Story Created:
Feb 4, 2010 at 12:11 PM PST
Story Updated:
Feb 4, 2010 at 12:11 PM PST
NORWALK — Regardless of population, nine payday advance loan or check cashing businesses are enough, the City Council ruled Tuesday night.
Council members approved an ordinance capping the total of such businesses at nine, the current number of operating stores. Voting for the ordinance were Vice Mayor Gordon Stefenhagen and Councilmen Mike Mendez and Jesse Luera. Mayor Cheri Kelley and Councilman Rick Ramirez were absent.
Final action on the ordinance, revised from the Planning Commission recommendation, is expected at the Feb. 16 meeting.
The commission Jan. 13 recommended that the city allow one check cashing or payday loan store per 15,000 population. Based on Norwalk’s approximately 100,000 residents, that would allow only six such businesses.
But council members said they could live with the existing nine. At one time they feared 15 to 20 stores might open.
“I don’t want to put anyone out of business in this economy. Those employees [who would be laid off] have families to support,” said Mendez. Luera and Stefenhagen agreed.
The City Council became concerned about a possible proliferation of such businesses in February 2008 and eventually declared a moratorium on them. That freeze was extended and is now in effect until March 31.
In a report to the council, Planning Manager Bing Hyun said the ordinance “will limit the location, number and spacing for future payday loan establishments to avoid the over-proliferation of these types of businesses which are typically located in or adjacent to lower income neighborhoods resulting in a cycle of indebtedness and financial vulnerability to lower income citizens.”
According to the Consumer Federation of America, the average payday loans at such businesses are offered with more than a 400 percent interest for 14 days. The average short term loan is up to $300, Hyun said.
Besides capping the number of such businesses, the ordinance states they must operate in commercial or industrial zones and be at least one-quarter mile from the nearest store offering similar services, Hyun said.
The commission recommended that each of the existing businesses obtain a conditional use permit, which gives cities more authority to regulate a business and close it down if so warranted, if it moved or expanded.
But council members said they did not believe a CUP was needed for the current businesses, most of which have been in operation for several years.
Several representatives of the Norwalk payday loan businesses said they had no problem with the proposed ordinance except for the CUP requirement.
A CUP would cost about $2,000, a planning official said.
Hyun said that while some markets and other businesses offer to cash paychecks for a fee, they do not offer loans, as do the payday loan businesses. Therefore they are not affected by the new rules.
Banks, savings associations, credit unions and industrial loan companies are not covered by the ordinance.
Payday loan businesses are also covered by a state law, which requires permits from the state attorney general which are reviewed annually. A law imposing more rules is currently in the state Legislature, said a representative of Assemblyman Tony Mendoza, D-Norwalk.
A representative for the check cashing, payday loan businesses has said those groups are adequately regulated by the state and perform a public service to those with no bank accounts or who need fast loans.
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