New Moratorium on Alexander City, Alabama, Payday Loans
Inside Subprime: Feb 20, 2019
By Lindsay Frankel
Payday loan and title loan providers will be barred from setting up new storefronts in the historic district of Alexander City, Alabama, thanks to a one-year moratorium that received unanimous approval from the City Council.
In a 6-0 vote, the council banned new vape/tobacco shops, payday loan and title loan shops, check cashing stores, tattoo parlors, liquor/beer shops, pawn shops, and arcades from opening up in the district for the next year.
The goal is to give officials time to assess businesses in the historic district, indicating that rezoning could be the next step. Businesses currently located in the historic district will not be impacted by the moratorium.
Community development director Al Jones said the downtown historic district is zoned for high-density retail businesses currently, and the moratorium will help a group decide if changes should be made and certain types of businesses should be limited. That group includes Jones, the Alexander City Planning and Zoning Commission, the Historic Preservation Commission, Main Street Alexander City and the Alexander City Chamber of Commerce. Mayor Jim Nabors said that similar moratoriums have taken effect in cities like Hoover and Decatur.
Payday loan and title loan storefronts, check cashing stores, and pawn shops are often considered predatory because they charge high interest and fees for financial services. 33.3 percent of Alexander City residents live in poverty, making them especially vulnerable to high-cost loans. And lenders charge an average interest rate of 461 percent on payday loans in Alabama, according to data from Pew Charitable Trusts. Cash-strapped individuals with bad credit frequently turn to payday loans because they lack alternative options, but most borrowers end up paying more in interest and fees than the loan principal, which strips away an unnecessary percentage of borrowers’ already limited income.
Stacy Jeffcoat, executive director of nonprofit Main Street Alexander City, said the resolution will help officials identify standards for the appearance of the historic district. “We want to take some time to do some studies on what kind of businesses we want downtown, especially in the historic district,” Jeffcoat said. “There are certain standards we want to maintain as far as the facades and the type of businesses there. This will give everybody time to do things in the correct way.”
The historic district was established in 2011 to encourage a downtown renaissance. The area, which includes most of downtown, is transitioning into a cultural center for the arts, entertainment and food.
While the effects of the moratorium have yet to be evaluated, it is possible that prohibiting new wealth-stripping businesses could have a positive impact on the financial health of Alexander City residents while helping the historic district to recruit new businesses.