Businesses in Iowa offering high-interest loans may soon see more restrictions at the local level. In Ames, the city council has approved an ordinance tightening restrictions on where payday lenders can locate. Iowa Citizens for Community Improvement is the group pushing for restrictions at both the state and local levels on short-term lenders who charge interest rates as high as 400%.

Adam Mason is Iowa CCI’s state policy director. “It really limits the spread of this predatory payday loan product,” Mason says. “Eventually, if they close down or we win that 36% cap at the statehouse, we’ll curb their practices altogether.”

The new ordinance in Ames won’t force existing lenders to close, but Mason says it effectively prevents any new payday lenders from opening inside city limits. Mason says such shops prey on low-income residents by clustering in one small area.

“If you get one payday loan at a store, two weeks later, you have to pay it back. If you can’t pay it back, you end up going to another (payday loan) store to get money to pay back the first one,” Mason says. “And that continues until you’re so far in debt you can’t get out.”

Des Moines, Clive and Urbandale have already enacted similar restrictions to the one approved this week in Ames. Mason says Iowa City zoning regulators are working to draft their own proposal. Iowa CCI is lobbying state lawmakers to cap interest rates on the loans.