Payday lenders may get rude welcome to East Palo Alto
When East Palo Alto officials learned this summer that the city's only bank was closing, they feared payday lenders would swoop in to fill the void, Mayor Carlos Romero said.
As it turned out, another financial institution, the San Mateo Credit Union, opened its doors in October, less than two months after California Bank & Trust closed its. And while there still aren't any payday lending outlets in East Palo Alto, the city tonight will discuss whether to draft regulations in case some might eventually try to locate there.
"I would like to at least look at the possibility of preempting these usurious rates by predatory lenders," Romero said.
Payday loans, also called "cash advances" or "deferred deposits," are short-term transactions that allow a borrower to write a postdated check to a lender, who provides immediate cash. The check is deposited on the borrower's next payday, according to a memo to the city council from Interim City Attorney Valerie Armento.
Under California law, the maximum payday loan a consumer can borrow is $300 and the maximum fee a payday lender can charge is 15 percent of the face amount of the check. That fee is equal to an annual percentage rate of 460 percent for a two-week loan, Armento wrote.
Though the loans are advertised as an easy source of cash in the event of an emergency, the state Department of Corporations found that a significant number of customers get caught up in a cycle of borrowing "in a repetitive fashion" to pay off the prior loan, Armento wrote.
State law does not allow cities to alter rates, but it lets them ban payday lenders, limit their number or restrict them to certain zoning districts, she wrote.
Greg Larsen, a spokesman for the California Financial Service Providers Association, which represents payday lenders, said the businesses provide a legitimate option for consumers that can be cheaper than other financial penalties such as utility shut-off fees.
lenders of payday advances - News
Non-bank payday lenders charge $15 per $100, but under California law they can only lend as much as $300 at a time. Officials at the bank would not reveal how many loan clients it has, but said customers who use payday advances seem satisfied.
Unlike traditional banks and lending stores, the company performs trustworthy service that is held totally online. It will help customers to cover the urgent expenses with least efforts involved. In addition, they will be able to get payday advance
The result for the customer is the same turnstile of debt wrought from storefront payday lenders. Each year, the cycle of debt caused by payday loans – regardless of the lender – costs 12 million consumers $1.4 billion in fees alone.
Seventeen states and the US military have effectively banned payday loans, which attract low-income borrowers who need a cash advance on paychecks. Georgia has declared payday lending to be felony racketeering. But in California, payday storefronts
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The hidden dangers of payday loans | Payday loans no credit check
For $115 to be cashed in say 14 days time when you are next paid. In this case, the finance charge on the loan is $15 which doesnt sound too bad. However the APR is equivalent to 391% which is extortionate.
If you continue to roll the loan over which many lenders will allow you to do, the finance charge will rise accordingly.
If you need cash urgently, it is wise to consider your options. Assuming that you are employed, there are certainly better choices available. You should look around for the credit offer with the lowest APR.
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It may help to look at the reason why you need a short term loan. Is it because of poor budgeting and not saving any of your income? If this is the case, it may be wise to work out a debt repayment plan with your creditors and work on developing a budget.
There are a number of free or low-cost credit counselling programs who will work with you to put together a budget.
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