Saturday, January 03, 2009

Like liquor stores, like payday... regulate them

While I'm not a huge fan of payday lending and check cashing companies, I do believe they provide a needed service in low-income communities-- access to basic banking and lending services. The larger question is why are these companies doing so well in certain neighborhoods? It's because of the lack of traditional financial institutions in these neighborhoods.
Like liquor stores that concentrate where there are few grocery stores, these act as a viable alternative at a premium to their customers. Similarly, I believe the non-traditional financial industry should be regulated as state and local government does liquor stores in two ways:

(1) These non-traditional financial institutions should be required to get a city-issued condition use permit (CUP). Liquor outlets are required to get a CUP which requires to some form of resident oversight through entities like the District Implementation Committees or the Planning Commission.

(2) The City of Fresno Planning Department should restrict the number of pay-day loan and check-cashing services within a neighborhoods. The state Alcohol Beverage Control (ABC) restricts the concentration of liquor outlets in residential areas. .

Lastly, the City can encourage/incentivise development of neighborhood banking. It was encouraging to see the City Council began to evaluate its financial/banking policy. With a near billion dollar budget, the City can influence the practices of bank through its deposit policy. The City's Bank of Fresno is a step in the right direction.

For more information on pay day loan services, consumer tips in using them and more, check out Americans for Fairness in Lending.

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