Sacramento wants to stem the proliferation of quick-cash operations like payday advance loan lenders and check-cashing stores that officials say prey on lower-income neighborhoods, encourage blight and trap consumers in devastating spirals of debt.
The City Council voted unanimously Tuesday in favor of a 45-day moratorium on new stores, action prompted by a national focus on the industry and one official’s survey of its growth in her district.
“I view them as predatory lenders – legalized loan sharks, actually,” said City Councilwoman Sandy Sheedy, who represents the struggling Del Paso Heights neighborhood, where on one street, four such stores operate in a mile-long stretch, and two more have applied for permits.
“You don’t see them targeting wealthy ZIP codes,” she said.
Sheedy said the temporary halt on approving new no faxing payday loan lenders gives the city time to consider how a permanent ordinance might be structured. Other cities have required special permits and kept stores away from churches, parks and other quick-cash stores.
Since payday lending became legal in California in 1997, more than 3,500 stores have popped up in strip malls and street corners. City records show there are at least 61 payday lenders in Sacramento, many of them lining streets of lower-income neighborhoods, such as Del Paso Heights and south Sacramento.
The payday industry says it is simply offering customers a product they want, at a reasonable price. Even with the costly fees, industry officials say a cash loan is often the best option for a consumer who needs cash fast.
“A cash advance, a credit card late fee, overdraft protection – if you put all those next to each other, a payday loan often winds up being least expensive, and convenient,” said Greg Larsen, a spokesman for the Sacramento-based California Financial Service Providers, which represents the state’s payday lenders and check-cashing companies. “Consumers make the choice and this makes sense to them.”
Taking out a personal loan is, as the sign above Advance America on Stockton Boulevard says: “Quick, easy and hassle-free.”
SOURCE: The Sacramento Bee