ORDINANCE NO. BL2016-117

ORDINANCE NO. BL2016-117

An Ordinance amending Chapters 17.04 and 17.08 of the Metropolitan Zoning Code to designate flex loan and installment loan as uses permitted with conditions and adding conditions applicable to these uses (Proposal No. 2016Z-003TX-001).

WHEREAS, a study conducted by the Regional Planning Agency of Chattanooga-Hamilton County, Tennessee concluded that the proliferation and clustering of “Alternative Financial Services” such as cash advance, check cashing, pawnshops, and title loan establishments can have a detrimental effect on local property values and economic redevelopment; and

WHEREAS, the study noted that efforts to promote economic revitalization through diversification of land uses in certain areas may be impeded by the clustering of certain alternative financial services; and

WHEREAS, a 2009 examination of the locations of alternative financial service providers by the Board of Governors of the Federal Reserve System provides evidence that these businesses tend to locate in areas where the population is disproportionately minority and poorly educated; and

WHEREAS, in the last decade, many cities have created zoning ordinances designed to limit the concentration of alternative financial services (AFS) businesses such as check-cashing outlets, money transmitters, car title lenders, payday loan stores, pawnshops, and rent-to-own stores; and

WHEREAS, AFS businesses have been expanding at a rapid rate, and the abundance of payday lenders in certain communities may be the result of a void left by banks and credit unions that have departed from middle- and low-income neighborhoods.

WHEREAS, the fees and lending practices used by alternative financial service establishments can have a significant negative effect on a city’s residents {Source: Baylor, Don; “The Hidden Costs of Payday Lending,” Texas Business Review, April 2008}; and

WHEREAS, as a result of the high fees associated with using AFS services, consumers become enmeshed in a cycle of debt and dependency from which it is difficult to emerge.

WHEREAS, Tennessee is among 27 states that have permissive regulations for payday establishments that have an Annual Percentage Rate (APR) of 391% or higher. Tennessee’s rate is 459%. Under Tennessee law, a payday lender can charge $15 per returned check, or $17.65 for every $100 loaned to the borrower; and

WHEREAS, pursuant to Title 45, Chapter 12 of Tennessee Code Annotated, certain rules and regulations governing financial institutions have been established which regulate flexible credit lenders and which became effective on January 1, 2015; and

WHEREAS, as a result of this new TCA legislation, there are additional types of alternative finance lenders (flexible credit loans) that are not currently identified in the zoning code, but have a similar impact as the alternative financial services noted in the RPA study; and

WHEREAS, on March 26, 2015, the Consumer Financial Protection Bureau (CFPB) -- a federal agency -- announced its consideration of rules proposed to end payday debt traps by requiring lenders to take steps to ensure that consumers can repay their loans. However, it is anticipated that implementation of any such new regulations will be months if not years away; and

WHEREAS, cities have authority to regulate the location and operation of AFS businesses within their boundaries, particularly in the aftermath of the U.S. Supreme Court decision in Village of Euclid, Ohio v. Ambler Realty Co. which established the general principle that zoning restrictions can legitimately be designed to protect public safety, health, and welfare of residents, specifically allowing the exclusion, separation, or limitation of particular types of land uses deemed harmful in some way to the local community; and

WHEREAS, other Tennessee cities, including Chattanooga and Memphis, have addressed AFS businesses by enacting minimum distance requirements from each other; and whereas on December 9, 2014, the Knoxville City Council approved resolution R-428-2014 titled “A Resolution of the Council of the City of Knoxville respectfully requesting that the Metropolitan Planning Commission consider and make a recommendation to City Council regarding the possible limitation of alternative financial establishments to the zoning regulation definitions and to potentially regulating the clustering of same”; and

WHEREAS, as shown on Exhibits A and B attached hereto and made a part of this ordinance, Nashville, Tennessee has a high concentration of alternative financial service establishments along the major thoroughfares in the city; and

WHEREAS, in order to protect local property values and economic redevelopment in Nashville, Tennessee, the Metropolitan Council deems it to be in the best interest of the residents of the city that the proliferation and clustering of alternative financial services be further regulated through the Metropolitan Zoning Code.

NOW, THEREFORE, BE IT ENACTED BY THE COUNCIL OF THE METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY:

Section 1. That Section 17.04.060 of Title 17 of the Code of The Metropolitan Government of Nashville and Davidson County, Zoning Regulations, is hereby amended by adding the following terms and definitions:

“Flex loan” means any building, room, space or portion thereof where a written agreement providing open-end credit, either unsecured or secured by personal property, in which repeated non-commercial loans for personal, family or household purposes is contemplated, as regulated by Title 45, Chapter 12, of the Tennessee Code Annotated.

“Installment loan” means any building, room, space or portion thereof where a loan is repaid over time with a set number of scheduled payments to a financial institution.

Section 2. That Section 17.04.060 of Title 17 of the Code of The Metropolitan Government of Nashville and Davidson County, Zoning Regulations, is hereby amended by deleting the final provision at the end of the definition of “financial institution” which currently reads:

“but excluding cash advance, check cashing, and title loan establishments.” and replacing it with the following: “but excluding cash advance, check cashing, title loan, flex loan and installment loan establishments.”

Section 3. That Section 17.08.030, District Land Use Tables, is hereby amended by designating “flex loan” and “installment loan” as uses permitted with conditions (PC) in zoning districts MUN, MUN-A, MUL, MUL-A, MUG, MUG-A, MUI, MUI-A, ON, OL, OG, OR20, OR20-A, OR40, OR40-A, ORI, ORI-A, CN, CN-A, CL, CL-A, CS, CS-A, CA, CF, SCN, SCC, SCR and IWD.

Section 4. That Section 17.16.050, Office Uses, is hereby amended as follows:

1. By deleting subsection D. in its entirety and substituting with the following new subsection D.:

“D. Cash Advance, Check Cashing, Title Loan, Flex Loan and Installment Loan.
1. No cash advance, check cashing, title loan, flex loan or installment loan establishment shall be located less than one thousand three hundred twenty (1,320) linear feet from the property line of another property upon which another cash advance, check cashing, title loan, flex loan or installment loan office is located.
2. Cash advance, check cashing, title loan, flex loan or installment loan offices in the MUN, MUN-A, ON, and CN zoning districts shall be limited to two thousand five hundred (2,500) square feet of gross floor area per establishment.”

Section 5. If any provision of this Ordinance shall be declared unconstitutional or otherwise invalid by the judgment or decree of any court of competent jurisdiction, such unconstitutionality or invalidity shall not affect any of the remaining provisions of the Ordinance.

Section 6. Be it further enacted that this Ordinance shall take effect immediately after its passage and such change be published in a newspaper of general circulation, the welfare of The Metropolitan Government of Nashville and Davidson County requiring it.

Sponsored by: Jeff Syracuse, Mike Freeman, Fabian Bedne, Colby Sledge, Karen Johnson, Mina Johnson

View Exhibit

AMENDMENT NO. 1
TO
ORDINANCE NO. BL2016-117

Mr. President:

I move to amend Ordinance No. BL2016-117 by deleting from Section 1 the reference to “Installment loan” which currently states:

“Installment loan” means any building, room, space or portion thereof where a loan is repaid over time with a set number of scheduled payments to a financial institution.

I further move to amend Ordinance No. BL2016-117 by deleting Section 2 in its entirety and substituting therefore the following:

SECTION 2. That Section 17.04.060 of Title 17 of the Code of The Metropolitan Government of Nashville and Davidson County, Zoning Regulations, is hereby amended by deleting the final provision at the end of the definition of “financial institution” which currently reads:

“but excluding cash advance, check cashing, and title loan establishments.”

and replacing it with the following:

“but excluding cash advance, check cashing, title loan, and flex loan establishments.”

I further move to amend Ordinance No. BL2016-117 by deleting Section 3 and Section 4 in their entirety, and by re-numbering Section 5 and Section 6 as necessary.

LEGISLATIVE HISTORY
Introduced:	January 5, 2016
Passed First Reading:	January 5, 2016
Referred to:	Planning Commission - Approved (8-0) Planning & Zoning Committee
Passed Second Reading:	February 2, 2016
Deferred to March 15, 2016:	February 16, 2016
Amended:	March 15, 2016
Passed Third Reading:	March 15, 2016
Approved:	March 16, 2016
By:
Effective:	March 25, 2016