Aug 04, 2013 Quinn Thomas
Short term lenders often have to leap over a number of legal hurdles to keep their organizations running, and the industry contends with a degree of oversight and regulatory proposals that few other businesses can match. Some states ban most forms of the market altogether, while interest rate limitations in other states hinders the ability for lenders to effectively operate.
Although Iowa has yet to ban or cap interest rates, lenders working in the area should be aware that the legislature has been discussing additional regulations for short term lending. According to a recent Des Moines Register report, the proposed bills are still in commerce subcommittees. Representatives such as Peter Cownie (R-West Des Moines) want to leave local officials responsible for handling loan policies, at least until they see a bill that addresses some of their concerns with the legislation. The source noted that Cownie wishes to see the loans offer more transparency to consumers.
The Des Moines Register pointed out that many Iowa cities already ban short term lenders, and advocacy groups such as Iowa Citizens for Community Improvement are working to further restrict these loans at the municipal level. While Des Moines does not currently prohibit these businesses, attrition could lead to a de facto ban - according to the source, when one lender closes, another can't replace it. This has reduced the number of these businesses from 31 to 25 in the city since the ordinance was approved in 2010.
Lending advocates have been working against these efforts. The Des Moines Register spoke with Amy Cantu, spokeswoman for the Consumer Financial Services Association. Cantu informed the source that short term loans can be extremely beneficial to individuals with little financial support beyond their paychecks.
Jamie Fulmer, spokesman for Advance America, mentioned that most borrowers understand their choice and use short term lending services because the fees are typically easier to manage than those involved with an overdrawn account or bounced check, the source noted.
Short term lending restrictions spreading through Iowa municipalities
Seven Iowa cities restrict short term lending operations, with the Associated Press reporting that Windsor Heights recently added their own ordinances. Cities such as Clive, Iowa City and Cedar Rapids, among others, were also reported to be discussing their own regulations.