The City Council’s attempt to enact an ordinance that would put a heavier tax on payday and car title lenders saw opposition Tuesday night at City Hall during a public hearing session. Industry stakeholders and attorneys spoke out against the proposed tax increase, saying that it is against Commonwealth law to tax just one portion of the financial services industry.

The ordinance, proposed by Councilman Justin Wilson, would create a special subcategory for payday and car title lenders under the city’s financial services section for business licenses. Rather than be charged $.35 per $100 of gross receipts, payday lenders would pay $.58 per $100 gross receipts the maximum rate for such a subcategory. Other financial institutions, like banks, would remain under the original tax rate category.

“The Commonwealth of Virginia requires that the taxes levied by any city be uniform for all persons engaged in the same business,” said Sam Choade, representing the Community Financial Services Association of America (CFSA). “The only distinguishing aspect of a payday loan, if there is one, is that it’s slightly more expensive.” He added that the CFSA would challenge the law if it were enacted.

City Council has advocated the abolition of payday lending, both locally and in statewide, since they adopted a November resolution stating that ” residents suffer from detrimental effects when they procure loans at the exorbitant interest rates charged by payday lenders.”

Representing the car title loan company Loanmax, attorney and former city councilman Lonnie Rich spoke against the proposed tax increase as well. Maintaining that abuses occur in all realms of the lending industry, Rich said that there are many beneficiaries too, and that some clients use payday and car title loans responsibly.

“You’re doing it simply because you have the raw power to do it and frankly that’s punitive and it’s not reasonable,” Rich said.

Jim McClellan of the Alexandria Human Rights Commission spoke in favor of the tax rate increase, citing years of studies by the commission. “As we study this we have reached the conclusion that this is an industry that acts in a manner contrary to the public interest,” McClellan said. “Who among us really believes that it is a service to extract money from people the way that this industry does?”

The fallout of a bill being discussed in the General Assembly regarding payday and car title lenders is still unknown, but in the future, a court could decide whether the tax rate increase is the city’s right or the Commonwealth’s.