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Quick Cash? No Interest, Says City

Proposal bars payday lenders from neighborhoods -- for nowWhy is a city in financial crisis telling certain lenders where they can go? One reason: 400 percent interest.

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Payday lending and check cashing outfits typically charge customers about $17 for every $100 they lend, with payment due in two weeks. That's equivalent to a credit card company charging more than 400 percent annualized interest. The companies argue that they serve cash-poor people who suffer temporary inconveniences, like car problems or minor home repairs, at a fee that's at least lower than a bounced check charge.

 

This year payday lenders have sought to open up shop in Oakland, East Allegheny, East Liberty and Lawrenceville -- to the consternation of neighborhood advocates. Payday lenders "are nothing more than legalized loan sharks," says Aggie Brose, chair of the Anti-Predatory-Lending Initiative of the Pittsburgh Community Reinvestment Group. "It just sucks all of the wealth out of our neighborhoods."

 

Community groups have used zoning challenges to slow payday lenders down. But Pittsburgh's current zoning law makes no mention of payday lenders, leaving the Zoning Board of Adjustment to wrestle with whether they are financial institutions, retail establishments or something else.

 

So community groups drafted a proposal that would limit payday lenders to Pittsburgh's industrial zones and highways. "The service is still available," notes Mark Fatla, executive director of the Community Technical Assistance Center, which aids neighborhood groups. "People can go to McKnight Road or Green Tree if they want to get ripped off," he adds.

 

City Councilor Bill Peduto introduced the proposal at council's July 13 meeting. Why pursue this now, when Pittsburgh's financial survival occupies most of City Hall's energy? "These locations are bad for business, they're bad for people and they're bad for neighborhoods," Peduto says.

 

Expect payday lenders to fight the effort. "They don't like our industry, so they're trying to zone us out," says Steve Schlein, spokesman for the Community Financial Services Association, which represents payday lenders. "It's ridiculous, and it's an abuse of their powers."

 

Peduto's proposal now faces a series of public hearings, but takes force on a temporary basis pending a final vote likely in the fall -- if the city isn't too busy looking for its own payday loan by then.

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