Bay Area City Joins Movement Against Predatory Payday Lenders

Sunnyvale, September 25, 2013— With a backdrop of state legislative inaction on payday reform and growing national visibility on the issue, the City Council of Sunnyvale voted last night to restrict the growth of payday lenders by enacting a “cap” on the number of lenders, creating “buffer zones” between lenders, allowing payday lending only in designated areas, and establishing operational standards. Most notable of the operational standards is that the city will require local payday lenders to provide information on “alternatives” available to consumers within the city and county that might be more appropriate than their high-cost, short-term loan product, which has garnered increasing criticism for creating cyclical debt for users.

Sunnyvale joins over a dozen other California cities that have enacted local controls to address or prevent the over proliferation of these and other fringe financial outlets. Just last week, the City of Long Beach adopted a similar policy, which strictly limits the development of any new payday lender, check casher or auto title lender.San Francisco, Oakland, Sacramento and San Jose have also adopted zoning limitations on high cost financial service entities in recent years.

Marie Bernard, Executive Director of Sunnyvale Community Services, one of the community leaders who attended the meeting voiced her support. She explains, “We’ve worked directly with people caught in the‘payday loan debt trap,’ who have taken out multiple loans with high fees and interest rates up to 459%. By enacting this ordinance, the City of Sunnyvale makes a strong statement that we want to protect residents from predatory loan businesses.”

The ordinance creates a “cap” of six payday lenders in the city (there are currently eight in business, so if two leave, they can’t be replaced), requires a “buffer zone” of at least 1,000 feet between payday lenders, allows payday lending only in highway business commercial zones, and will create operational standards that new lending establishments will have to follow.

Liana Molina, the payday campaign organizer with the California Reinvestment Coalition, a member of the Coalition Against Payday Predators, (CAPP) applauded the council’s vote: “Tonight’s vote adds to the momentum of other California communities like Gilroy and Fresno that are considering similar ordinances to restrict payday and other fringe lenders. We hope officials in Sacramento heard tonight’s message loud and clear:local communities don’t want these businesses and the financial heartaches they create for our families.”

Kyra Kazantzis, Directing Attorney at the Law Foundation of Silicon Valley, also a member of CAPP, voiced her support: “Cities like Sunnyvale are taking courageous steps forward to restrict these modern day loan sharks.Looking forward, the California legislature should address the problem of payday lending at the state level.” (A state bill, SB 515, would limit the number of loans a person can receive annually, and would lengthen the amount of time borrowers have to pay back the loan.)

Additional Background: The Coalition Against Payday Predators (CAPP) is a coalition of 10 local organizations working to end payday lending in Santa Clara County. The coalition has received endorsements from over 40 local organizations and is funded by the Silicon Valley Community Foundation, which was recognized earlier this month by the National Center for Responsive Philanthropy for its payday lending work.

The San Jose Mercury News(8/27/12), the Sacramento Bee(9/16/13), and the New York Times(9/15/13) have published editorials against payday lending.

The Long Beach City Council voted 8-0 last week on an ordinance limiting payday lending in their city.