Payday loan stores face checks, balances

Thursday, Dec. 15, 2005 | 8:24 a.m.

Las Vegas Valley cities are stepping up efforts to limit the number of payday loan stores in their communities.

Henderson is preparing to join Clark County and Las Vegas in restricting the location of payday loan companies as part of an effort to hold down their number. And North Las Vegas is planning to extend a moratorium on new payday loan stores through May 20 to give the city more time to develop its own ordinance restricting their use.

Henderson's planning staff has drafted an ordinance that would require the businesses to be at least 200 feet from residential neighborhoods. The businesses also must be at least 1,000 feet from each other.

The ordinance mirrors those in Las Vegas and Clark County, where similar distance requirements are already in place. The Henderson City Council, which has called for regulations to help limit the spread of payday loan offices, is expected to consider the ordinance early next year.

Henderson has 29 payday loan branches, many of which are concentrated on Boulder Highway and Sunset Road. City Planner Shelly Labay said the distance requirements should help limit additional payday loan stores in Henderson.

The industry has come under fire from critics who argue that the companies, with high interest rates, prey on problem gamblers, drinkers and the poor. The industry says on average it charges 19.2 percent interest for a two-week loan -- a charge of $86 for borrowing $500 until the next payday.

"I think the perception is important," said Henderson Councilwoman Amanda Cyphers. "When you start to see one of these businesses at every corner and see more (of them) than gas stations, it affects the image of our city.

"We are not saying they shouldn't be allowed in our city, but there is a negative connotation associated with their use and it does impact what view people may have of Henderson. We are so much more than payday loans."

Kim Koster, Nevada Financial Services Association treasurer, said the industry opposes distance requirements because they protect existing bad operators. Having stores close to one another creates competition, which in turn produces better rates and services, she said.

Jim Marchesi, the president of payday loan company Check City, said Henderson's proposed separation requirements would be measured from door-to-door, as occurs in Clark County, rather than from property line to property line, as Las Vegas does. Las Vegas also has regulations limiting the payday loan companies' hours of operation.

"We don't think it is necessary to have distance restrictions because they provide discrimination in a sense," Marchesi said. "Why not put distance requirements for fast-food restaurants or nail salons? In other businesses like bars, you have secondary effects. ... We don't have any secondary effects."

Payday loan operators maintain that the industry has been unfairly criticized for the behavior of some bad operators, adding that the loans offered are cheaper than banks' insufficient-fund fees.

The industry came under fire in Nevada this year after residents who took out small loans wound up paying high interest rates and late fees. In some cases, loan recipients had additional penalties imposed when companies took them to court.

"The data does not support it being a bad thing," Marchesi said. "This business is growing and it's because of consumer demand. We offer a much lower cost than the alternative."

Henderson will wait to move ahead with the distance-requirement ordinance while the Nevada Supreme Court considers two local cases -- one involving Las Vegas and the other, North Las Vegas -- dealing with the payday loan industry, Labay said. In both, payday loan companies are contesting the cities' refusal to issue permits for new offices.

In North Las Vegas, city officials are considering distance requirements and other regulations to limit payday loan offices, said Phil Stoeckinger, the city's finance director. The council enacted a six-month moratorium on new branches in July and is expected to approve a resolution in January extending it for another four months, he said.

Stoeckinger said the city, which has 25 payday loan stores, plans to contact officials in Las Vegas, Henderson, Sparks and Reno about ways to regulate the industry and whether state legislation is needed giving cities more control.

Brian Wargo can be reached at 259-4011 or at wargo@lasvegassun.com.