by Bradley Parsons
Staff Writer
Duval County will have to wait to become the toughest place in Florida for payday lenders to do business.
A legal challenge from lenders will delay the introduction of an ordinance regulating the short-term, high-interest loans. The ordinance would give Duval County the tightest regulations in the state over payday lenders.
The ordinance limits interest rates the businesses can charge and where they can operate, keeping them away from favored locations like military bases and from each other. The bill also closes loopholes in earlier state legislation that allowed questionable lending practices like disguising the loans as rebates and threatening borrowers with arrest.
The ordinance has been hailed as a possible trendsetter for payday loan regulation across the state. It would have gone into effect with Mayor John Peyton’s signature after the bill passed the Council Oct. 10. But lenders responded with a lawsuit less than a week after the bill passed the Council. The complaint contends that the City did not provide adequate notice before expanding the scope of the bill and that the interest rate caps violate state law.
Court proceedings are expected to begin Feb. 1. At that time, the plaintiff lenders are expected to seek an injunction against the regulations that would delay their introduction.
The fair notice complaint stems from the Council’s expansion of the scope of the bill during the October meeting. The bill was originally crafted to address only borrowers who are also military members. The Council expanded the interest rate caps to civilian borrowers as well.
The lawsuit claims that lenders were not given adequate notice of that change. In response, the Council will likely pass a new ordinance that will delay the introduction of the regulations. That should eliminate the fair notice challenge, leaving only the legality of the interest rate caps to be litigated, said Council President Kevin Hyde, a Foley & Lardner attorney who helped write the bill and shepherded it through the Council.
“We’re trying to correct some of the procedural issues that have been raised,” said Hyde. “It’s not that we didn’t do it correctly the first time. It’s that we have a chance to take those issues off the table in terms of the litigation, and why not do that?”
Still on the table are the interest rate caps. Lawyers for lenders like Advance America, one of the plaintiffs, say that Jacksonville must conform to statewide regulations on payday lenders enacted in 2001. By setting its own caps, the County would clash with state law, Advance America argues.
But Hyde said the City Council was well within its rights to regulate businesses operating within its borders and protect its citizens.
“It’s the inherent power of local government to deal with local issues,” said Hyde. “I negotiated with representatives from the [lending] industry for many months leading up to this bill passing, and we found some common ground in areas like best practices and zoning. But, at the end of the day, we have a fundamental disagreement on this issue. That’s why we have courthouses.”
Ironically, if the bill passes its legal challenge, it has the potential to change the state regulations. Hyde said he’s already heard from state lawmakers interested in following Jacksonville’s example.