Hoover, AL, Passes One-Year Moratorium on Payday Loans

Inside Subprime: Oct 18, 2018

By Lindsay Frankel

The Hoover City Council in Alabama has approved a proposal for a moratorium on new licenses for select industries. These include payday loan and title loan storefronts, pawn shops, and vape stores.

Councilman Casey Middlebrooks introduced the proposal, explaining that these types of businesses can hinder development opportunities and prevent the city from attracting more desirable businesses. Many of the city’s council members promised to protect Hoover’s older neighborhoods from degradation when campaigning, and Middlebrooks believes the moratorium is a step in the right direction. Payday lenders have popped up in some older neighborhoods, and the moratorium is intended to protect these neighborhoods while the city reviews zoning ordinances and/or subdivision regulations for these industries.

The proposal passed in a 4-3 vote. One of the councilmen who voted against the resolution, stated that the moratorium would be an improper use of regulatory authority. He also noted that the industries in question only account for 15 out of approximately 4,000 businesses. In addition, nearby cities such as Birmingham have been successful at recruiting new businesses despite the presence of payday loan storefronts and other undesirable businesses.

Shaw instead proposed limiting these industries to C-2 commercial districts and preventing businesses like pawn shops from setting up shop too close to residential neighborhoods or too close to each other. The council is scheduled to vote on these restrictions in early November.

Councilman John Lyda also voted against the moratorium. “In my opinion it was really a solution looking for a problem,” he said. “We’re in a period where we’re trying to recruit businesses. So really to come up with an ordinance that would outlaw future businesses of any kind is really anti-business.”

Middlebrooks disagreed with Lyda. “We just all want to maintain our quality of life here in Hoover. And having a temporary moratorium on these types of businesses is going to help us in the long run recruit new businesses,” he said.

The moratorium will not impact established businesses, which will still be allowed to operate, and Councilman Curt Posey said the city might rescind the moratorium should Shaw’s alternative proposal be approved. In the meantime, some residents are pleased with the decision.

Levon Parker, 30-year resident, expressed concern over payday lenders in Hoover. “When people take advantage of your interest rate to gauge your interest, the people they’re doing that to the most can afford it the least,” he said. Consumer advocates contend that payday lenders target poor communities, charging exorbitant interest and fees. Payday loans in Alabama cost borrowers an average annual interest rate of 461 percent, according to Pew Charitable Trusts.

While residents have yet to assess the impact of the moratorium on Hoover, many are hopeful that the new regulations will protect Hoover’s neighborhoods and limit the financial harm caused by payday lenders, title lenders, and pawn shops.

For information on predatory payday loans, check out all of our Alabam Subprime Reports.

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