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Payday loan shops have long offered local residents an option to pay their bills during tight financial times.
But the prevalence of the shops - there are 26 such stores in Kansas City, Kan. - and their often-aggressive financing terms have drawn the ire of the Unified Government.
During a Public Works and Safety Standing Committee Meeting Monday night, UG legal officials outlined a proposed ordinance to further regulate payday shops that currently operate in KCK and impose regulations on future stores.
Though the ordinance remains in draft form, UG attorney Delia York outlined some ideas currently included:
Payday loan shops would be required to get a license from the UG's business licensing department. York suggested a fee of $1,000 to cover administrative expenses in approving the license and regulating the businesses.
Though the ordinance is somewhat limited in what it can regulate with existing businesses, York outlined a geographical restriction on new shops, proposing that new pay day loan stores couldn't be located within a mile of an existing shop or within 200 feet of a residence.
The ordinance would require signage in the payday loan shop outlining what rights consumers would have, and directing local residents to call 311 for more information or to be directed to other consumer-rights agencies.
York says the rates charged by loan companies can sometimes be exorbitantly high, though she added payday loans in Kansas charge an effective annual percentage rate of roughly 390 percent, comparable to the national average of roughly 400 percent.
York told the standing committee that a $115 loan rolled over three times would incur $60 in finance charges.
"We need some regulations in place locally to help our consumers," York said.
The committee asked whether the ordinance could place a cap on the total number of payday loan shops in KCK, similar to what the UG does with pawn shops (only seven pawn shops are allowed in the city at any given time).
"That might be something we look into," Commissioner Butch Ellison said.
Commissioners also asked whether the geographic restriction could be expanded to two miles instead of one. York said she would provide future information on how an expanded geographic restriction would affect the ordinance.
The committee voted unanimously to hold over approval of the ordinance to the next standing committee meeting to allow UG legal staff to incorporate new data and suggestions.
If the ordinance is passed by the public works standing committee, the UG's Board of Commissioners would still be required to adopt the ordinance. No date has been set for that action.
Source: http://www.kansascitykansan.com/news/
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