"Warning: Predatory Lender"--A Proposal for Candid Predatory Small Loan Ordinances

Peterson, Christopher L.
March 2012
Washington & Lee Law Review;Spring2012, Vol. 69 Issue 2, p893
Academic Journal
Over a hundred different local governments around the country have adopted ordinances restricting small, high-cost loans. This trend reflects the solid majority of the American public that opposes the legality of triple-digit interest rate loans and the long historical tradition of treating payday and car-title lending as a serious civil offense or even a crime. Nevertheless, perhaps owing to limits on municipal power, local payday lending law has generated relatively little scholarship or commentary. This paper describes the existing local law governing small, high-cost consumer loans and proposes a more emphatic ordinance that better reflects the policy judgment of many local leaders and a solid majority of the America public. In particular, this paper (1)introduces the historical background of regulation of usurious lending; (2) analyzes the recent growth in local ordinances attempting to control small, high-cost loans; (3) discusses the evidence of market failure in the small, high-cost loan market; (4)proposes a model ordinance requiring that lenders who offer loans in excess of 45% per annum display a cautionary message that reads: "Warning: Predatory Lender," on their street, storefront, and other on-premises signs; and (5)argues that the well-established municipal authority over signage provides a solid statutory and constitutional basis for such a law. An appendix with a model ordinance suitable for adoption by most local governments follows.


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