Pelham, AL, Passes Moratorium on Pawnshops, Payday and Title Loan Storefronts

Inside Subprime: Aug 8, 2018

By Kerry Reid

What do pawn shops, vape shops, tobacco stores, tattoo shops, car title loan, payday loan and used automobile businesses all have in common?

Well, if you’re in Pelham, Alabama, none of them can open in town for a year, thanks to a moratorium on certain business licenses passed in July by the city council by a 2-1 vote, with two members absent.

This isn’t the first time the city has passed such an ordinance. According to an August 7 article by Briana Harris of the Shelby County Reporter, the city passed a similar measure in 2014, which expired in May 2017.

Erin Edgemon of reported on May 24, 2017, “Pelham City Council unanimously approved an ordinance lifting the three-year moratorium but requiring these businesses to receive approval from the Pelham Commercial Development Authority and the City Council before being granted a business license.”

One of the businesses caught in a gray area before that first moratorium was lifted last year was Revolution Ink, owned by Jeff Hubbard. As reported August 8 by Hillary Simon of CBS42, Hubbard tried to move his business a mile away from its original location and was told he needed council approval for his new license.

He eventually got it – the law passed in May 2017 included exemptions for his business and for an existing vape shop. But that law still required new businesses in those categories to receive approval for licenses.

And that led to the restrictions that just passed. As reported by Simon, “Any business that is already here in Pelham is not being asked to leave. This only prevents a new business from coming in that falls in this category.”

While Hubbard’s business has nothing to do with the payday or auto-title industry, these businesses have been targeted with zoning restrictions in recent years across the United States. For example, in 2014, Decatur, Alabama (about 100 miles away from Pelham) passed a zoning law aimed at payday lenders.

As noted by Decatur city councilman Chuck Ard at the time, zoning laws are the one place cities have some leverage if the state won’t take action against the high interest rates charged by payday operations. “These places take advantage of people by charging exorbitant interest rates,” Ard said. “Obviously we want to limit those and prevent them from escalating in the city.”

According to the nonprofit Alabama Appleseed, there are currently 630 licensed payday lender shops in the state – compared to 250 McDonalds restaurants. They also report “Between October 2016 and September 2017, 214,429 Alabamians took out more than 1.8 million payday loans.” The annual percentage rate, or APR, for a 14-day $100 loan in Alabama is 456.25%. Loans are limited to $500 for a maximum of 31 days, with one rollover permitted, but there are no restrictions on how many loans a borrower may have at one time.

Whether it’s because cities view payday loan storefronts as downscale operations that give neighborhoods a black eye and chase away more desirable businesses, or because they fear that such businesses prey on vulnerable low-income populations, it seems clear that zoning restrictions will continue to be used by municipalities to put the brakes on the payday loan industry.”

Read the full Alabama Subprime Report and check out the following reports on these Alabama cities:

Birmingham | Huntsville | Mobile | Montgomery