The town of Starkville finds itself in a situation that’s pretty common in many places during these tough economic times. It seems they’ve seen a quick expansion in the number of payday lenders within the city limits over the past few years. Accordingly, Starkville has decided not to allow any more payday loan businesses into their city.
No New Businesses
Currently, there are around 20 payday loan businesses in Starkville. The Aldermen of Starkville voted unanimously that these kinds of businesses, which provide high interest short term loans, should be denied licenses and certificates of occupancy for doing business for the next year.
This moratorium on new payday lenders is just the first step. It is expected that the aldermen will seek a more permanent solution during the next 12 months that will prevent new payday loan businesses from sprouting up for good.
Hands Off Existing Businesses, for Now
The resolution doesn’t affect existing payday loan businesses. However, it does state that, when an existing business goes out of business, their license and their certificate of occupancy can’t be renewed or transferred. This means that the number of payday loan businesses will, eventually, dwindle as businesses shut down or need to move from their current locations.
Taking More than they Give?
The problem with these businesses, according to one Alderwoman, is that they take more money out of the local economy than they put back in. She said that many of the businesses are part of national chains and that most of the profits funnel elsewhere. In addition, she complained that they tend to crowd out other kinds of businesses.
Not Just Payday Lenders
There are other businesses that fall into this category, along with payday loan businesses. There are “car title loan businesses” which make small short-term loans using the equity in a car as collateral. Banks, however, are still allowed to make that kind of a loan.
Check cashing businesses are affected too. The moratorium sees those as businesses whose primary purpose isn’t banking, and who don’t provide face value of a check.
Some residents did speak out against the moratorium. One man argued that the moratorium hurts the city because it reduces potential property taxes. In addition, he complained that the moratorium goes against the spirit of American free enterprise.
What the Aldermen will do over the next 12 months remains to be seen, but what is certain is that this issue is far from resolved in Starkville.