San Franciso's New Spin on Payday Loans
Their storefront locations with neon signs usually occupy the most impoverished, minority-populated parts of town. No, I'm not talking about liquor stores, but payday lenders—that fast cash industry that uses loopholes and exorbitant interest rates to prey on the vulnerable. North Carolina outlawed the industry in 2006, Washington D.C. followed suit in 2007, and this week, thanks to a coalition of six local credit unions devoted to derailing predatory lending, San Francisco will launch a low-cost alternative loan program called PayDayPlus SF.
Its 13 locations will open just weeks after a Federal Deposit Insurance Co. report found that 25.6 percent of U.S. households—that’s 60 million adults—either lack bank accounts or use payday loans and check cashing services in lieu of banks. The majority of these folks are black, American Indian, and Hispanic, the report shows. And that's exactly the demographic PayDayPlus SF aims to target, says Leigh Phillips from the San Francisco treasurer's office. The city is the first in the U.S. with a program designed to bring disenfranchised residents into the financial mainstream. Basically, it has created a local banking system to respond to low-income people's needs and means. PayDayPlus SF is an off-shoot of the program and will cover check cashing and payday loans. "There are a couple of people that PayDayPlus SF's trying to reach," Phillips says. "They are people who need access to emergency funds for a car repair, people who don’t have access to credit cards, who don’t have credit ratings to get one, people who are trapped in the payday debt cycle."