News

New county ordinance to limit payday lenders

Santa Clara County Board of Supervisors passes ordinance to block check-cashing businesses

The Board of Supervisors passed an ordinance Tuesday night, May 1, that blocks payday lenders and check-cashing businesses from opening new branches in the unincorporated areas of Santa Clara County.

Payday lenders and check-cashing outlets act as an alternative to traditional banks by offering short-term loans and can charge effective interest rates of up to 460 percent, county officials said. Board of Supervisors President George Shirakawa said they passed the ordinance because such lenders are "predatory" and target low-income residents.

According to the Center for Responsible Lending, such lending businesses are disproportionately located in African-American and Latino neighborhoods, county officials said. Supervisor Mike Wasserman said that he believes such payday loans only drive borrowers deeper into debt.

"The high rates of interest charged by payday lenders entangle borrowers in a vicious cycle," Wasserman said.

The board made the decision to ensure that payday lending and check-cashing businesses do not move into the unincorporated county areas if San Jose and other cities also pass similar ordinances, according to Andrea Flores Shelton, deputy chief of staff for Shirakawa's office. The San Jose City Council is scheduled to consider one such ordinance May 15.

"We didn't want those businesses moving in," Shelton said, adding that the commission is not taking away existing services, only limiting growth.

According to the board, there are more than 2,000 payday lenders in the state, exceeding the number of Starbucks locations. Of those, at least 64 are located in Santa Clara County.

In February, the board had paved the way for the ordinance by imposing a 45-day moratorium on payday lending and check-cashing businesses in the unincorporated county. They then extended that moratorium on April 3 and say that it will remain active until the new ordinance becomes effective on June 21.

— Bay City News Service

Comments

Posted by anti-business, a resident of Adobe-Meadows
on May 3, 2012 at 9:18 am

This is another assault on the rich by the 99 percenters. Payday lenders are just like any other bankers who are trying to maximize their profits. Is the government picking on small businesses like this because they are not paying enough in campaign contributions?


Posted by moi, a resident of Another Palo Alto neighborhood
on May 3, 2012 at 10:28 am

More payday lenders than Starbucks? Curious comparison.

Since you mentioned Starbucks, why don't we just make the future Palo Alto drive-thru location a time-saver, providing both espressos and payday loans? That way you could make two poor financial decisions at once.


Posted by creolelady, a resident of Old Palo Alto
on May 3, 2012 at 11:05 am

Thank you BOS for looking out for the low-income population. I know of many victims that are tangled up with these payday loans. These loan sharkers also sink their teeth into Seniors that are on SSI and SSA because of their direct deposits status!


Posted by Cid Young, a resident of another community
on May 3, 2012 at 11:14 am

These "Pay-Day" lenders are the bottom feeders of our economy. The only difference form them, and the "Banksters" is that THEY go out of their way to prey on the least fortunate ones in the community, the ones who are less sophisticated and financially educated/savvy.
BANKS, cast a really wide net and snares all sorts of folks.


Posted by JustMe, a resident of Duveneck/St. Francis
on May 3, 2012 at 2:04 pm

I would assume that, as horrible as these loans are, people only go to them when they have no alternative and are desperate. I have no problem killing off the predatory practices that target the poor, but is there an alternative we can offer the poor? I don't like the "Sorry, no more pay-day loans, you are just going to have to starve until you get your check" approach.

I have the same problem with the use of child labor in poor countries: If we shut them down, does that mean the children starve? We need a better alternative than just simply closing the doors, or we are going to destroy those we are trying to save.


Posted by old brown desk, a resident of Barron Park School
on May 3, 2012 at 2:17 pm

justme "If we shut them down, does that mean the children starve? "

Any more than they are? No. Child slavery and child labor perpetuate bad economies and starvation.

It drives the wages up for adults. But nice deflection off the topic of legalized loansharking.

Payday lenders are bottom feeders that were not allowed to abuse loanshark rates under the old laws. Deregulation opened up a Pandora's box of hell. Study after study has shown this to be the case, but they buy a lot of politicians, uh, sorry, they contribute a lot of money.


Posted by old brown desk, a resident of Barron Park School
on May 3, 2012 at 2:19 pm

*should have read

It <eliminating child labor> drives the wages up for adults.


Posted by JustMe, a resident of Duveneck/St. Francis
on May 3, 2012 at 2:58 pm

I am sorry, I did not mean to deflect the topic. All I am saying is that there seems to be a need that supports these lenders, and if we just chop off the lenders at the knees, then that need goes completely unfilled. I am wondering if there is any way to fill that need, when called for, without the predatory practices we abhor. How can we support the poor without feeding those that prey on them?

On the other hand, encouraging borrowing towards payday encourages living on debt, I fear. Given time and poor borrowing practices anyone can feel put-upon by even the most lenient of terms.

But if borrowing from a payday lender is the only way someone can feed their kids, then if we do away with that lender, we have to find a way to get those kids fed, right?


Posted by Hmmm, a resident of East Palo Alto
on May 3, 2012 at 3:15 pm

JustMe brings up a good point. I'm all for eliminating these loan shark dirtbags, but what are the alternatives? I'm going to do some digging & see what I come up with & will post info here.


Posted by How-Come?, a resident of Another Palo Alto neighborhood
on May 3, 2012 at 4:05 pm

> "We didn't want those businesses moving in," Shelton said, adding
> that the commission is not taking away existing services, only
> limiting growth.

It would be interesting to know what legal right the Supervisors claim to restrict businesses that they don't like? If a business is not otherwise engaging in illegal activities, what right does the BOS have to shut down, or even limit growth, of those businesses?


Posted by musical, a resident of Palo Verde
on May 3, 2012 at 4:46 pm

460% APR is 2 cents an hour on a hundred bucks.

Not bad if you need cash for gas until you get to your bank in the morning. Really bad if you need cash for gas and you don't have a hundred bucks waiting at your bank in the morning.


Posted by Hmmm, a resident of East Palo Alto
on May 3, 2012 at 10:56 pm

So here's what San Mateo County just unveiled as options to payday loans. I wish there were more options, but at least there are these:

Web Link

I've donated to my church's emergency fund that is to be used for emergencies such as the ones people seek out payday loans for. These emergency funds help the working poor. If you wish to donate but don't belong to a church, it may take some research to figure out which churches do. I already asked around & the Unitarian Churches in the area often have emergency funds.

I know that there are a few nonprofits that have similar funds, but I don't know of any in Santa Clara County.


If you were a member and logged in you could track comments from this story.

Post a comment

Posting an item on Town Square is simple and requires no registration. Just complete this form and hit "submit" and your topic will appear online. Please be respectful and truthful in your postings so Town Square will continue to be a thoughtful gathering place for sharing community information and opinion. All postings are subject to our TERMS OF USE, and may be deleted if deemed inappropriate by our staff.

We prefer that you use your real name, but you may use any "member" name you wish.

Name: *

Select your neighborhood or school community: * Not sure?

Comment: *

Verification code: *
Enter the verification code exactly as shown, using capital and lowercase letters, in the multi-colored box.

*Required Fields

Veggie Grill coming soon to Mountain View's San Antonio Center
By Elena Kadvany | 24 comments | 3,628 views

Is HBO's Silicon Valley Any Good?
By Anita Felicelli | 23 comments | 2,402 views

Finding mentors in would-be bosses
By Jessica T | 0 comments | 2,066 views

A memorable Paly prom
By Sally Torbey | 7 comments | 1,220 views

Passover Joke
By Paul Losch | 6 comments | 435 views