Payday loan company openings halted

Thursday, July 7, 2005 | 11:12 a.m.

The North Las Vegas City Council has halted the opening of any more payday loan companies while city officials consider an ordinance limiting their number in the community and distance from one another and possibly even an outright ban on new ones.

The City Council set July 20 for a public hearing on a proposed six-month moratorium and imposed a two-week moratorium until the longer ban is considered.

The setting of the hearing followed a 4-1 vote in which the council denied a permit by Check City to open an outlet in a shopping center at the southwest corner of Craig Road and Revere Street. The council overturned an April 27 decision of the Planning Commission that approved the permit.

It's the second time in three months the council has denied a permit to open for a payday loan business, citing an oversaturation in areas requested for the businesses.

City officials said Wednesday that there are six payday loan companies on Craig Road alone, and Councilman Robert Eliason complained that there are 27 such businesses operating in the city.

The council is considering an ordinance to deal with an increase in applications for payday loan services as a primary use or as an accessory to an existing business. A moratorium gives the city time to define the regulations that may be enacted, city officials said.

Mayor Mike Montandon said he wouldn't support any outright ban but said he sees the council considering limits on the number of businesses and distance to one another, as the city does for pawn shops. The city may also consider a lottery for permitting of such businesses as it does for pawn shops.

Check City Ed Garcia called the council's action to reject the permit as "arbitrary," and subject to a legal challenge while Jim Marchesi, the president and chief executive officer of Check City said the city isn't treating his industry the same as other businesses.

Check City officials said there are no other payday operations within 4,000 feet of the location their company wants to use and the same area has 10 banks, 15 fast food restaurants and six nail salons. Many of those business generate more traffic and event result in more police calls, company officials said.

Wednesday's meeting brought out about a dozen residents who gave the council divergent views on the value of the payday loan companies, which have come under scrutiny in recent months for unscrupulous practices. The state enacted a new law July 1 that limits the penalties that can be charged on delinquent loans. It stops garnishment fees and treble damages being added to late paying loans and fees for early payment of the loan.

As was detailed in an in-depth Sun investigation in early March, many Las Vegas Valley residents had been taking out small loans only to wind up paying late fees and enormous interest rates. When those people couldn't pay off the rapidly accumulating debt, the companies took them to court and had more penalties imposed.

Marchesi said that he's providing a service that's done at banks and grocery stores, that his company has been an industry leader and that his company does not gouge customers. He said his charges are 40 percent less than his competitors. He said his company charges $1 per day per $100 loaned and such fees are lower than the bank charges for bouncing a check.

Customers of Check City told the council the company has provided them a valuable service when they needed cash for emergency expenses until they are paid. Other residents who live near the proposed Check City on Craig Road criticized such businesses as preying on problem gamblers and drinkers.

Wednesday's vote by the council sets up the possibility that Check City will file a lawsuit to overturn the council decision. That was the case when the council denied a permit for a payday loan operation at the northeast corner of Cheyenne Avenue and Martin Luther King Boulevard, Montandon said.

Joseph Brown, an attorney for Check City, said the appeal shouldn't have been considered because the person who filed it, Kimberly Davis, didn't attend the April Planning Commission meeting. Under state law, that disqualifies her from filing the appeal, he said.

Montandon, who supported Check City getting a permit, said the city should have the right to hear an appeal, even if Davis didn't attend the commission meeting. Having several people opposed to it justifies the decision to hear the case, Montandon said.

Davis, who said she couldn't attend the meeting because she is a single parent, applauded the city's decision to deny the permit.

"I think there are too many of these businesses, and they don't need any more on Craig Road," Davis said.

Davis criticized the businesses as charging customers high interest rates and for encouraging people to gamble. She said the store would have been too close to her home and near Gold Crest Park where children play.

"These places attract people in desperate need of money, and naturally I don't want those people to be allowed near a park anyway," Davis said.

Montandon said he opposed the appeal because he doesn't believe anyone is harmed by walking past a check cashing center. He said it was a tough decision and understands the stigma the industry has created that makes some people not want to live near them. He said if people quit supporting a business, it will go away.

Marchesi said there are only 16 payday loan companies state licensed to operate in North Las Vegas -- and that many will cease to operate because of the new state law. Per capita, he said North Las Vegas has one-third as many compared to Las Vegas and Clark County and half as many as Henderson. Limiting the number will stifle competition and hurt the consumer, he said.

"Competition is what drives America," Marchesi told the council. "The more there are will lower prices."

But Councilman William Robinson told Marchesi that he was the "victim of circumstances" for an industry seen as "ripping off" people.

Davis said she would be surprised if it's legal for the city to ban permits to all payday loan companies that request them in the future. She said she would like any ordinance to limit the businesses from being too close to schools and parks.