Seven Important Updates on Payday Lending in California and Nationally

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

This has been a busy summer for the payday loan industry!  We’re including seven important updates below.  While you’re here, consider signing our petition, calling on the CFPB to include STRONG consumer safeguards as it designs new rules for payday loans:  Petition to CFPB Director Richard Cordray

ACE Cash Express

How Ace Cash Express  staff were trained to encourage customers to continue renewing their payday loans. (From Ace Cash Express training manual)

1) On July 10, the CFPB announced a settlement with Ace Cash Express which has 1,600 locations nationwide and 200 in California. As part of the settlement for illegal debt collection tactics, the payday lender will pay $5 million to the CFPB, and will return $5 million to customers. One of the “smoking guns” from the settlement is a graphic from a 2011 training manual for the company. The picture spelled out how Ace Cash Express employees should encourage customers to renew their payday loans if they couldn’t afford to pay them back.(See graphic here). In other words, advocate concerns about the “payday loan debt trap” keeping people in a constant cycle of taking out new loans and paying high fees are well-founded.

Local momentum continues to build, with California cities moving policies to protect communities from the saturation of payday lenders.

2) In Fresno, the city council unanimously voted for a new ordinance that requires a new permit application and a “buffer zone” of at least a quarter mile between locations and limits areas where new stores can open.

3) Daly City adopted similar location restrictions.

4) In Victorville, the town council passed a 45 day moratorium on approving permits for money service businesses, including payday lenders, check cashers, and car title lenders.

5) Local leaders are also working on payday lending restrictions in San Mateo and Menlo Park.

6) At the federal level, House Republicans have recently attacked “Operation Choke Point” which is the DOJ’s initiative to prevent banks from enabling illegal online payday lending, among other things. Four Oaks Bank, the first settlement under Operation Choke Point, allegedly facilitated $2.4 billion in illegal transactions, and later settled with the DOJ.

7) The Protecting Consumers from Unreasonable Credit Rates Act was recently introduced in the House. The bill would extend existing protections for servicemembers, and caps interest rates at 36% for all consumers at 36% for products including payday and car title loans. The Senate version of this bill is co-sponsored by Senator Barbara Boxer.

Most promising is the Consumer Financial Protection Bureau’s upcoming rule-making process, which has the potential to instill significant industry reforms to end the payday loan debt trap for consumers. While the CFPB cannot impose an interest rate cap, CRC and our allies are calling for the Bureau to issue the strongest proposal feasible, including a limit on the payday loan cycle, a determination of the borrower’s ability to repay the loan and a prohibition of the lender’s direct access to consumers’ bank accounts.

This is a critical moment, now is the time to push for a strong rule as it is  developed over the next several months.

Please join CRC, advocates and consumers from across the country in sending a message to the CFPB urging them to craft a strong rule to end the debt trap. Sign our petition to Director Richard Cordray and make sure the new rules end abusive practices!

Sign petition here and please share with your networks: Payday Loan Petition to Richard Cordray

Thank you for your support!

Liana Molina

Payday Campaign Organizer

California Reinvestment Coalition

Fresno Bee: Another Editorial Board Against Predatory Payday Lending

payday lender vultures

The California Reinvestment Coalition was happy to read the Fresno Bee’s editorial about an ordinance to restrict payday lending in Fresno: Fresno should regulate new payday loan shops.

The editorial explains that Fresno’s City Council will consider zoning ordinances and land use regulations for new payday lenders later this week.

Councilmember Oliver Baines is advocating that Fresno establish rules that would include requiring a conditional use permit before a payday lender could open, and requiring a minimum distance of a quarter mile from other payday lenders.

Councilmember Baines points out that 90% of the lenders are from either other parts of the state, or not even California companies, meaning the profits from the companies are not reinvested in Fresno’s economy.  This net economic loss totaled $3.6 million in 2011, according to research by the Insight Center for Community Economic Development.

In CRC’s 2013 report, “Down in the Valley: Financial Neglect in Rural California”, we found that the San Joaquin Valley has a whopping 140 check cashing and payday stores per 100,000 households compared to only 51 bank branches per 100,000.

In light of the California legislature’s inaction on payday lending reform, CRC has worked with city leaders in a number of cities across California to implement payday lending reforms, including Fresno, with recent successes in Sunnyvale and Long Beach.

A resolution and ordinance proposal will be heard by Fresno City Council on Thursday morning.

Last night the Gilroy City Council unanimously voted to move forward with developing a permanent ordinance, as well.

A final vote will take place in 2014 for both Gilroy and Fresno.

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

Nonprofit Summit Will Focus on Nonprofit-based Alternatives to Payday Lending

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Payday Loan Debt Trap

Payday lending has been well-documented as a financial product that drains money out of the pockets of its consumers.

While supporters of payday loans suggest that consumers have no other options except triple-digit interest loans, there are other options.

Leaders from non-profit agencies will gather tomorrow at a Summit focused on nonprofit-based alternatives to payday loans.

The event, sponsored by the Coalition Against Payday Predators and hosted by Catholic Charities of Santa Clara County and Step Up Silicon Valley will include a panel discussion, moderated by Gwendy Brown from Opportunity Fund.  Panelists include

In addition, groups will discuss alternatives, and there will be an update on the Filene/Ford Foundation Incubation Project.

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

Click here for more posts about payday lending.

Bay Area City Joins Movement Against Predatory Payday Lenders

Sunnyvale Passes Payday Lending Reforms

Sunnyvale, September 25, 2013— With a backdrop of state legislative inaction on payday reform and growing national visibility on the issue, the City Council of Sunnyvale voted last night to restrict the growth of payday lenders by enacting a “cap” on the number of lenders, creating “buffer zones” between lenders, allowing payday lending only in designated areas, and establishing operational standards. Most notable of the operational standards is that the city will require local payday lenders to provide information on “alternatives” available to consumers within the city and county that might be more appropriate than their high-cost, short-term loan product, which has garnered increasing criticism for creating cyclical debt for users.

Sunnyvale joins over a dozen other California cities that have enacted local controls to address or prevent the over proliferation of these and other fringe financial outlets. Just last week, the City of Long Beach adopted a similar policy, which strictly limits the development of any new payday lender, check casher or auto title lender. San Francisco, Oakland, Sacramento and San Jose have also adopted zoning limitations on high cost financial service entities in recent years.

Marie Bernard, Executive Director of Sunnyvale Community Services, one of the community leaders who attended the meeting voiced her support. She explains, “We’ve worked directly with people caught in the ‘payday loan debt trap,’ who have taken out multiple loans with high fees and interest rates up to 459%. By enacting this ordinance, the City of Sunnyvale makes a strong statement that we want to protect residents from predatory loan businesses.”

The ordinance creates a “cap” of six payday lenders in the city (there are currently eight in business, so if two leave, they can’t be replaced), requires a “buffer zone” of at least 1,000 feet between payday lenders, allows payday lending only in highway business commercial zones, and will create operational standards that new lending establishments will have to follow.

Liana Molina, the payday campaign organizer with the California Reinvestment Coalition, a member of the Coalition Against Payday Predators, (CAPP) applauded the council’s vote: “Tonight’s vote adds to the momentum of other California communities like Gilroy and Fresno that are considering similar ordinances to restrict payday and other fringe lenders. We hope officials in Sacramento heard tonight’s message loud and clear: local communities don’t want these businesses and the financial heartaches they create for our families.”

Kyra Kazantzis, Directing Attorney at the Law Foundation of Silicon Valley, also a member of CAPP, voiced her support: “Cities like Sunnyvale are taking courageous steps forward to restrict these modern day loan sharks. Looking forward, the California legislature should address the problem of payday lending at the state level.” (A state bill, SB 515, would limit the number of loans a person can receive annually, and would lengthen the amount of time borrowers have to pay back the loan.)

Additional Background: The Coalition Against Payday Predators (CAPP) is a coalition of 10 local organizations working to end payday lending in Santa Clara County. The coalition has received endorsements from over 40 local organizations and is funded by the Silicon Valley Community Foundation, which was recognized earlier this month by the National Center for Responsive Philanthropy for its payday lending work.

The San Jose Mercury News (8/27/12), the Sacramento Bee (9/16/13), and the New York Times (9/15/13) have published editorials against payday lending.

The Long Beach City Council voted 8-0 last week on an ordinance limiting payday lending in their city.

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, watch our movies on ourYouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

Sunnyvale City Council to Vote on Restricting Payday Lending

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Sunnyvale, September 23, 2013—The City Council of Sunnyvale will vote tomorrow night on an ordinance to restrict the growth of payday lenders by enacting a “cap” on the number of lenders, creating “buffer zones” between lenders, allowing payday lending only in designated areas, and establishing operational standards.

Marie Bernard, Executive Director of Sunnyvale Community Services, supports the ordinance. She explains, “We’ve worked directly with people caught in the ‘payday loan debt trap,’ who have taken out multiple loans with high fees and interest rates up to 459%. By enacting this ordinance, the City of Sunnyvale is making a strong  statement that we want to protect residents from predatory loan businesses.”

Liana Molina, the payday campaign organizer with the California Reinvestment Coalition, a member of the Coalition Against Payday Predators, (CAPP) explained, “By voting for this ordinance tomorrow, city councilmembers will stop the spread of predatory lending in Sunnyvale and join a state-wide movement of cities for payday reform.” CAPP has successfully advocated to limit payday lending in San Jose, Santa Clara County, Los Altos, and current efforts are under way in Gilroy.

Kyra Kazantzis, Directing Attorney at the Law Foundation of Silicon Valley, also a member of CAPP, voiced her support: “Cities like Sunnyvale are taking courageous steps forward to address these modern day loan sharks.  These cities are sending a strong message to the California legislature that it should address the problem of payday lending at the state level.”  (A state bill, SB 515, would limit the number of loans a person can receive annually, and would lengthen the amount of time borrowers have to pay back the loan.)

Who: Sunnyvale City Council, community leaders, and financial justice advocates. Community leaders will be present to make public comment in support of the policy.

What: The City Council will vote on an ordinance to limit payday lenders in the city. The ordinance would create a “cap” of 6 payday lenders in the city (meaning no more than 6 payday lenders could be operating in the city at one time), create a “buffer zone” of at least 1,000 feet between payday lenders, allow payday lending only in highway business commercial zones, and create operational standards that new lending establishments would have to follow.

Why: The City Council wants to reduce the impact of these businesses by limiting their numbers, ensuring that the businesses are not located in residential area or concentrated in one particular location.

When:  Tuesday, September 23, 2013 at 7pm

Where: Council Chambers of City Hall, 456 W. Olive Ave, Sunnyvale CA, 94086

Additional Background:  The Coalition Against Payday Predators (CAPP) is a coalition of 10 local organizations working to end payday lending in Santa Clara County. The coalition has received endorsements from over 40 local organizations and is funded by the Silicon Valley Community Foundation.

The San Jose Mercury News (8/27/12), the Sacramento Bee (9/16/13), and the New York Times (9/15/13) have published editorials against payday lending.

The Long Beach City Council voted 8-0 last week on an ordinance limiting payday lending in their city.

Sunnyvale, CA, City Council votes on payday lending ordinance

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Editorials from NYT and Sac Bee against payday lenders, and the momentum continues next week in Sunnyvale, CA!

Coalition Against Payday Predators

Sunnyvale, California, City Council will be voting on a “Payday Ordinance,” which would limit the future growth of the predatory payday loan industry in Sunnyvale.

There’s growing momentum on this issue around the state. Last night the Long Beach City Council voted 8-0 for an ordinance that would greatly restrict the expansion of the fringe financial sector, including payday lenders, check cashers, auto title lenders and other high cost lenders throughout the city.

Sunnyvale is next! The meeting agenda is not available to the public yet, but we have requested that this issue be early on the agenda  (we hope they will accommodate our request).

How can you help?

1) Please join us next Tuesday September 24 at 7 pm at Sunnyvale City Hall, 456 W. Olive Avenue, to demonstrate support for a local ordinance.  rsvp to liana@calreinvest.org

and

2) Send a letter or email to Mayor Tony Spitaleri and…

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10 Things you may not know about payday loans and the companies that make them

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

1. Payday lenders would not survive without financing from banks and Wall Street. Adam Rust, Director of Research at Reinvestment Partners, and author of the blog Bank Talk, recently highlighted this in his post: “High-Cost Consumer Finance Companies Extol the Benefit.” Rust uses statements from companies like National Money Mart and First Cash Financial to illustrate that Wall Street plays an important role in funding services like payday lenders and pawn shops. Read more: “High-Cost Consumer Finance Companies Extol the Benefits” by Adam Rust, Bank Talk Blog, July 30, 2013.

2. Payday lenders LOVE people with Social Security! Why? Because Social Security is a regular payment, so repayment of their loan is virtually guaranteed. According to the Detroit Free Press, Patricia Guy, A 62 year old in Detroit, who receives Social Security, took a loan from Western Sky after seeing an ad on TV that said this it was a good way to pay off payday loans (she had two at the time and thought she could use the new loan from Western Sky to pay them off).

Ms. Guy is paying 139.13% interest for this loan. In other words, to borrow $2,525, she will pay $11,412.12 in interest over the course of four years. The Michigan State Department of Insurance and Financial Services is trying to kick Western Sky out of the state, with a hearing set for September 24th. Read more here: “Debt can soar for users of quick-fix loans” Susan Tompor, Detroit Free Press, August 12, 2013.

3. Payday lenders exploit loopholes. In Ohio, they have exploited so many loopholes in a 2008 state law that the Toledo Blade recently editorialized against them, suggesting “Lawmakers must close the loopholes to make the Short-Term Lending Act work as it was designed to, including a ban on auto title loans secured by a consumer’s car. Essentially, any payday-style loan must be subject to the 28 percent cap.” Ed Mierkwinski recently captured the dynamic of payday lenders trying to use loopholes to get around predatory lending laws: “Playing ‘Whack-a-Mole’ With Predatory Lenders” (US News and World Report , Opinion, August 13, 2013) Read the Toledo Blade’s editorial here: “Swimming with sharksToledo Blade. August 12, 2013.

4. Federal regulators are starting to pay attention to online payday lenders: According to an article by the Center for Public Integrity, six different federal agencies are now investigating online payday lenders, and the Justice Department has already subpoenaed more than 50 financial companies, “mainly banks and the payment processors that connect consumers to online lenders and other companies that Justice thinks may be operating fraudulently.” Six federal agencies are investigating online payday lenders” Daniel Wagner, Center for Public Integrity, August 8, 2013

5. They make payday loans in the United Kingdom, and it’s been the focus of government officials and advocates all summer:

Some payday lenders decided they would rather close shop than follow the law. During a “Payday Lending Review” by the Office of Fair Trading in the United Kingdom, the regulator identified areas of noncompliance with 50 payday lenders. Of these 50 lenders, 13 of them decided to stop doing business instead of complying with the law. Read more: OFT Payday lending compliance review 

One payday lender in the UK recently tried collecting money from people who never had loans with them. Unfortunately for them, one of the people they sent a collection email to was a banking law expert in the United Kingdom. He received a collection email from “Quick Quid,” (a payday lender) who eventually acknowledged (after wasting his time) that he never owed them a debt. In response, a British Prime Minister accused Quick Quid of “dodgy dealings.” Read more here: “Payday loan firm Quick Quid demands cash from Ancoats bank expert who had never borrowed any” Jennifer Williams, Manchester Evening News, August 12, 2013.

6. State Attorneys General don’t like payday lenders. In July, Georgia’s Attorney General sued CashCall Inc, and Western Sky Financial, LLC (Western Sky), demanding that they stop breaking Georgia state law, specifically, the Pay Day Lending Act which prohibits offering these types of loans, including online. Georgia consumers have complained that CashCall representatives have “harassed them with repeated telephone calls, obscene and abusive language, threats of wage garnishment or other legal action, and even going so far as to call consumers’ employers to threaten wage garnishment.” Read more: Attorney General Olens Files Suit to Protect Georgia Consumers from Illegal Payday Lenders 

Similar to Georgia, New York’s Attorney General, Eric T. Schneiderman, is also suing Western Sky Financial. He is suing them for violating New York usury laws that limit interest rates at 25 percent. According to the New York Times, the AG believes that Western Sky has made 17,970 loans in the past three years, with interest and fees totaling almost $185 million. New York is one of at least 9 states going after lenders with ties to American Indian tribes. Read more: “Suit Accuses Online Lender of Violating New York Rate Caps” by Jessica Silver-Greenberg, DealBook, New York Times. August 12, 2013.

7. Cities across the U.S. are passing laws to stop payday lenders. The California Reinvestment Coalition is proud of our work in California to restrict harmful payday lending in Sacramento, San Francisco, Oakland, Oceanside, San Diego, and more recently in San Jose, as part of the Coalition Against Payday Predators (CAPP). Currently, we are excited to work with CAPP on local ordinance campaigns in Gilroy and Sunnyvale, and to support our allies and partners in the cities of Fresno and Long Beach.

We are also encouraged to see cities in other states taking on the payday loan industry-

Texas: On August 2, 2013, the Town of Flower Mound became the 7th city in Texas (including Austin, Balcones Heights, Dallas, Denton, El Paso, and San Antonio) to adopt an anti-payday lending ordinance. The Texas Municipal League also started a payday lending clearinghouse with helpful information, including example ordinances and lawsuit pleadings for other city leaders who are considering legislation against payday lenders.

Iowa: Cedar Rapids was the sixth city in the state to enact stronger regulations against payday lending. According to the Associated Press (“Iowa cities take on payday lenders with zoning laws” June 17, 2013), Ames, Clive, Des Moines, Iowa City, and West Des Moines have already enacted legislation aimed at limiting payday lenders.

Read More: Texas Municipal League Payday Lending Clearinghouse  
Read More: “Iowa cities take on payday lenders with zoning laws” by Associated Press. June 17, 2013.

8. There’s nothing more unpatriotic than taking financial advantage of soldiers, but it still happens. Twenty-three senators and 53 members of the US House of Representatives recently weighed in on this topic, asking the Department of Defense to close a loophole in the Military Lending Act that has allowed lenders to offer high-interest, triple-digit interest rate loans to soldiers. Read more: “Congress to Pentagon: Save the Troops From Predatory Lenders” by Erika Eichelberger, Mother Jones, August 9, 2013.

9. Payday lenders have redefined “sleazy campaign tactics.” Propublica’s recent expose: “The Payday Playbook: How High Cost Lenders Fight to Stay Legal” shines a bright light on industry tactics recently used to stop a proposed law in Missouri. Payday lenders used secret funds to threaten and intimidate churches, harass community organizers who were trying to get petitions for a ballot initiative, filed decoy laws to confuse voters, and even hired a former NFL player to be their spokesperson. All of these tactics were used to stop a law that would have capped interest rates at a reasonable 36%. Read more: “The Payday Playbook: How High Cost Lenders Fight to Stay Legal” by Paul Kiel, Propublica, August 2, 2013.

10. Payday loans are also offered by banks.  Banks also make short-term, small dollar amount, high-interest loans, but they try and dress up the high interest rates on these loans by using language such as “direct deposit advance” (Wells Fargo), or “Checking account advance” (US Bank), or “Ready Advance” (Regions Banks).

With a few clicks of the mouse, customers can obtain loans with sky-high interest rates. At a recent Senate hearing about these bank payday loans, a lobbyist for the banks struggled to explain the difference in storefront payday loans and the payday loans made by banks to Senator Elizabeth Warren (D-MA). Senator Bill Nelson (D-FL), Chair of the Senate Select Committee on Aging, (committee which held the hearing), also pointed out that making these types of loans is virtually risk-free for the banks since the customer has to have a source of income to qualify for the loan.

Annette Smith, a senior from California, testified at the hearing about her experience trying to pay back a Wells Fargo direct deposit advance on her Social Security income of roughly $1,200 a month. Read CRC’s perspective on the hearing here. “Hearing Focuses on Direct Deposit Advances, are They Different than Payday Loans?

A coalition of groups in Illinois, Missouri, and Iowa, recently started a campaign against Regions Bank for offering its version of a payday loan, known as a “Ready Advance” loan. George Goehl, executive director of National People’s Action explained that groups are organizing against bank payday loans because “Banks should help people build wealth, not strip it away.” Read more here: “Groups call on bank to stop offering ‘predatory’ payday loans” Jessica M. Karmasek, Legal Newsline Legal Journal. August 12, 2013.

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, watch our movies on our YouTube Channel, sign up to receive our newsletter and action alerts, and of course, visit our website.