An auto-title-loan company has taken legal action against the City of Long Beach in an attempt to have the courts overturn the City Council’s decision last year that denied the firm’s request for a conditional-use-permit (CUP).
The permit was needed for the business to move into a vacant building at the corner of Pacific Coast Highway and Pacific Avenue, considered by residents a “gateway” to the Wrigley Village area.
Georgia-based Pennbrooke Financial Services, LLC filed a lawsuit, called a writ of mandate, against the City after the Council unanimously voted (9-0) to turn down the business’s CUP application in November 2012. The Council’s decision was made on appeal after the Planning Commission came to a (3-3) tie vote on the permit.
Both the City and the company are now expected to present oral arguments in Los Angeles County Superior Court before Judge James C. Chalfant at a hearing set for Oct. 22, according to attorneys.
Opposition to the company moving to town was launched nearly two years ago by a group of Wrigley-neighborhood residents, who called such businesses “predatory lenders” and claimed that the companies prey on the most vulnerable low-income communities by offering loans that come with exorbitantly high interest rates.
The residents also said the area is already “oversaturated” with such short-term lenders, such as check-cashing and payday-loan businesses. That notion ultimately became the genesis for the Council to approve a one-year moratorium on such businesses in order for city staff to develop a new ordinance that was unanimously approved by the Council at its Sept. 17 meeting.
Though the Council agreed to exempt Pennbrooke Financial from the moratorium since the company’s application had already been filed, the Council still ended up denying the company’s request for a CUP based on its merits.
But Assistant City Attorney Michael Mais said in a phone interview that the Council’s decision was based solely on grounds of an inappropriate land use and not on conjecture of the company’s business practices, despite the opinions of some residents and councilmembers.
The property straddles two separate designated land-use districts, one that is supposed to encourage pedestrian activity and the other zoned for small retail operations. But the Council determined that the short-term lender wouldn’t be suitable for the designated zones, he said.
“Our argument is that Pennbrooke doesn’t fit either one of those criteria and it’s just, quite frankly, not a good fit for what has been characterized as the gateway to the Wrigley Village area,” Mais said. “The findings don’t address whether the business is a predatory lender or not. It addresses whether or not it’s appropriate land use at that location.”
According to a staff report, the Council had determined that the proposed tenant “would not provide vitality or create a commercial center or provide commercial activity” as outlined in the description of an area zoned for a pedestrian-oriented retail strip.
Roger Jon Diamond, an attorney representing Pennbrooke Financial, however, claims that the Planning Commission effectively disallowed the CUP but never made findings, which is required by city law. He added that the property has been vacant for seven years and city officials admit it is zoned for a financial institution.
“A loan business like this doesn’t create problems for the surrounding area,” Diamond said. “There are no adverse consequences. They don’t create crime or anything. Most importantly, this property has been vacant. The client was willing to get a limited CUP for five years… So it didn’t make sense.”
He said the real reason the Council denied the CUP application is that the people who opposed it are against the kind of business it is, “not because it’s a land-use issue.”
Furthermore, Diamond said the down economy has prevented the property owner from bringing in another tenant and the auto-title-loan company, which hopes to bring jobs and services, has had to pay rent on the property despite being unable to move in.
“All these people clamoring for a bakery, malt shop or flower shop–why don’t they put one in?” Diamond said. “This is a business that does not pollute, doesn’t make noise, doesn’t bring in strippers… It’s discrimination against poor people. They just don’t like people who are not wealthy.”
Still, Lee Fukui, a Wrigley neighborhood resident and community activist who helped thwart the company’s plans, said in an email that he doesn’t think the business will prevail in court.
“It’s frivolous,” he said. “It’s what this industry does, and they have the money to do it. We argued against the proposed land-use issues on that property exclusively, which was something Pennbrooke was not expecting… Predatory lenders like Pennbrooke reduce property values and would not bring investment to our neighborhood. The Council was right in siding with the community.”
Fukui said Nix Financial offers a check-cashing and auto-title-loan service just 300 feet away from the property. He added that the Wrigley gateway is also located in a former redevelopment area that residents were working on revitalizing before redevelopment was abolished by the State.
Mais said Pennbrooke Financial is thus far not seeking monetary damages in the case, but it still has the right to do so. He added, however, the business would have a “slim” chance of being awarded any money.
Meanwhile, the Council voted 8-0 at a meeting last month to approve a new city ordinance that establishes new definitions and regulations for check-cashing, payday-loan, car-title-loan, signature-loan and other financial-services businesses. Councilmember Steven Neal was absent.
The ordinance prohibits new short-term lenders from locating within 1,320 feet or a quarter mile of any existing such business in neighborhood-commercial, pedestrian-oriented, planned-development and industrial-zoning districts.
It also requires that: windows not be obscured by signs, dark-window tinting, shelving, racks or similar obstructions; exterior phones, security bars and roll-up doors be prohibited; all fees and regulations be displayed near the cashier/check stand and provided to customers upon checkout; and hours of operation be stated in the application and subject to review.
Long Beach Development Services Director Amy Bodek said the ordinance applies only to new businesses, and existing businesses will be “grandfathered in.” Currently, there are 53 such businesses that exist in Long Beach, including 35 check-cashing businesses, 15 payday-lending businesses and three consumer-finance businesses, she said.
Still, some residents said the ordinance should go even further, suggesting that the businesses be located at least 500 feet away from residential areas. At the request of Councilmember Gary DeLong, city staff said they would look into the condition.
Annie Greenfeld, president of the Central Project Area Council (CPAC), a key proponent of the new ordinance, said in a phone interview that the group is overall satisfied with the restrictions but will continue to work with staff on adding other conditions.
“I’m just so happy that it passed,” she said. “We’re going to continue working with the City to make sure that hopefully they’ll include other areas in the ban. I think that was the first time that the community has been able to work with planning. I thought it was a terrific outcome.”
Business representatives, however, spoke out against the distance requirement and called for a 1,000-foot radius that was originally proposed by city staff but failed to pass because of a tie vote (3-3) by the Planning Commission.
Sophia Garcia, director of government affairs for Advance America, told the Council the new ordinance is essentially a “de facto ban” on the businesses, and the restriction would limit needed jobs and services.
“Consumers want and benefit from having more alternatives, not fewer,” she said. “This need is better served in a competitive marketplace.”
Vanessa Lugo, government affairs director for Check Into Cash, said the short-term-lending industry is already highly regulated by the state and federal governments and that restricting the number of businesses allowed to operate would only force consumers to apply for loans online through unregulated and unlicensed means.
“If storefronts are banned completely, unfortunately this won’t eliminate the demand for payday lending,” she said.
Bodek said the distance requirement is considered a “de facto buffer and cap on the number of such businesses that may come into the city.” City officials said a “hard cap” on the businesses would have brought about legal challenges.
Councilmember Gerrie Schipske said she took offense to some business representatives calling the city “not business-friendly,” adding that the Council recently approved a new ordinance on liquor stores. She said there are “great concerns” regarding “what is the best and highest use” for property in areas struggling with high unemployment and poverty.
Councilmember James Johnson noted that there appears to be some agreement between residents and businesses, which is a sign that both sides of the issue were fairly represented. “It’s remarkable the amount of consensus,” he said. “Most people are happy with most of the ordinance, which is a good thing.”