The ordinance was introduced in December 2012 as part of the City’s three-pronged plan to better regulate predatory lending industries and protect consumers. Placement restrictions are intended to reduce the over-proliferation of alternative lending entities, specifically in underbanked lower-wealth communities and communities of color.

According to Woodstock’s research, there are only a few communities in Chicago where existing storefronts would violate the new law. These entities will be grandfathered in, but new shops will have to locate elsewhere. Unsurprisingly, these neighborhoods with the highest concentrations of alternative financial services are either communities of color or areas with a substantial number of low- and mid-wage workers.

I testified in support of the ordinance at the hearing alongside staff of the City’s Bureau of Planning and Zoning. Bureau staff pointed to studies that indicate increased crime rates and higher incidences of bankruptcy in communities with an over-concentration of pawn and payday shops. Representatives from the industries also testified, some opposed to the ordinance, others in favor of passing it and even increasing the distance from 1,000 feet between storefronts to 2,000 or 3,000 feet.

At the hearing, I noted that “Ensuring that lower-wage workers and communities of color have access to a variety of products—specifically those that will allow them to save, build positive credit, and accumulate wealth—is vital to the well-being of our City and State. This ordinance brings Chicago in line with cities across the country that have limited the number, location, and density of potentially predatory lending entities.”

Members of the committee sought clarity on the differences between payday lending institutions and pawn shops and also wondered whether the ordinance could be amended with a larger distance between shops. In the end, the ordinance passed as written and will be sent to the full council for a vote. We urge the full Council to pass the ordinance and ensure that Chicago communities aren’t drowning in potentially predatory financial products.