WASHINGTON (Map, News) - Alexandria officials want to crack down on what they say are predatory lending practices by heavily taxing payday and car-title lenders.

The city taxes financial services companies, which include stockbrokers, hedge funds and payday lenders, at a rate of 35 cents for every $100 of gross receipts.

Councilman Justin Wilson has proposed creating a subcategory for payday lenders and car-title lenders and taxing them the state limit of 58 cents for every $100.

Payday lenders issue short-term, high interest-rate cash advances to borrowers who can’t wait until their next payday for the money.

The Virginia legislature last month passed a bill that places stricter limits on payday lenders by requiring them to allow borrowers more time to pay back loans and restricting the number of loans they can issue to a single borrower.

“I think that is a positive move forward — I don’t think it’s far enough,” Wilson said.

“The average payday loan of $325 ends up costing the borrower $793,” Deputy City Manager Mark Jinks said. “It’s very expensive, and generally you’ll find payday lenders in the lowest-income neighborhoods where people have the least sophistication in financial services and the biggest need to pay the basic bills.”

Representatives from the Consumer Rights League, a lending industry advocacy group, countered that borrowers end up paying more money in bank overdrafts, bounced checks and late credit fees when the loans are not available to them.

“This tax increase is simply a way to reduce or eliminate payday loan and car title loan shops in Alexandria,” league spokeswoman Kari Scott said. “Consumers are better served by an array of financial tools that compete in a free-market environment.”

Wilson said the $13,000 in revenue from the tax increase would go toward educating borrowers.

“I think one argument the payday industry has made that is very compelling is that there aren’t a lot of financial lending opportunities for low-income folks, and that is certainly a problem,” Wilson said.