Wednesday, Nov. 16, 2005 | 7:52 a.m.
Nevada's largest cities should urge the Legislature to give local governments more power to regulate payday-loan companies, according to a North Las Vegas staff recommendation.
The push for more land-use authority over payday-loan companies comes as Henderson and North Las Vegas move closer to writing regulations limiting the growth of an industry that has come under fire by critics who say the companies, with high interest rates, are preying on problem gamblers, drinkers and the poor.
While that effort moves forward, North Las Vegas appears headed to the Nevada Supreme Court in a separate bid to halt the opening of a new payday-loan store.
The city, which on July 20 enacted a six-month moratorium on new payday companies to allow more time to study regulations, is preparing to appeal a District Court ruling ordering it to issue a permit for a Check City outlet at the southwest corner of Craig Road and Revere Street.
In making its decision, the council cited an oversaturation of payday-loan companies along Craig Road, where there already are six such businesses. Overall, there are 25 payday-loan offices in North Las Vegas, officials said.
District Judge Mark Denton reversed the council's decision by siding with Check City, but in a Nov. 7 order gave North Las Vegas a 21-day stay before it has to issue the permit. That gave the city time to appeal to the Nevada Supreme Court.
At a meeting today, the council will consider hiring the Las Vegas law firm Schreck Brignone to file an appeal. Check City attorney Craig Newman declined to comment on the pending appeal.
In examining possible broader limits on payday-loan offices, North Las Vegas City Manager Gregory Rose said staff will urge the council to go to the Urban Consortium -- a group composed of North Las Vegas, Henderson, Las Vegas, Reno and Sparks -- to seek legislation giving local governments more control over the companies.
"The idea is to see if there is a statewide uniform way we can regulate this industry," Rose said.
Cities have the ability to place distance requirements and limit the number of payday-loan companies in their borders, but it would take state legislation for local governments to prohibit any new outlets from opening, Rose said.
North Las Vegas Finance Director Phil Stoeckinger said getting additional authority from the Legislature would further protect cities from legal challenges if they want to impose tougher limits on payday-loan companies.
But Kim Koster, Nevada Financial Services Association treasurer-- who has her own chain of payday-loan stores -- argues that cities already have sufficient control over the firms and do not need more authority.
"If you give them more control, then it is never ending," Koster said. "They could put a ban on restaurants and ban on casinos. Where would it stop?"
Mirroring a national pattern, the payday-loan industry has come under scrutiny locally in recent months after residents who took out small loans wound up paying high interest rates and late fees. When borrowers could not pay off the rapidly accumulating debt, the companies took them to court and had more penalties imposed.
Citing one example of an individual paying $2,000 for borrowing only $200, a new state law went into effect July 1 that limits the penalties that can be charged on delinquent loans to the prime rate plus 10 percent. The law also stops garnishment fees and triple damages being added to borrowers' debt.
The Henderson City Council would like to see the Nevada Legislature do even more to regulate the businesses.
With Nevada having no usury laws, the payday-loan industry on average charges 19.2 percent interest for a two-week loan. That amounts to a charge of $86 for borrowing $500 for two weeks. In contrast, Wells Fargo charges customers $50 for borrowing $500 until the next payday.
"The business is one of the most predatory on the face of the Earth," Henderson Councilman Jack Clark said during a recent council meeting. "It preys on people who can least afford it. They (the firms) have a higher rate than loan sharks. They may not break any legs, but they are taking food out of the mouths of kids."
Koster, however, said the industry is unfairly getting a black eye for some bad operators, adding that the loans are cheaper than if people had to pay banks insufficient-fund fees.
The North Las Vegas City Council today also will hold a workshop to consider options for regulating payday loans, including possible distance requirements between new and existing stores, an annual cap on the number of permits and a lottery system for licenses. No such regulations exist now.
Henderson, which met with payday-loan operators last week, also is eyeing an ordinance regulating the businesses.
Planner Shelly Labay said the city is looking only at distance requirements to limit concentration in Henderson, which has 29 payday-loan branches, many near Boulder Highway and Sunset Road.
Koster said the industry opposes distance requirements because it would only protect the bad operators. Having stores side by side creates competition and better rates and service, she said.
Las Vegas, which has 64 licenses for payday-loan stores, and Clark County already require that the stores be at least 1,000 feet from each other. While Clark County does not track payday-loan numbers, it has issued 117 licenses for all businesses that offer check cashing and deferred deposit services.
Brian Wargo can be reached at 259-4011 or at [email protected].
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