Santa Clara Supes Clamp Down on Payday Lenders

The Board of Supervisors passed an ordinance Tuesday night that blocks payday lenders and check cashing businesses from opening new branches in the unincorporated areas of Santa Clara County.

Payday lenders and check cashing outlets act as an alternative to traditional banks by offering short-term loans and can charge effective interest rates of up to 460 percent, county officials said.

Board of Supervisors President George Shirakawa said they passed the ordinance because such lenders are "predatory," and target low-income residents.

According to the Center for Responsible Lending, such lending businesses are disproportionately located in African-American and Latino neighborhoods, county officials said.

Supervisor Mike Wasserman said that he believes such payday loans only drive borrowers deeper into debt.

"The high rates of interest charged by payday lenders entangle borrowers in a vicious cycle," Wasserman said.

The board made the decision to ensure that payday lending and check cashing businesses do not move into the unincorporated county areas if San Jose and other cities also pass similar ordinances, according to Andrea Flores Shelton, deputy chief of staff for Shirakawa's office.

The San Jose City Council is scheduled to consider one such ordinance May 15.

"We didn't want those businesses moving in," Shelton said, adding that the commission is not taking away existing services, only limiting growth.

According to the board, there are more than 2,000 payday lenders in the state, exceeding the number of Starbucks locations.  Of those, at least 64 are located in Santa Clara County.

In February, the board had paved the way for the ordinance by imposing a 45-day moratorium on payday lending and check cashing businesses in the unincorporated county. They then extended that moratorium on April 3 and say that it will remain active until the new ordinance becomes effective on June 21.

--Bay City News