Payday Loan Writer
Payday loan and check cashing businesses may be restricted in Smithville in the not-so-distant future.
The Smithville Board of Aldermen discussed possibly placing a moratorium on those businesses as well as drafting ordinance language restricting how many may open within the city limits.
Alderman Bob Foreman brought up the issue after one fast cash advance business opened in the Creekwood shopping center and another has been slated to open in the Hillside Plaza shopping center. Gladstone has also placed a moratorium on these businesses and is expected to draft ordinances to restrict them this summer.
Foreman cited the payday loan business of cash advance loans as being unnecessary in Smithville.
“I am very concerned about these businesses after the research I have done,” he said. “I don’t think they are good for the citizens.”
Foreman said that the high fees and interest rates associated with payday loans were what concerned him.
“I found out that the average borrower will pay $800 for every $325 loan,” he said.
According to the Federal Trade Commission, check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names including “[no fax payday loans], cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.”
With payday loans, according to the Better Business Bureau, a consumer writes a check to one of these businesses for the amount he wishes to borrow plus a fee.
“The lender gives the borrower the amount of the check minus the fee,” the BBB Web site stated. “The lender holds the check until the borrower’s next payday, when he or she can do one of three things: allow the check to be cashed, redeem it by paying cash to recover the loan plus a fee or roll it over by paying the fee to extend the loans for two or more weeks.”
The BBB stated that the fees charged for these loans are usually a percentage of the face value of the check or a fee charged per amount borrowed — typically from $15 to $50 dollars for every $100 borrowed on a quick payday advance.
However, Alderman Kelly Edwards highlighted that the payday loan businesses also offered other services including Western Union.
“There is value in them,” Edwards said. “I just don’t know how many we need in Smithville.”
Edwards suggested structuring licenses for these types of personal cash loan businesses like liquor licenses so that only so many are allowed by population amount.
“We could say that Smithville can only handle one per every 5,000 people,” he said. “That way, we don’t have 10 of these things open here.”