Payday lenders looking to locate in Waukesha will now have limited options about where they can place their business.
The Waukesha Common Council unanimously passed Tuesday night an ordinance that would restrict where the payday loan stores can locate. The ordinance prohibits payday lenders from locating within 3,000 feet of another payday lender and within 500 feet of any residential district.
The city currently has 10 payday lenders in Waukesha. Proposed changes would mean seven of the payday lending stores would be non-compliant; however, those stores would be grandfathered into the ordinances.
Between two and four payday lenders could locate in the city – depending on where the businesses open – under the new restrictions.
Neighborhood aesthetics, economic viability and high interest rates were among primary reasons for the payday lender restrictions.
Payday loan stores receive high criticism for high interests rates on loans given to conceivably the most vulnerable borrowers. About 70 percent of payday loan borrowers use the loans to pay monthly bills, according to the Huffington Post.
The immediate access to cash is attractive to some borrowers strapped for money. But the average borrow spent $900 in fees, interest and principal for a $375 loan in 2011, according to the Huffington Post.
Some states have implemented legislation to limit the short-term loans. Changes in Colorado saved residents there $100 million in 2011 by extending the minimum term from two weeks to six months, according to the Associated Press.
A State of Wisconsin document warns borrowers that annual interest rates can reach 500 percent of the loan. Wisconsin has limits on the loans that include capping interest charges after a loan meets maturity.
While approving the ordinance, Alderman Andy Reiland had some concerns about interfering with business.
“We are a free market society,” Reiland said. “Businesses open and close within the city. … It is customers that dictate whether these businesses survive or not. By restricting this, is it a feel good that we are doing?”