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

 +   Like this comment
Posted by kman
a resident of Monta Loma
on May 4, 2012 at 4:27 pm

If they need money bad, they will just go to the next city that has them.

This is ridiculous to limit them. Government pushing it's power around again.

The nannies are at it again. They should just go back to kindergarten were there talents would be more appreciated.


 +   Like this comment
Posted by Alex M.
a resident of Willowgate
on May 4, 2012 at 5:01 pm

It's interesting to note that the "number of Starbucks locations" has become a standard measure of comparison. This isn't the first article in which I've seen that standard used.


 +   Like this comment
Posted by Sabrina
a resident of The Crossings
on May 5, 2012 at 9:01 am

Thank you for this small step in the elimination of one piece of financial fraud. These businesses prey on the poor and uninformed, in the end benefiting on themselves, and have no place in our community.


 +   Like this comment
Posted by Sabrina
a resident of The Crossings
on May 5, 2012 at 9:04 am

*only themselves


 +   Like this comment
Posted by Otto Maddox
a resident of Monta Loma
on May 7, 2012 at 2:07 pm

Prey on the poor? Really? I used to have lunch everyday at a place located next to one of these loan businesses. The rates are CLEARLY displayed in the front window. I'll admit I wouldn't pay that kind of interest but it's none of my business if someone else wants to.

I don't know who makes up the typical check cashing customer but it's up to them what they want to do with their money.

Now some of the tax money we all pay will have to be spent enforcing this stupid law. The "poor people" will get their loans one way or another.. just might not be in Santa Clara County.


 +   Like this comment
Posted by gcoladon
a resident of North Whisman
on May 7, 2012 at 5:19 pm

gcoladon is a registered user.

What fraud are these businesses all guilty of?

If it's just that they charge too high a rate for their service, maybe we can have Goldman Sachs and Skadden, Arps outlawed as well.


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