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California Counties Considering Payday Lending Changes


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By: Javi Calderon
California Counties Considering Payday Lending Changes

Several local and county legislative bodies around San Francisco, California and the area of San Mateo County are looking for ways to curb and monitor the activities of payday loan lenders.

While organizations within San Francisco have been advocating for more regulation for years, cities in the surrounding areas are finally starting to follow suit. Pacifica City has recently passed a law prohibiting new payday stores from opening. Dale City and San Jose are considering similar measures.

Meanwhile, community activism focused on payday loan regulation has seen a significant increase in cities like Palo Alto and Santa Clara.

San Francisco laws do not allow payday-lending stores to open within a quarter mile of one another within city limits.

Last year, San Mateo County was home to 37 cash advance locations. The County Board of Supervisors has agreed to commit recourses to studying options for curbing payday lending through education and/or zoning laws.  

The county already offers small-amount loans through the San Mateo County Credit Union. The loans have a term limit of 18 months and carry what they consider to be a reasonable interest rate.

Ironically, with so much effort going into reigning in payday lending, the industry is booming and state lawmakers are considering a provision to increase the maximum short-term credit loan amount to $500 from $300, which has been the limit since the mid 1990’s.

Supporters of the bill believe the increase would give consumers more options. Current California deferred deposit laws limit interest at 15% of the value of the loan. By state law, rollovers of loans – extending the loan into the next pay period – are not permissible. The maximum loan length is 31 days.  

While critics believe that cash advance loans hurt low-income consumers more than they help, industry insiders argue that the interest paid on a short-term loan is far more affordable than the penalties for late payment on mortgage and utility bills. They also claim that the vast majority of borrowers use the loans responsibly and pay them off within the original life of the loan.

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