THE ISSUE

Officials in Muscle Shoals are debating whether to join other municipalities in preventing further growth in the number of short-term cash lenders.

In theory, fierce competition should cull the number of payday loan businesses dotting the streets of Muscle Shoals.

Yet, somehow, 21 such establishments are surviving in the city, with most populating the Woodward Avenue strip. That is one payday lender for every 627 residents.

The Alabama Department of Banking has licensed 18 lenders in Florence, two in Sheffield, one in Tuscumbia and six in Russellville.

Worried what image the concentration of such fast-cash businesses is sending, Muscle Shoals City Council members are debating whether to join other Alabama cities in restricting more growth. Among those cities is Midfield, where a moratorium says the excessive concentration of payday loan businesses limits the ability to attract other types of businesses.

Perhaps a bigger issue is why so many Alabamians are relying on payday loans and what they are paying in interest. The problem is not limited to the Shoals, or Alabama, but the combination of low wages and lack of state regulations is cause for worry.

According to a recent Pew study, 12 million Americans use payday loans every year. On average, a patron takes out eight loans of $375 per year and spends $520 in interest.

Most borrowers use short-term loans to cover living expenses rather than for emergencies or extras. About 69 percent use the cash to cover utilities, credit card bills, rent or mortgage payments, or food.

Most borrowers are white females from 25 to 44 years old. Other heavy users are those without a four-year college degree, home renters, blacks, workers who earn below $40,000 a year and divorcees.

States that enact strong legal protections for consumers find a major decrease in payday loan usage, according to the study. Unfortunately, Alabama is a “permissive” state, according to Pew, which allows single repayment loans of 391 percent or higher.

About 7 percent of Alabama residents seek payday loans compared to the national average of 5.5 percent. In Georgia, which bans storefront payday loan businesses, only 3 percent of residents seek short-term loans.

Muscle Shoals officials have reason to worry about the message that the number of quick lenders is sending. They also should consider what shape the shopping districts might take with a more diverse selection.

Beyond public perception of individual cities, however, remains the larger issue of protecting the great number of poor and uneducated residents of Alabama through stronger regulations.