A pair of Baton Rouge councilwomen are picking up where a handful of state legislators left off in their crusade against “payday loan” businesses and what critics describe as predatory lending practices targeting the poor.
Councilwomen Donna Collins-Lewis and Ronnie Edwards want to restrict where new payday lenders can open. Their proposed ordinance would ban the businesses from opening within 1,000 feet of existing payday loan stores, pawn shops, churches, libraries, schools, public parks, businesses that sell alcohol, casinos and residential neighborhoods.
The proposal, which affects only payday lenders opening after Sept. 1, also would limit operating hours from 7 a.m. to 7 p.m. and require businesses to post information about local nonprofit agencies that provide financial education and training programs.
The Metro Council is expected to consider the measure Wednesday at its 4 p.m. meeting in City Hall.
Troy McCullen, president and CEO of Finance America Business Group, which owns 31 Cash-2-U lenders across Louisiana, including locations in Baton Rouge, Zachary and LaPlace, said the councilwomen are misguided in their efforts.
“It’s just an attack on business because we’re low-hanging fruit,” he said. “We’re easy to hit because we’re so misunderstood, but it’s just ridiculous.”
But the councilwomen said they want to move forward with a local restriction on the businesses, particularly given the defeat this summer of statewide constraints on the industry.
“I have had family members that have been hung up on payday loans, and it takes forever for people to pay back,” Collins-Lewis said. “There’s an argument that it benefits people, but, in reality, they’re losing more money than they actually gain.”
Edwards and Collins-Lewis said many of the payday loan businesses in East Baton Rouge Parish are in their two council districts, with large concentrations of the loan storefronts along Florida Boulevard and in the 70805 and 70806 ZIP codes.
“It’s well-documented that these areas are underserved and disenfranchised, with a large number of elderly people — that we consider the very definition of vulnerable,” Edwards said.
McCullen was one of several payday loan owners and lobbyists who showed up at the State Capitol this summer and helped kill attempts to restrict the businesses statewide.
Payday loans, sometimes called cash advances, often appeal to people who are ineligible to borrow from banks or credit unions — typically borrowers living paycheck to paycheck. The idea is that they can borrow a small amount of money for a fee and pay it back during their next pay period.
But the practice has come under fire, as low-income customers often fall behind on payments and are charged hefty penalty fees, falling into a cycle where they visit multiple lenders, taking out new loans to keep up with the last one. Interest rates, when calculated on an annual basis, can be steep.
This summer, legislators debated and ultimately killed bills that sought to limit the amount of interest that can be charged and the number of payday loans consumers could take out each year.
Baton Rouge state Rep. Ted James, a Democrat, said East Baton Rouge Parish is in the top three parishes in the state for the number of payday lenders. James proposed capping short-term loans at 36 percent interest in the state Legislature.
He said he hopes the council is more successful with passing new regulations than he was, noting that the payday lender lobby was among the most powerful he’s encountered.
“I think this is a huge step in the right direction,” he said. “We have way too many in Baton Rouge.”
McCullen, who also represents the Louisiana Cash Advance Association, the statewide group representing payday lenders in Louisiana, said the businesses are already well regulated by the state and that their lending practices are no more predatory than banks.
“Our rates are posted on the walls,” he said. “Customers are not dumb, and they know what they’re doing. To have the government step in and do something like that just doesn’t make sense.”
Metro Councilman Buddy Amoroso said he wouldn’t support intruding on a legal business.
“I may not agree with lending practices of payday lenders, but they are a legal business and people are free to use them or not use them,” he said. “That’s a personal responsibility issue and not an issue the Metro Council needs to be taking up.”
Together Louisiana, the AARP and the Louisiana Budget Project were chief supporters of payday lending reform during the past legislative session.
According to Together Louisiana, payday loans resulted in 154,227 bounced checks last year and payments to businesses of $145 million in fees and interest.
The Rev. Errol Domaigne, a Together Louisiana leader, said the group fully supports any effort to curtail payday lending.
“The biggest obstacle is the willful or nonwillful lack of understanding of the effects the present businesses have on the lives of poor people,” he said.