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On the defensive.

At 10:00 a.m. tomorrow morning, the City Council’s Committee on Public Services and Consumer Affairs will hear testimony on an idea that could radically change the landscape for high-interest lending in the District: A bill that would cap the allowable interest rate for pawn shops at 24 percent, among the lowest rates in the country.

The effort started in Ward 4, when ANC 4B objected to Famous Pawn opening at Georgia Avenue and Fern Street. But, the commission decided, others should also have some control over pawn shops locating in their communities as well—they deputized Commissioner Sara Green to take the resolution on the road, and she has since gotten four other ANCs to sign on.

In mid-May, the Council passed temporary legislation that caps interest at 24 percent and gives ANCs “great weight” in deciding whether a pawn shop can be licensed in a given area. Ward 4 Councilmember Muriel Bowser is now campaigning for a permanent version, which currently places pawn shops under the authority of the Department of Insurance, Seurities and Banking, includes the interest cap only for licenses granted after April 1, 2010, and omits the ANC great weight provision. Green is hoping that, after testimony is heard, councilmembers will put back the ANC provision and extend the interest rate cap to all operating pawn shops.

“A lot of people are saying they love pawn shops because they love to go in and get a deal,” Green says. “And that’s fine. But their primary interest is not selling people gold watches at great prices. It’s to make a high interest loan. That is their purpose.”

The 24 percent threshold is quite strict. A few mid-sized towns in Massachusetts have that low a cap, but a more typical level is 36 percent (it was proposed as a national limit last year). Green says that Famous Pawn has accepted the 24 percent limit, and that it’s totally feasible for others to live within that limit as well.

“Clearly, we’re not asking for anything that is not possible for the industry,” she says. “We’re not trying to ban pawnshops. We’re not.”

But it’s fair to predict that the pawn shop industry will have some objections in tomorrow’s hearing—a national pawn shop advocacy group predicted that even a 36 percent cap would “devastate” the industry, meaning “the loss of a convenient, trusted, and vital credit option for consumers.”

Photo via flickr user M.V. Jantzen.