Councilman Tom Simplot
Arizona Republic My Turn Column

October 2005

How many loans centers are enough?

We see them around our city — payday loan centers or instant loan centers. The Phoenix City Council recognizes they fill a niche in the local finance industry and often serve as the lender of last resort for many who otherwise wouldn’t qualify for a loan. These businesses generally provide small, short-term loans.

We also know they charge extraordinarily high interest rates (in some cases the equivalent of 460% annually!) and their customers are most often those who can least afford the high rates. We also know these high-interest loan centers are now multiplying, especially in some low-income neighborhoods, at an alarming rate.

The City Council cannot regulate the high interest rates these businesses charge. The debate as to whether or not they practice predatory lending will hopefully take place at the Arizona Legislature.

We are concerned, however, with the numbers of these businesses and we can exercise reasonable control through citywide zoning ordinances. The city’s planning staff is now studying zoning options at the request of the Regional Cooperation and Government Efficiency Subcommittee, which I chair.

It is not our intent to impede the progress of these businesses. We understand they provide a service some residents want. But Phoenix is already home to nearly 200 high-interest loan centers. In some neighborhoods there are more than one on the same block. They have become the dominant business in the area. We have an obligation to oversee how such businesses impact our community, while serving the needs of our residents. My colleagues and I are working to designate a reasonable distance that such businesses should be from one another, so they do not dominate entire local business areas.

Some have suggested we should “let the marketplace decide.” Whenever and wherever possible, I agree completely with that sentiment and philosophy. But sometimes the marketplace requires oversight. We believe neighborhood business centers should provide residents with useful products and services. City planning ensures that neighborhoods are given a balance of organizations and resources that residents can use. Neighborhoods filled with high-interest loan centers do not meet those criteria.

There also are some concerns that high-interest loan centers attract crime. Data both supports and refutes this assertion. What cannot be denied is that payday loan centers are attractive targets for robbers, as happened in Mesa just last week, resulting in a fatal shooting. These businesses are now clustering around the edges of neighborhoods already at risk.

Once our staff analysis is complete, we will introduce an ordinance that does nothing more than restrict how close high-interest loan centers can be to one another. The new regulation will not affect existing payday loan centers. Residents who want to use this service will still be able to do so. But neighborhood business centers will be protected from being overrun by the intrusive expansion of these businesses.

Phoenix City Councilman Tom Simplot represents District 4. If you have questions about this or other issues, please contact Councilman Simplot’s office at 602-262-7447 or e-mail council.district.4@phoenix.gov.