San Francisco Home to Plethora of Payday Loan, Check Cashing Companies
By J.J. CameronPayday Loan Writer
In what shouldn't exactly be a shock, a recent report states that low-income individuals around the country pay extra for every day fees/items than their better off counterparts.
Why is this the case? Because this group of citizens take out higher-interest mortgages, shop at rent-to-own furniture stores and use payday loan companies often. The study was sponsored by the Brookings Institution study, which analyzed services in San Francisco, Oakland and 11 other cities.
The report - "From Poverty, Opportunity: Putting the Market to Work for Lower-Income Families" - calls on government officials to create laws to curb services that gouge low-income consumers, such as regulating the entire field of faxless payday loans. Matt Fellowes, the report's main author, praised San Francisco's new push for mainstream financial services in poorer areas as an example.
"Reducing the fees by just 1 percent would add up to $6.5 billion in new spending power for the families," said Fellowes, a senior research associate at Brookings. "It would enable low- and modest-income residents to save for and invest in assets, like homes and retirement savings or pay for child expenses like health care and education."
Among the cities Brookings studied, San Francisco stood out most for its high concentration of providers that specialize in short-term payday loans and check-cashing businesses - where customers pay $5 to $50 to cash a check. Its poor neighborhoods have the second-highest concentration per capita.
Moreover, you're nearly five times more likely to find a check-cashing business in a poor area than any other neighborhood in this city. In the Tenderloin, the city's poorest area, there are 10 check-cashing businesses alone!
Payday advance lenders, of course, offer cash for a consumer's own post-dated check, charge 500 percent-plus in annual interest.
"Check cashing and payday lending are probably the biggest financial impediments facing low-income people," said Kevin Stein, associate director of the California Reinvestment Coalition. "It is a huge problem in San Francisco."
