Cash advance loan stores are springing up in all sorts of neighborhoods

The payday loan industry has seen unbelievable growth during the past five years. By some estimates, the number of stores in the United States now numbers five times as many as it did five years ago. There are a number of reasons for this, including Republican control of the Federal and many state governments, which tends towards a “hands off” attitude towards business of all kinds. Several states have passed laws regulating these high-interest lending firms, but some of the “regulations” actually permit lending at interest rates of up to 500% per year. With that sort of interest rate cap, it’s no surprise that the growth of high interest lending has been astronomical, as these stores have begun to crowd urban, low-income neighborhoods. In some areas, you can find three or four payday loan stores on the same city block.

As these neighborhoods become saturated, the stores are tending to move to other neighborhoods, and the latest target of this expansion is the somewhat more well-to-do suburbs. In some areas, like Overland Park, Kansas, consumers can now find as many as three stores at the same intersection. It certainly makes it easy to borrow money at 400% per year, but what are the effects of the neighborhoods themselves?

Many lawmakers are concerned, as there is a perception that cash advance stores tend to suggest urban blight, or that the area is in decay. That sort of thinking isn’t entirely without merit. After all, no one elects to borrow money a few hundred dollars at a time at such high interest rates; the people who do are people who cannot afford to borrow their money elsewhere.

“Elsewhere” would be a bank, or a credit union, or even a credit card, where loans of 20% are considered high in traditional lending circles. The operators of cash advance stores say that they are simply building stores where they are needed, and that the public wants them and uses them. Still, the question remains - If the public wants them, then the public must be unable to borrow elsewhere, right? And people who cannot borrow from banks are usually viewed as the poor.

This is a problem for city planners, as people who move to a community usually visit it first. If they visit a city and see that it’s covered with cash advance stores, they may get “the wrong impression” about the community. The operators of such stores disagree, of course. They mention that the businesses are simply locating themselves in areas where they are wanted by the public, and that they are hardly the sort of business that caters to the poor. After all, they say, you must qualify for a payday loan before you can actually receive one.

Ultimately, the decisions about what sorts of businesses are permitted in a community are made by the citizens themselves. If the public doesn’t want such businesses in their neighborhood, they will find a way to legislate them out.

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