Monday, June 15, 2015
Rafael O. Morales, Program Officer, Economic Security
While payday loans are often marketed as short-term solutions for emergency cash needs, the two-week loans can quickly spiral out of control, forcing borrowers to take out successive loans to pay back the original loan and continue to make ends meet. In California, the State Department of Business Oversight, which regulates the payday loan industry, found that 78 percent of payday borrowers took out more than one loan in 2013, with a full third taking out 10 or more loans in the same year. It further found that the effective annual percentage rate on these loans totaled 408 percent, making them among the most costly forms of credit available to California consumers.
On April 1, the Morgan Hill City Council unanimously approved an amendment to its zoning ordinance to prohibit the establishment, expansion or relocation of payday lending stores operating within city limits. This comes after months of outreach and education by the Coalition Against Payday Predators (CAPP), a project of the Law Foundation of Silicon Valley.
Through its economic security grantmaking strategy, SVCF since 2009 has supported anti-payday lending policy advocacy efforts across San Mateo and Santa Clara counties, providing more than $2 million in grants to community-based organizations working to raise the visibility of this issue and demand that local governments take action to protect low- and moderate-income families from unscrupulous lenders. Although the work began slowly, SVCF grantees have made great strides in recent years, and 2015 is off to a strong start.
On the heels of the Morgan Hill victory, efforts led by Community Legal Services of East Palo Alto have also borne fruit. The San Mateo City Council unanimously passed an ordinance on May 18 that caps the number of payday lenders that can operate within city limits and sets a minimum distance requirement of 1,000-foot between payday lenders to avoid overconcentration in at-risk communities.
With passage of these ordinances, SVCF grantees have succeeded in encouraging 12 Silicon Valley jurisdictions, including the counties of San Mateo and Santa Clara, to restrict payday lending, protecting residents from an industry known to prey on low- and moderate-income families and individuals when they are most vulnerable.
The City of Campbell is also exploring an ordinance to limit payday lending. We will post more news on this topic as developments occur.