ST. PETERSBURG — City officials on Wednesday called off a controversial deal that allowed Amscot Financial to accept its utility payments, just days before the City Council was expected to publicly denounce the company's check cashing and payday advance services.
At least six of the city's eight council members had expressed reservations about Amscot's business dealings and its service fees. Payday loans, which are essentially advances on a worker's salary, can carry annual percentage rates of about 300 percent.
"A city ought to be doing everything we can to bring people into the financial mainstream and this kind of very high interest lending is the opposite of that," said Council member Karl Nurse. "It's like quicksand."
Mayor Rick Baker's staff had contracted with Amscot to process utility bills so the city could close the bill payment desk at Midtown's Enoch Davis Center, an annual savings of $96,000.
The City Council voted to keep the payment center open last week after angry residents and community leaders flooded City Hall with complaints. Critics opposed Amscot's $1 convenience fee and the city encouraging residents to patronize such stores.
"They do not need to be in business with predatory lenders," said Bill Newton, executive director of the Florida Consumer Action Network in Tampa. "It ends up that they are promoting them and it's really unhealthy for the residents."
Resident Ella Roundtree said she often goes to Amscot for free money orders, but she prefers to pay her water bill at Enoch Davis.
"When you start adding up the dollars, with this economy, I can't afford it," said Roundtree, who lives on Social Security.
Baker said Thursday that the controversy did not play a role in his decision to cut ties with the Tampa company. "That was not part of my decision," he said. "It was just no longer needed."
The city's letter of termination to Amscot also didn't reference the outrage.
"The city's objective in providing alternative utility bill paying services is no longer necessary," wrote Richard Bulger, the city's billing and collections director. "We are respectful of the time and effort put forth by Amscot Corp. to provide the contract services and wish to be perfectly clear this action has nothing to do with performance."
Founder Ian MacKechnie said the criticism of Amscot and its clients is insulting.
"I see it as elitist," he said earlier this week. "They are talking down to people who they don't know. We think what's most important is that people have choices."
More than 190 residents paid their city water bills at Amscot since the company began accepting payments Dec 1.
"They are quick," said Charles Hill, who regularly uses Amscot to cash checks for a fee of up to 10 percent. "You are in and out."
The family-owned company has 174 locations in Florida, including nine in St. Petersburg.
The city is likely the first government to sever ties with Amscot, company spokesman Joe Kilsheimer said. The company accepts payments for Orange and Brevard counties, along with court fees in Pinellas County.
Baker's relationship with Amscot also overshadowed the utility payment deal.
Amscot contributed $87,000 to Baker's education programs. And Deveron Gibbons, the company's vice president for public affairs, was a significant supporter and fundraiser in both of Baker's mayoral campaigns. Gibbons plans to run for mayor in 2009 and many expect Baker to support him.
In light of the close relationship, executive vice president Ian A. MacKechnie said he should have sent someone other than Gibbons to make the pitch to the city.
"With 20/20 hindsight, I would have done exactly that," he said. "We didn't think that through."
Cristina Silva can be reached at (727) 893-8846 or firstname.lastname@example.org.