Daly City Council Member, Mike Guingona describes how he and fellow council members have led the charge against predatory payday loan practices in his city. Don't forget to register for SVCF's free webinar tomorrow at 10:00 AM. Register here.
The $46 billion payday loan industry is big business across the country, but especially in California. In 2013 alone, 1.8 million Californians took out 12 million payday loans totaling over $3 billion. Research from the federal Consumer Financial Protection Bureau (CFPB) and others has shown that the majority of payday loan borrowers fall into cycles of repeat borrowing. The payday loan that a consumer first took out, thinking it would be for a “one time, emergency use,” usually morphs into a long-term cycle of debt, consuming the borrower’s income month after month and impeding his or her ability to pay other bills or save money for the future.
We all recognize the importance of access to credit, but payday loans are not the type of credit product we want for our constituents: they leave those who use them worse off and deeper in debt.
That is why I led the charge to enact a land use ordinance to restrict any additional growth of payday lenders in Daly City. While somewhat symbolic, that ordinance provided an opportunity to educate policy makers and the public on the harms of payday lending and the importance for government to take action. Unfortunately, our authority as city officials prevents us from regulating the actual business practices of payday lenders, beyond their ability to locate in certain zoning districts.
Real reform to protect consumers from exorbitant interest rates, short repayment periods, lump sum payment structures and abusive collection practices can only happen at the state and federal levels. Given these limitations, I was very encouraged by President Obama and the CFPB’s recent announcement of their plans to regulate the small dollar credit market, including payday, car title and other high-cost installment loans. While the proposal could be strengthened further to ensure lenders don’t exploit loopholes, it is a step in the right direction.
As front line political leaders, city and county officials will play an important role in supporting the CFPB’s proposal, which is why our city will be pursuing a resolution to support strong CFPB rules, and I encourage other jurisdictions to do the same. I urge my fellow city and county officials across California to become more informed on this issue and join us on April 15 for a webinar on local responses to payday lending, hosted by Silicon Valley Community Foundation. For more information and to register, please click here.