The Long Beach City Council has granted Las Vegas-based Dollar Loan Center final approval of a conditional-use permit (CUP) to operate at 2004 Ximeno Ave., Suite 200, in a shopping center near the Traffic Circle in the city’s 4th District.
The Council denied an appeal against the Planning Commission’s approval in a 5-3 vote Tuesday night, allowing the company to bypass an existing citywide moratorium on such “high-interest” lenders.
The financial operation, which has a three-year lease term with property owner Equity One to occupy an empty retail space near a Coffee Bean & Tea Leaf, is licensed under the state’s California Finance Lenders Law to only offer unsecured short-term loans of no less than $2,500. The company, which has been in business for more than 14 years in South Dakota, Nevada and Utah, has opened other California locations, including in Anaheim, Los Angeles, Brea, Huntington Beach, Santa Ana and Costa Mesa, as early as this year.
The firm offers signature loans, also known as good-faith or character loans, defined as personal loans provided to consumers by using only the borrower’s signature and their promise to pay as collateral. In order to qualify for a loan, however, clients, including small-business owners, must meet certain loan criteria, such as having a minimum income of $4,000 a month, which comes out to an annual income of about $48,000 to $50,000 a year, according to company officials.
Dollar Loan Center’s CUP request was one of three applications already in the “pipeline” that the City Council agreed in October to exempt from a one-year moratorium on land-use permits for auto-title, payday and short-term consumer finance loan companies. The City Council must base their decision on the merits of each application alone. The Planning Commission and development services staff are meanwhile currently conducting a citywide study on the relatively new financial institutions.
Lee Fukui and Mauna Eichner appealed the Planning Commission’s unanimous approval of a CUP application for Dollar Loan Center in July because they said an influx of so-called “predatory lenders” in Long Beach has become a broader citywide issue. The residents both live in the Wrigley neighborhood in the 6th District, where another company known as Pennbrooke Financial Services, LLC plans to open a store on Pacific Coast Highway and Pacific Avenue to offer auto-title loans.
Fukui added that Dollar Loan Center has strategically positioned the Ximeno Avenue location as a way to prey on college students and low-income residents of east Long Beach. He said the company offers an interest rate of 196.9-percent APR, which can force a client to pay almost triple the original $2,500 loan by the time it’s paid off.
“That’s predatory any way you look at it, and it affects those people who can least afford it,” Fukui said, adding that credit unions, on the other hand, typically have interest rates of about 11.65 APR. “Being business-friendly doesn’t mean that a predatory lender from Las Vegas should be able to occupy our prime retail spaces. If our city is to prosper, then we need to set our sights and our expectations higher. Long Beach citizens deserve better.”
Long Beach Assistant City Attorney Michael Mais, however, told the Council that cities aren’t allowed to outright ban high-interest lenders from operating since they are permissible under state law, but he said jurisdictions are able to regulate the operations like any other commercial business. “You can’t turn them down based on the interest rate that [they] charge, but you can regulate them just like you do other uses,” he said.
Fukui also claimed that Dollar Loan Center sometimes offers loans less than $2,500 by allowing clients or businesses to pay back a portion of the loan within 24 hours, which would be against state law.
Dave Galyen, national director of technology for the company, admitted to the practice, however, he said the firm doesn’t particularly solicit it to customers.
Councilmember Gerrie Schipske, who voted against granting the company a CUP along with Councilmember Suja Lowenthal and Vice Mayor Robert Garcia, however, said that this practice violates the state’s law under which the business is licensed. “I’m sure the Attorney General would be very interested in that because they’re trying to crack down seriously on this kind of inrunning the game,” she said.
Some residents expressed a concern about “clusters” of such high-interest financial institutions forming in the city. However, 4th District Councilmember Patrick O’Donnell said he conducted a meeting in his district about Dollar Loan Center moving in and that the proposal received overwhelming support from residents. Although a credit union is located at 10th Street and Ximeno Avenue, city officials said the area doesn’t appear to have other financial institutions located close by like other areas of the city. City staff added that there are about 40 financial institutions in Long Beach.
O’Donnell, who said he’s “torn” on the issue of predatory lending practices, reiterated, as did 8th District Councilmember Al Austin, that the company had already spent $200,000 on lease negotiations and other expenses for the company to take up the space. “My concern is, what kind of message does this send to the business community?” he said. “Do they come and invest a lot of money and then we say no?”
Lowenthal and Garcia both disagreed with those assertions, adding that each CUP should be granted solely on its own merits and whether the proposed land use is right for the community, not based on how much an applicant has invested in the project.