The Long Beach City Council approved a one-year moratorium on land uses for auto-title, payday and short-term consumer finance loan companies Tuesday night, directing the city attorney, the Planning Commission and development services staff to conduct a citywide study on the controversial, new financial institutions. But the City Council also agreed to exclude three applications already in the “pipeline.”
Fifth District Councilmember Gerrie Schipske, who cast the lone dissenting vote on the council action that passed 8-1, brought the item forward during the Oct. 2 meeting, originally proposing an “immediate” ban on all such enterprises that residents and councilmembers have called “predatory lenders.” The council, however, approved an amendment made by 4th District Councilmember Patrick O’Donnell to exempt businesses that already paid for conditional-use permit (CUP) applications. City staff is expected to come back with a formal moratorium for City Council approval within coming weeks.
For the past several months, residents have expressed strong opposition to such businesses proposing to move into Long Beach, fearing that “clusters” of short-term loan companies that carry high interest rates and fees are starting to accumulate in pockets of the city with the intention of preying on vulnerable, low-income neighborhoods.
“If you stand on any corner in many areas– in downtown or [on] Anaheim and Pine or [on] Anaheim and Long Beach Boulevard– [you] could probably walk to seven or eight check-cashing locations within two blocks,” said Vice Mayor Robert Garcia. “There’s just a massive over-concentration of these businesses.”
The three applications exempt from the ban include a proposal by Las Vegas-based Dollar Loan Center to open up a short-term consumer finance lending operation at 2004 Ximeno Ave. in the 4th District and two proposals by Georgia-based Pennbrooke Financial Services, LLC to open up car-title loan establishments: one at Pacific Coast Highway and Pacific Avenue in the 6th District’s Wrigley area and another at South Street and Paramount Boulevard at the border of the 8th and 9th districts.
O’Donnell said blocking those two applicants from their due process would send a “poor signal” to the business community since the businesses already applied and paid for CUP applications (at a cost of $8,000 each) under good-faith assumptions. He added that Dollar Loan Center has invested $200,000 in tenant improvements to the site. “They’re investing a lot of money, and then we say ‘no?’…That’s very poor process, if you ask me,” O’Donnell said. “These were legal when they applied.”
Car-title loan companies typically offer short-term loans secured by the Blue Book-value of a vehicle, which can be repossessed if a borrower defaults on payments. Pennbrooke Financial, also known as Loan Max, operates more than 500 locations in 22 states across the country and offers a minimum $2,500 loan with a .33 percent per-day interest rate, which comes out to about 120 percent APR.
A staff report prepared by Schipske’s office states that payday lending agencies accept post-dated checks in exchange for cash-payment loans that have typical interest rates ranging from 300 percent APR to 400 percent APR. Short-term consumer finance loans generally involve a cash advance, or unsecured “signature” loan, oftentimes carrying rates exceeding 300 percent APR, according to the staff report.
Numerous states and the US military have effectively banned payday, car-title and short-term consumer loans, according to the staff report, which adds that such lenders are often exempt from state usury laws. “It is vital that the City undertake the studies necessary to determine the appropriate land use and related regulations in order to ensure the quality of life of our citizens,” the staff report states.
The City Council’s action comes after the Planning Commission, at its Sept. 20 meeting, failed to grant Pennbrooke Financial a CUP to take up an empty one-story building at 201 W. Pacific Coast Highway due to the commission coming to a tie vote. Dollar Loan Center’s CUP request also ended in deadlock, after which that decision was appealed to the City Council and was taken up at a meeting in late September. The City Council eventually decided to postpone any action until November.
Now, the City Council’s most recent move to exempt the businesses from the moratorium allows the two applicants to appeal those decisions, which will be taken up by the City Council at public hearings within coming months. Meanwhile, Pennbrooke Financial’s CUP request for the South Street location is set to go before the Planning Commission.
Assistant City Attorney Michael Mais indicated that, historically, the City Council has exempted businesses from moratoriums in similar cases. “In most instances, when we’ve had this similar situation…Council has voted to direct the city attorney to exempt uses in the pipeline,” he said.
Residents and community activists, however, spoke out against exempting the applicants. “I feel that it is ridiculous that we would exempt the ones in the pipeline, as they are the reason we’re talking about the moratorium,” said Lisa Wibroe, a Wrigley neighborhood activist. “In the beginning, that was the whole purpose of it here.”
She said the proposal for a lot at 201 W. Pacific Coast Highway is not ideal for an area that is still struggling to grow after the loss of the city’s redevelopment agency (RDA). She said the site is supposed to be a “cornerstone” to the Wrigley neighborhood. Lee Fukui, a Wrigley district resident, expressed concerns about a check-cashing business called Nix Financial already being located within one block of the empty lot. “This is a beginning of a cluster,” he said.
Although the building has been empty for a decade, Wibroe said the community is better off having no business rather than what’s being proposed. “This place has not been problematic to the Wrigley district empty,” she said. “An empty lot can be better than a blighted business or this type of predatory loan [company].”
Defending the businesses, however, Bernie Delaney, general manager of City Loan at 3431 Cherry Ave., who said he already offers car-title loans, attempted to dispel claims brought by residents that such businesses prey on low-income residents. “I think that limiting people’s ability to have access to funds when the banks have said ‘no’ is a terrible thing,” he said. “There is a need for this.”
Linda Mendoza, who has owned the Wrigley-area lot with her mother Kay Mendoza for the past six years, said various proposals have come forward, including a 99-cents store, a prepaid cell-phone store and an indoor swap meet, but none was suitable for the location. She said a contract with Pennbrooke Financial, which plans to invest in the site, would enable financing for future development that may include a grocery market.