Agreed, this makes 0 sense to me. There should be an explicit list of reasons for which police should be able to deny these permits, and the police should have to show their evidence as to why they believe one of these reasons apply.
The problem with this is pretty obvious. When some scumbag like a pimp or similar without a conviction goes for a permit, you end up in a situation where the police are enabling certain types of undesirable behavior.
IMO, discretion for this sort of thing should be with a judge, not a cop.
How are they enabling undesirable behavior? Wouldn't the behavior occur anyways? Most people would be stupid to create a paper trail for themselves if they plan to use a weapon in a crime. Hence the reason close to 50% of guns recovered from a crime were stolen.
How would a judge or a cop have any impact on a situation without a conviction? They wouldn't know any better without additional data.