within 1,000 feet of a duly organized and recognized place of worship; a public or private elementary or secondary school; a public or private day care facility or kindergarten; a boundary of a residential or landmark district; or any other check-cashing, payday loan, or title loan establishment.”

Representatives of the fringe lending industry regard the zoning change as an unnecessary business restriction. Those business owners are expected to be present to air their concerns when the city and county government bodies discuss their final version of the ordinance.

Advocacy of a different sort

Former City Council member Dedrick Brittenum Jr. – an attorney at Farris Bobango Branan PLC – has approached council members recently on behalf of some members of the industry. He spoke briefly with Morrison on the day of a recent council meeting about the proposed zoning change.

Brittenum left the city council in 2007. When asked to comment, he directed a reporter to Jabo Covert, a government relations executive at Tennessee-based Check Into Cash.

Covert could not be reached for comment. Check Into Cash CEO Allan Jones was not familiar with the details of the proposed ordinance in Memphis, but said it was unfair to place his business in the same category as auto title lenders and businesses that cash payroll checks.

Unlike customers of most other short-term lending businesses, Check Into Cash requires that its customers have active checking accounts. Customers can get a maximum loan of $200 from a Check Into Cash store and would then pay a fee of no more than $30 on that $200 loan.

“Our clientele is not what they think it is,” Jones said. “Everybody that deals with us has to have a checking account. Our average consumer is a female schoolteacher with an unexpected car repair. One-hundred-percent of our people have active checking accounts that they’re reconciling every month. It’s firemen, policemen, nurses and (near them) is typically where our stores are located.”

In context

The chain’s Memphis-area presence is emblematic of most of its competitors. Most of the stores are concentrated inside the interstate loop with a smaller amount in suburban markets.

Check Into Cash’s local stores include a Downtown store about three blocks from Memphis City Hall and one in a strip center on the north side of Wolfchase Galleria near Lakeland.

Such stores are often a stone’s throw from traditional banks. The Wolfchase-area Check Into Cash, for example, is about half a mile east from a First Tennessee Bank branch that sits on the side of Wolfchase Galleria facing Germantown Parkway.

Those two businesses are not only separated by distance. They are divided by a world that traditional bank customers might never venture into, but that low- to middle-income customers know all to well. That world is characterized by post-dated checks written to cover unexpected expenses and by the burden of triple-digit interest rates on short-term loans.

Jones said it makes sense for his stores to be near customers.

“Say you had a payroll check and you wanted to get it cashed,” Jones said. “But if you take away that service from me and make me, as a check-cashing customer, drive halfway across town to cash it somewhere else – I don’t know how that benefits anybody. Who are they trying to protect?”

To paraphrase Morrison’s response: Count yourself lucky. Morrison did not specifically mention Advance America, the largest payday lending chain in the country, but his comments allude to the fact that the chain is feeling a squeeze like many of its competitors as lawmakers tighten restrictions governing the industry.

Morningstar Inc. analyst Jason Ren said in a recent report that Advance America will find it difficult to adapt as its current business model “is legislated out of business on the local, state and potentially the national level.”

“Quite frankly, this is a very lenient ordinance in my opinion,” Morrison said. “There are some places where they are simply outlawed. Period. They can’t even be in the state.”