Des Moines declares a moratorium on payday lenders

Urban Decay

The Iowa payday loan moratorium was sparked by concerns that payday lending causes urban decay. Image from Wikimedia Commons.

The city council of Des Moines, Iowa, has declared a moratorium on payday lenders and pawn shops throughout the city. The intention is to put a stop to any new businesses of that type setting up shop in the city while regulatory legislation is considered. No new payday loan stores or pawn shops may open for the next six months in Des Moines. Meanwhile, the Iowa legislature is considering legal restrictions on payday lenders, and the federal government is considering the same thing as part of the financial reform bill.

Payday lenders blamed for urban blight

The Des Moines City Council has put a temporary halt to any new payday lenders, according to the Des Moines Register, to mull over some potential changes in zoning code along with potential financial regulation changes.  It has been alleged that payday lenders are a cause, or at least implicated, in urban blight.

Potential new zoning

Des Moines City Council is looking into proposed zoning laws . There may be distance requirements between payday lenders and pawn shops, such as those that already exist for liquor stores and bars in Des Moines. Concerns are being raised that more payday lenders and pawn shops in the area would negatively impact the Des Moines area, especially real estate. This will not be the first time the urban blight argument has been raised.

The Urban Blight argument

There have been many allegations that payday lenders are a cause of urban blight, or urban decay.  Granted, sometimes there are payday lenders that operate in decaying areas, but it isn’t proven whether this is coincidence rather than causality. For instance, urban decay in Detroit has been tied to the decline of the auto manufacturing industry.  Jobs moving away from manufacturing plants and resulting urban decay, was going on well before payday lenders showed up. It also happened in other areas well before payday lenders opened their doors — apparently, no one has ever heard of the Rust Belt before.

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