LOS ANGELES -- On Tuesday,, a group of more than 80 religious and community leaders sent a letter to the Los Angeles County Board of Supervisors, urging the board to take action next month to address high-cost payday and car title lending storefronts in the county.
“Predatory lenders target our most vulnerable communities – particularly areas with high family poverty rates, which is why we’re asking for the board’s help,” said Paulina Gonzalez, executive director of the California Reinvestment Coalition.
“Payday and car title loans are advertised as quick, one-time Band-Aids for financial challenges, but the reality is four out of five of their customers get caught in a long-term debt trap. In Los Angeles County, we know that people are losing over $85 million to payday loan fees every year. We need local and state policymakers to take action to reform this industry.”
“It was troubling to learn that seniors are now the largest group of borrowers in California,” added Rabbi Jonathan Klein, executive director of Clergy and Laity United for Economic Justice. “This is why we’re urging the board to take measures to prevent these lenders from concentrating in areas that are struggling economically. By doing so they can help protect seniors and working families who are on fixed incomes and who can’t afford to get caught in the payday loan debt trap. Local action would also help send a strong message to our state policymakers that reforms are sorely needed.”
While the Consumer Financial Protection Bureau recently released new rules to better protect consumers, the protections won’t take effect for almost two years, and may be at risk of Congressional repeal, which is why advocates are urging the board to act now.
“We’ve seen the same story play out again and again with the people we work with and high-cost payday and car title loans,” said Isaias Hernandez, community service director at the Mexican American Opportunity Foundation. “People take out one loan to help with a financial emergency but instead they’re quickly in over their heads and drowning in fees, collection calls, closed bank accounts and financial heartaches.
“If we can limit the number of storefronts, we can make these harmful products less accessible to people in dire financial situations and prevent them from falling deeper into expensive debt that they can’t climb out of.”
“While these lenders like to position themselves as ‘neighborhood businesses,’ we are concerned that they’re disproportionately located in certain neighborhoods - namely in black and Latino communities. The board can put a stop to our communities being saturated with these financial predators” added Leticia Andueza, associate executive director of New Economics for Women.
Advocates are calling on the Board to enact an ordinance to protect LA county residents by limiting the saturation of these lenders in low-income communities and communities of color. Long Beach, for example, passed an ordinance in 2013 that restricts where alternative financial services businesses can locate and requires special permit approvals.
In 2012, the City of San Jose enacted an ordinance that imposes a cap on how many payday loan stores are allowed to locate in the city. Numerous jurisdictions in California and around the country have passed similar policies.
Specific recommendations include:
1) Enact a limit on the number of alternative financial services locations allowed within the unincorporated areas of Los Angeles County.
2) Require conditional use permits for any new alternative financial services storefront locations.
3) Impose distancing requirements between alternative financial services businesses so that they don’t cluster in low-income communities and neighborhoods of color.
4) Impose distancing requirements between alternative financial services businesses and other sensitive uses, such as residential areas and liquor stores.
“Payday loans create financial disasters for people, so I’m urging the board of supervisors to do what they can to check these lenders,” said Davina Esparza, a resident of Montebello.
“Thanks to payday loans, my credit was damaged, I had difficulty finding housing and I experienced an incredible amount of stress. While I’m just one person, I know my story isn’t unique and most borrowers get caught in the same ‘debt trap’ I found myself in.