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Limit need, not loan shops

October 14, 2006 - Tempe, Arizona

Mesa may soon join Tempe in regulating how far apart payday loan shops may be situated.

This is a tempting but not necessarily good idea.

It's not that we're fans of such operations. Stick a bunch of payday loan shops with a bunch of pawnshops, blood plasma collection centers and resale stores, and you're looking at a community full of people who, in Thoreau's words, are living lives of quiet desperation.

Tempe certainly does not want to be in that category, which is why the city imposed restrictions on payday loan and check-cashing stores at the start of this year. Those restrictions slowed but did not stop the proliferation of such businesses in that city, which now has about 30 of them.

Mesa, on the other hand, has more than 110. Of course, Mesa is bigger than Tempe, so that accounts for some of the disparity. But by far the majority of Mesa's stores are west of Gilbert Road, a part of town that just happens to be home to a great many Hispanics and to several unhappy economic developments in recent years.

So the Mesa City Council is thinking about following the lead of Tempe and other Valley cities in limiting where the stores can be placed. The idea is to keep them 1,200 feet apart, as the crow flies. While existing stores would be grandfathered in, the regulations would make it impossible for the same intersection to sprout several of them, as is the case in several Mesa locations.

Councilman Tom Rawles has taken the lead in opposing the proposal, which is to be discussed in a public hearing during the council's Oct. 16 meeting.

Rawles chief argument is that if the marketplace has created a demand for these businesses, it's not the city's job to whip out the old tape measure.

This newspaper has disagreed with Rawles on many issues, but not this one.

If the presence of so many such outlets is disturbing, it's because of what they represent: an economy where not only do many folks live paycheck to paycheck, but where those paychecks often fall short. Nobody in his right mind would ever want to visit a payday loan shop, but those are the straits in which many find themselves.

Requiring them to maintain certain distances is, frankly, lipstick on a pig. It does nothing to solve the economic realities that allow these businesses to thrive despite their demanding interest rates that in more consumer-friendly times would have been usurious to the point of being illegal.

About which, some have called for legislation to cap those interest rates. North Carolina went even further, allowing the law that legalized payday-loan operations to expire. In their stead, the state's employee credit union now provides low-cost, short-term loans to about 40,000 people a month.

That should be a sobering reminder to this lucrative industry that the red carpet can be yanked just as easily as it can be rolled out.

So even as we support the marketplace finding the right number of these outlets, perhaps the marketplace will soon find a way to offer short-term credit at something less than loan-shark rates.

Meanwhile, city councils can concentrate on the marketplace itself, strategizing economic revitalization projects that don't leave so many citizens on such sharp financial hooks.

News Source

The Arizona Republic, Editorial

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