High-Interest Payday Loans Called Predatory, But Regulations Die In Iowa Legislature

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Easy Cash Solutions, on First Avenue in Cedar Rapids, is pictured on February 26

Easy Cash Solutions, located on 1st Avenue in Cedar Rapids pictured on February 26.

Inma Mateos/IowaWatch

Easy Cash Solutions, located on 1st Avenue in Cedar Rapids pictured on February 26.

Brian Curtis took out his first payday loan when he was 19. It took more than a decade before he got out from under it and the climbing interest payments that followed.

“It’s a trap,” he said.

Curtis, 37, and living in Davenport, said he had roughly $5,000 in payday loan debt after taking out loans for a $1,500 car repair while living in Florida, and then again when he moved to Missouri and needed a deposit for an apartment.

Add to that more than $22,000 in interest that accrued and he said he faced a bill topping $27,000.

“Who has $27,250 just laying around? Because if you had it just laying around you would never have been in the payday loan store in the first place,” Curtis said.

Payday loan companies provide small-dollar, short-term loans that dodge state usury laws, allowing payday lenders to charge annualized interest rates as high as 400 percent.


Yet, repeated attempts to place stricter regulations on the industry have failed to garner interest from state legislators, despite support from the Iowa Attorney General’s Office.

“Leadership on both sides of the aisle will not let these bills move forward for debate,” said Matthew Covington, a community organizer with Iowa Citizens for Community Improvement and part of campaigns in the Iowa legislature for tougher regulation of the payday loan industry.

Coming Thursday:
Behind The Scenes:

These loans affect thousands of Iowans every year, a seven-month IowaWatch investigative revealed. At the end of 2012, Iowa had 209 payday loan storefronts, which made over 950,000 loans that year and earned a combined annual net earning of nearly $5 million, according to the 2013 annual report from the Iowa Division of Banking.

Many borrowers — often low-income earners or those with poor credit histories — turn to payday lenders despite the high cost because payday loans are viewed as more accessible than traditional bank loans. Payday lenders, labeled as delayed deposit service businesses by the Iowa Division of Banking, do not seek the same credit history or salary requirements as banks and traditional lenders and the application process can take just a few minutes.

State Sen. Joe Bolkcom, (D-Iowa City)

State Sen. Joe Bolkcom, (D-Iowa City)

“The business model is locking people into this cycle of debt. Most consumers think ‘How could we allow that.’ But we do,” said Sen Joe Bolkcom, D-Iowa City.

Since 2001, Bolkcom, majority whip and chair of the Ways and Means Committee, has introduced multiple bills proposing increased regulation of the industry, including interest rate caps, reducing fees and a requirement that payday lenders provide repeat borrowers with information on debt management. Each time, the bills failed to gain traction, despite Bolkcom’s position as a leading member of the majority party.

A similar bill in the House mandating an option to pay off payday loans in installments was introduced in 2013 and passed through a subcommittee in February, but then languished.

Supporters of the payday loan industry, including the founders and owners of several of payday loan companies, have voiced their opposition to new regulations, contributing money to political campaigns and hiring lobbyists to voice their concerns.

Campaign contributions to Iowa legislators from payday loan-associated donors totaled over $480,000 between 2003 and 2013, according to Iowa Ethics and Campaign Disclosure Board data collected by IowaWatch. An additional $800,000 has flowed into the state as payday loan companies and interest groups contract lobbyists to speak in favor of the industry in the Iowa Statehouse.


Iowa legislators denied the contributions have had an influence.

Contributions may not buy votes, but experts say they can buy access to legislators, which can impact the agenda and give industry leaders a heads-up to legislation coming down the pike.

With state legislation stalling, Iowa cities have taken action. Over the past four years, ten Iowa cities passed ordinances restricting locations for new payday loans stores. But cities can’t control interest rates.

Waterloo City Council Member Pat Morrissey, who spearheaded Waterloo’s recent ordinance, said he hoped action at the municipal level could spur the state government into action.

“Just the concept of payday loans is atrocious. It’s usury and takes advantage of people who can least afford it and puts them in a cycle of debt,” Morrissey said.


This cycle of debt is linked to repeated use, through which borrowers who can’t pay off a loan when it comes due end up in a cycle of re-borrowing. With each additional loan, borrowers pay a fee. Added together, these fees can exceed the amount of the original loan and customers can remain in debt for months.

Surveys and studies reviewed in a seven-month-long IowaWatch investigation and which report high repeat usage rates suggest customers rely on the loans to cover chronic shortages, despite warnings from consumer advocates that the loans are only meant for short-term use.

Payday lenders also warn customers about repeat usage, but the warnings are often buried under positive messages portraying the loans as quick and easy.

An ad sent out in May by Advance America Cash Advance.

One mailing sent in May by Advance America Cash Advance, a national payday lender with 26 storefronts in Iowa, announced: “Whenever you need money, we’ll get it to you quickly, easily and with respect.” Small print at the bottom warned potential customers “short-term loans are not intended to be long-term financial solutions. Customers with credit difficulties should seek credit counseling.”

A survey by the Iowa Division of Banking shows roughly 53 percent of customers at Iowa’s payday loan stores took out 12 or more loans in a year. An additional 32 percent took out 15 or more loans.

A March report from the Consumer Financial Protection Bureau showed more than 80 percent of payday loans are rolled over or followed by another loan within 14 days. Iowa prohibits rollovers, where borrowers pay a fee or the interest on a loan to extend the due date, but lenders are allowed to make a new loan the same day a borrower repays a previous loan.

The Iowa Division of Banking survey shows the average payday loans interest rate in 2013, measured as an annualized percentage rate (APR), was 268 percent. In 2009 the average rate reached a peak of 296 percent APR.

While payday loan businesses are required to post interest using an annualized percentage rate, the businesses often provide additional ways of measuring interest rates that portray the loans more favorably.

In Iowa, a fee of up to $15 can be charged for a $100 loan. This could be billed as an interest rate of 15 percent. But calculating the annualized percentage rate, as mandated by the Truth in Lending Act, takes into account the quick turnaround by dividing that $15 fee over the number of days. During a two-week period that fee is divided by 14 days to become $1.07 per day. Multiplying this $1.07 for a full year results in a fee of $390, or a 390 percent annualized rate on the original $100 loan.

Randy Johnson, compliance examiner at the Iowa Division of Banking, said using an annualized percentage rate is the only way to compare “apples to apples” in order to give consumers an accurate picture of different loan options.

Jamie Fulmer, senior vice president of public affairs at Advance America Cash Advance said the company follows regulations, clearly posting APR rates in its stores.

However, Fulmer said annualized percentage rates best describe loans that will be paid off over a number of years.

“That’s not how our customers use our loans,” he said.

Payday loans are meant to be paid off in two to four weeks. But usage rates suggest that, while the loans might not last years, they often last longer than a few weeks.


A study by Pew Charitable Trusts showed borrowers took an average of five months to pay off their loans, accumulating an average of $520 in interest.

The study, involving a telephone poll of payday loan customers and 10 focus groups in select U.S. cities, pointed to the system of fees associated with payday loans as encouraging repeat borrowing. Of those polled, only 14 percent could afford the more than $400 needed to a repay an average payday loan. However, most could afford to pay about $50 every two weeks, roughly equal to the cost to rollover a loan.

Fulmer referred to a more positive study conducted by Harris Interactive, saying the vast majority of customers were satisfied with payday services and understood the terms and costs of the loans. An infographic from the study shows 98 percent of customers were “at least somewhat satisfied” with their payday loan experience and 97 percent strongly or somewhat agreed that the lender “clearly explained the terms of the loan to them.”

Fulmer said the study was done independently of the payday loan businesses. But documents reviewed by IowaWatch show the Community Financial Services Association of America, a payday loans industry organization heavily involved in lobbying and other promotional activities, commissioned the survey.

Harris relied on subject lists derived from customer data provided by five payday loan companies. The lists explicitly left out customers unable to pay back loans; it included only customers who had made the final repayment on a loan, including all rollovers, and had a zero balance.

The instructions sent to the five companies include comments that directly state the purpose of the survey as providing promotional material to “refute other research in the public domain that has shed a negative light on payday lending.”

Despite this goal of producing promotional material, nearly 60 percent of respondents to the Harris survey said they would favor government regulations on the amount of money people can borrow from payday loan stores. More than 40 percent said they would favor restrictions on how many times people can renew or extend a payday loan. Nearly half of respondents said payday loans were much more or slightly more expensive than other lending resources.

Brian Curtis pictured January 20 in a Davenport, Iowa Starbucks.

Lauren Mills/IowaWatch

Brian Curtis pictured January 20 in a Davenport, Iowa Starbucks.

For Curtis, re-borrowing the loans meant becoming mired in debt.

The first two times Curtis went in to pay off his loans, he was able to pay only the interest, $25 each time. But by the third visit, he needed to come up with the full payment. Curtis had a full-time job, but living expenses ate up most of his wages.

“Then you just go ahead and re-borrow it because you didn’t have the $445 to start with. So you’re just stuck,” he said.

Curtis said he first heard about payday loans through a televised ad.

“When I first saw the commercials when I was younger, I was like, ‘Oh, this is cool. I can just go there. I don’t have to go through all the credit check process.’”

He said he didn’t try to get loans from a bank because he didn’t have a credit history and had been turned down for credit cards. Borrowing from friends or family wasn’t an option.

“My family didn’t live close by and struggled for money as it was. I came from a good home life, but there weren’t a lot of extras to go around. I don’t think we ever took a family vacation anywhere,” he said.


Despite the high interest rates and the dangers of repeat borrowing, the loans are still in demand. The Community Financial Services Association reports payday loan businesses provide $38.5 billion in short-term credit to an estimated 19 million American households.

Amber Castle, an employee at Easy Cash Solutions in Cedar Rapids shown February 26.

Inma Mateos/IowaWatch

Amber Castle, an employee at Easy Cash Solutions in Cedar Rapids shown February 26.

In a February interview during IowaWatch’s investigation, Amber Castle, an employee at Easy Cash Solutions on First Avenue in Cedar Rapids, said she saw about 150 people a week come in for a loan.

“There are people who make a lot of money and shouldn’t be coming in here, but it is easier and more convenient. Banks are making it harder to get a loan and it can take a long time. Here it only takes about 20 minutes,” Castle said.

Outside the store, signs read “All Credit Welcome,” which had to change from “No Credit Checks” when the store adopted an underwriting program to check customer’s eligibility for a loan. Flyers advertise “convenient services,” a “friendly team” and a business motto of “helping everyday people.”

Applicants need to have a bank statement, some form of identification, a home phone or cell phone bill, proof of income and a check.

Because payday loans are not usually included in credit reports from the major credit reporting agencies, many consumers assume the loan won’t impact their credit history and don’t plan on paying it back, Castle said. But failure to pay off a payday loan can damage an individual’s credit score if the store uses an outsourced collections agency, she said.

Castle and Fulmer both said the loans are transparent and borrowers know how much they’ll owe.

But Susan Taylor, a family finance specialist with Iowa State University Extension and Outreach who teaches personal finance classes to low-income individuals, said the businesses are predatory, preying on people who are in need of cash.

“They are not being very upfront about the true costs over time. And when your luck is not good — and with many low-income individuals you go from crisis to crisis to crisis — you don’t question it.”

Curtis said he was naïve when he took out his first payday loan. “I thought it was a quick fix for a problem. I realized how bad of a problem it was going to become for me after I was already in,” he said.

“You’re constantly stressed, thinking, ‘How am I going to make the payments?’ I was tired of having panic attacks.”

He eventually asked his grandfather for help to pay off a portion of the debt and declared bankruptcy on the rest in 2007, which is affecting his credit history for 10 years.

“I felt ashamed. You feel ashamed when you get to that point where you have to ask somebody else for help to get out of debt. You feel unaccomplished. You feel worthless,” he said.

Now, seven years after getting out from under his payday loans, Curtis said he’ll “never go back into it. No way.”


Curtis said he’d like to see further regulation of the industry to prevent others from falling into similar situations. But regulations proposed in the Iowa Legislature repeatedly have died before reaching the floor for debate.

There have been successes in the past, with actions taken against the car-title loan industry, a similar small-dollar, short-term lender that required borrowers to put up their vehicles as collateral. A bill proposed by the Iowa Attorney General’s Office was signed into law in 2007, capping interest rates on car-title loans and effectively shutting down the industry in Iowa.

“We had been seeing a tremendous problem with people losing their cars. It’s a lifeline to get to work, to school, to get health care. Losing their car was everything,” said William Brauch, director of the consumer protection division of the Iowa Attorney General’s Office.

Steve Warnstadt, former Iowa Senator.

Steve Warnstadt, former Iowa Senator.

Steve Warnstadt, government affairs coordinator for Western Iowa Tech Community College in Sioux City and a former Democratic state senator, was involved in efforts to ban car title loans.

Similar efforts made at the time to pass payday loan regulation stalled.

Warnstadt said legislators “did broach the subject with the House and it was evident that they were not going to be able to pass anything.”

“There are some folks who have a complete free market approach to things, and say that consumers want this product, they are purchasing the product; if they didn’t want it they wouldn’t use it.”

At the time of the proposed car title loan bill, the attorney general’s office also pointed to payday loans as a similarly abusive practice. Brauch said the office continues to support stronger regulation of payday loans but the office hasn’t proposed a payday loan bill because Bolkcom, the Senate majority whip, consistently has proposed new bills.

“If it is something that is the legislators’ initiative, I think that has the highest degree of weight particularly if it comes from legislative leaders,” Brauch said.


Bolkcom has introduced bills with proposed payday loan regulation nearly every session since he entered the Iowa Legislature in 1999.

“Regulations are necessary. Consumers expect regulators and their government would not allow a loan product to be available that didn’t have some kind of consumer protection. Bank loans have all kinds of protections for the consumer. In payday loans, it is consumer beware” he said.

Bolkcom proposed a bill during the 2013 legislative session that proposed capping the annual percentage rate at 36 percent, essentially extending the cap set by the federal Military Lending Act of 2007, which created a 36 percent cap for payday-style loans to active-duty military personnel and their dependents.

During the 2013 session, the bill made it through the Ways and Means Committee, which Bolkcom chairs. Because the bill passed the committee it could have been brought up for debate during the 2014 session, but it didn’t make the cut.

“The senate leader is only going to bring things up if he thinks there are the votes to get it through the House,” Bolkcom said.

Iowa House Majority Leader Linda Upmeyer, Clear Lake

Iowa House Majority Leader Linda Upmeyer, Clear Lake

House Republican Leader Rep. Linda Upmeyer, R-Clear Lake, objected to using the House as an excuse not to pass a bill.

“To portray that as a reason that they wouldn’t send it over when they send over many bills that are unsuccessful, not because it doesn’t get a fair hearing, but because it doesn’t have enough support. Perhaps they can’t get enough support in their own chamber and it’s a convenient excuse to blame another chamber,” she said.

When asked whether she would support a bill further regulating payday loans, Upmeyer said she had “seen no such bills come forward.”

However, the House saw a payday loans bill, HF 382, which was introduced last year and passed a House Commerce subcommittee during the 2014 session before stalling. The bill would have required payday loan businesses to give borrowers an option to pay off loans through installments after paying a $10 fee.

Brauch, of the Iowa Attorney General’s office, spoke in favor of the bill during a subcommittee hearing and said he will work with legislators again next year to put forward a new bill.

Although the Iowa Attorney General’s Office and Iowa Division of Banking get few complaints about payday lenders, Brauch said that doesn’t mean consumers are happy with the service.

He said people usually complain to the office when they feel they’ve been ripped off or lied to about the terms of the loan.

“With these (in-store) transactions its not that people are being lied to as much as that they (the loans) are fundamentally unfair. They don’t complain about it. They kind of just bear the burden of it,” he said.

Regulations have passed successfully in other states. The Pew Charitable Trusts study labeled 15 states as “restrictive.” These states have no payday loan storefronts. An additional nine states allow payday loans but have placed tougher requirements on the industry, including rate caps and longer repayment periods, the study shows.


Iowa is among the 27 states labeled as “permissive” by the Pew study. Currently, Iowa has some regulations on payday loans:

  • Loans are capped at a maximum of $500 to one person at a time;
  • The loan term is limited to 31 days;
  • A fee of no more than $15 can be charged for the first $100, then a maximum $10 fee for each additional $100 loaned. The total fee is capped at $55;
  • Penalties for failure to repay the loan are limited to $15 and can only be collected once per loan.


Iowa legislators said the lack of tougher regulations is not due to the influence of political donors, but the payday industry has been heavily involved in campaign contributions in Iowa.

Contributions from the payday loan industry amounting to over $83 million have poured into state campaigns across the country, according to data from the National Institute on Money in State Politics. Ohio, home to the payday lending company Check ‘N Go, is the biggest target for this money, the data shows. The institute shows Iowa legislators receiving more than $360,000 from donors associated with the payday loan industry since 1998.

However, data collected by IowaWatch from the Iowa Ethics and Campaign Disclosure Board reports shows Iowa legislators received more than $480,000 in campaign contributions from payday loan-affiliated donors since 2003.

“It’s hard to draw a straight line from contributions to how people vote on these issues,” Bolkcom said. “Does it play a role? Yeah, probably. Does it make a difference? Probably not. But people would be naive to think these contributions don’t have some effect.”

Four donors make up the majority of the contributions:

  • Michael Medved, owner of two Nebraska-based payday loan companies, donated more than $165,000;
  • Rod Aycox, owner of an Alpharetta, Geo.-based payday loan company, donated more than $145,000;
  • Allan Jones, CEO of the Cleveland, Tenn.-based Check Into Cash payday loan chain, donated more than $38,000;
  • Advance America Cash Advance Centers PAC, the political action committee for the Spartanburg, S.C.-based payday loan company, donated more than $37,000.

Fulmer, senior vice president of public affairs with Advance America Cash Advance, said the company doesn’t discuss specific donations, but that its goal is to “support candidates that support consumers having access to credit in a free marketplace.”

“We certainly participate in Iowa. We have 60 to 65 employees in Iowa who get up every day to provide these services. We have made an investment in Iowa,” he said.

Hans Hassell, an assistant professor of politics at Cornell College, in Mount Vernon, Iowa, said studies have shown a contribution doesn’t do much in terms of directly affecting policy or legislation, but it influences access.

“If I call up a state legislator I’m going to talk with their legislative assistant or their secretary because I have not given this large amount of money, but the executive of a corporation or a company that has given a fair amount of money to these campaigns, they are more likely to have direct access to the politician themselves,” he said.

Hans Hassell, assistant professor of politics at Cornell College, pictured in his office on February 26.

Inma Mateos/IowaWatch

Hans Hassell, assistant professor of politics at Cornell College, pictured in his office on February 26.

Most of the contributions from payday loan-associated donors went to incumbents from both parties, which Hassell pointed to as a sign that companies are more interested in gaining access to key players.

“What it gives them is not access to policy changes but access to information that may be useful to them in terms of mobilizing individuals, mobilizing grassroots, getting information to prepare their corporation for whatever is coming down the road,” Hassell said.

Ultimately, Warnstadt, the former Democratic state senator, said political campaigns are appealing to a broad spectrum of potential donors when raising funds.

“You end up getting money from entities that are going to have conflicting interests and there’s going to be a conflict. Ultimately, you are held accountable by the people who sent you to the Statehouse and you get judged on your deeds and your actions,” he said.

The top recipient, Senate Majority Leader Michael Gronstal, D-Council Bluffs, received more than $66,000 from payday-associated donors.

In an emailed statement to IowaWatch, Gronstal said:

“Campaign contributions have never influenced my decision about whether to move legislation, including legislation affecting the payday loan industry. Instead, my decision is based on other factors, including whether legislation is good public policy, whether it has the support of my Senate Democratic caucus, and whether there’s a reasonable chance that it will pass the House and be signed by the Governor.”

Warnstadt received more than $17,000 from payday-associated donors during his 16 years in the Iowa Legislature. He said making a contribution “increases the likelihood of being heard but it doesn’t preclude those who aren’t making contributions from being heard.”

Upmeyer, who has received more than $15,000 from payday-associated donors, said donations don’t play a role in her votes, support for bills or accessibility.

“I speak with anyone who calls the office and schedules an appointment. I’m very accessible,” she said.

This statement came after multiple calls and emails from IowaWatch to Upmeyer and her office during the course of three months failed to garner a response.

Upmeyer didn’t answer questions about whether or not she would support regulations on payday loans.

IowaWatch attempted to contact other legislators among the top recipients of payday-associated contributions, including House Speaker Kraig Paulsen, R-Hiawatha, who received nearly $11,500, and former House Democratic Leader, Rep. Patrick Murphy of Dubuque, who received over $16,000. Repeated calls and emails went unanswered.


Adding to the money spent on political campaigns, payday loan companies and industry organizations spent more than $800,000 on lobbyists in the Iowa capitol between 2008 and 2013, Iowa lobbyist registration reports show.

  • Community Financial Services Association, the national payday loan industry organization, spent nearly $290,000 between 2008 and 2013.
  • Aycox’s company, Anderson Financial Services, spent nearly $118,000 between 2008 and 2011.
  • Medved’s company, Midwest Check Cashing, spent nearly $350,000 between 2008 and 2013.
  • The Iowa Association for Financial Choice, which started spending money on lobbying in 2011, spent almost $50,000 over three years.

Brauch, of the Iowa attorney general’s office, said the money spent on lobbying can make it harder to get regulation of payday loan businesses passed in the legislature.

“The payday industry invests a great deal of money in lobbyists who work the issue hard and even if the voices of others are speaking in favor of this legislation it can be an uphill battle,” he said.

Bolkcom said he’s noticed more lobbying from the industry since he started proposing regulations more than a decade ago. “They’ve definitely become more organized and have more of a presence,” he said.

By employing lobbyists in the Statehouse, the industry has an additional opportunity to speak with legislators about the industry in a positive way.

Covington, the community organizer with Iowa Citizens for Community Improvement, said the industry “knows how to cover their bases,” hiring lobbyists that speak to both sides of the aisle.

“They do, of course, reach some people and have some influence,” he said.


Despite the lack of regulation and a steady demand for the loans over the past few years, the number of payday loans stores in Iowa has begun to decrease. But decreasing storefronts don’t indicate a decreased flow of money from the industry into the Iowa Statehouse.

Over the years, companies owned by Medved, including MM Finance, Midwest Check Cashing and the short-lived 3-Way Money Ventures, have licensed 33 different storefronts. Many are now closed. As of July, only 16 storefronts licensed to MM Finance were listed as “active” by the Iowa Division of Banking, which means the stores are up-to-date on business filings and annual inspections. The stores registered under the more recognizable name EZ Money Check Cashing.

At one point, Aycox’s business, Anderson Financial Services, had 23 storefronts across Iowa. In April, only one was listed as active by the Iowa Division of Banking. By July, that too was closed. The stores were registered under the name Iowa Payday Loans or LoanMax.

Despite the decreasing number of stores, the dollar values for Aycox’s contributions to Iowa candidates increased significantly. During a three-day streak in 2012, Aycox dropped $30,000 on political contributions in Iowa:

  • On Oct. 30 and 31, Aycox gave two consecutive $10,000 donations to Col. Al Ringgenberg, who ran unsuccessfully against Sen. Michael Gronstal, D-Council Bluffs.
  • On Nov. 1, Aycox donated another $10,000 donation to Team Iowa PAC, which advertises itself as “dedicated to helping elect conservatives from Iowa into office.”

Multiple phone calls and emails to Aycox went unanswered.

Emails to Medved also went unanswered. Messages left with the secretary of the corporate offices went unreturned.

“If he hasn’t called you back, he probably doesn’t want to talk to you,” she said after repeated calls.

Although his businesses are headquartered in Nebraska, Medved lists only Iowa addresses in his Iowa campaign contributions. Trips made to these Iowa addresses — including one Urbandale address cited as the home office of Midwest Check Cashing on documents filed with the Iowa Secretary of State — turned up empty.

The West Des Moines address of EZ Money Check Cashing, shown March 23.

Lauren Mills/IowaWatch

A Des Moines EZ Money Check Cashing storefront shown March 23. Michael Medved, owner of two payday loan companies, listed the store’s address on campaign contributions.

When IowaWatch visited the Urbandale address, offices under the name of Midwest Check Cashing or Michael Medved were notably missing. One office in the building belongs to the Des Moines-based Premier Real Estate Services, LLC, run by Medved’s business partner, James Myers. Employees recognized Medved as a partner in a Premier property in Omaha, but didn’t have a forwarding address.

Two other Iowa addresses listed in Medved’s campaign contributions turned out to be a West Des Moines building that was home to the now-defunct Regency real estate businesses, which also was headed by the Myers family, and a Des Moines EZ Money Check Cashing storefront. The EZ Money clerk initially didn’t recognize Medved’s name, but later said he would call. He didn’t.


Ten cities across Iowa have passed ordinances limiting the locations of new payday loan stores in residential areas or near certain buildings, like schools. But both critics and advocates say the ordinances fail to address key issues: high interest rates and business practices that target low-income borrowers.

“Cities can only do so much. They can’t do anything about the interest rates,” said Covington, of Iowa Citizens for Community Improvement, who has worked with cities on ordinances.


Des Moines passed Iowa’s first city ordinance in 2010, which restricted new locations and the relocation or expansion of payday lenders and pawnbrokers. The ordinance says the presence of these businesses detracts from efforts to attract or retain other businesses and concentrations of payday lenders have “adverse effects on the overall business atmosphere of the City.”

Ordinances also have passed in Ames, Ankeny, Cedar Rapids, Clive, Iowa City, West Des Moines, Windsor Heights and, recently, in Waterloo and Dubuque. [ED.NOTE: A previous version of this story did not include Dubuque, which passed a local ordinance July 21, 2014.]

Pat Morrissey ran for the Waterloo City Council last fall on a platform that included tougher zoning for payday lending stores. He won the election with nearly 60 percent of the vote against three other candidates.

“When I was walking around knocking on doors I never had anyone say anything good about a payday lender. The majority said it’s about time. Most wanted to see them gone, or at least out of their neighborhood,” he said.

After winning the election, Morrissey spearheaded an ordinance restricting both future payday loan locations and preventing existing storefronts that have closed for more than 90 days from re-opening. The ordinance passed April 28 with a 5-2 vote.

Rebecca Rosenbaum, of Iowa City, said that while an interest rate cap passed in the Statehouse would help borrowers, she didn’t support city ordinances.

In 2012, Rosenbaum spoke at an Iowa City Council meeting, opposing the city’s ordinance restricting payday lenders. She said payday lenders have been one of the few financial resources available to her and she was grateful to have access to the loans.

“If there were the kind of safety nets we need, such as affordable housing and decent wages and real help for poor people, we wouldn’t need to go to payday lenders,” she said, according to the transcript of the Sept. 4, 2012, meeting.

Rosenbaum’s husband, Steve Marsden, has been a part-time temporary worker at the Iowa City Public Library since 1982 and Rosenbaum does freelance writing jobs. When unexpected expenses come up the money simply isn’t there. In the past, they’ve turned to payday lenders, she said in a May interview.

Rebecca Rosenbaum and her husband, Steve Marsden pose with their cats in the backyard of the Iowa City home.

Lauren Mills/IowaWatch

Rebecca Rosenbaum and her husband, Steve Marsden pose with their cats in the backyard of their Iowa City home on May 16.

In 2011, Rosenbaum took out a loan from an online payday lender with connections to the Santee Sioux Nation in Nebraska.

She said she didn’t remember the exact amount of the loan, which went toward veterinary services that racked up a bill for hundreds of dollars when she and Marsden discovered one of their cats had diabetes. Because the couple had to renew the loan before they could pay it off, the loan ended up costing more than the original vet bill.

Marsden said he doubted the Iowa City ordinance, which passed in 2012, had much effect on payday loan use.

“If people are desperate enough, they can just go online,” he said.

However, Morrissey said keeping new lenders out of residential areas was a step forward, and he hoped the ordinances in his town and others would lead to action in the Statehouse.

“I would hope the state legislators are getting the message loud and clear that people want to see changes and one of those is they need to cap the interest rate. They need to be responsive to the common people of Iowa, not the moneyed business interest,” he said.