Sunnyvale, Calif., has enacted an ordinance that limits the number of payday lending installations allowed in the city. The new law allows for six payday establishments, although a grandfather clause permits the eight existing businesses to remain open.
Mayor Tony Spitaleri considers the restriction the first step in addressing the larger problem, which will persist as long as banks keep up barriers that prevent many low-income customers from opening checking and savings accounts. He pointed out that payday lenders depend on that gap in the marketplace, saying that many consumers borrow payday loans out of desperation. Spitaleri recommended that the city council consider policies to eliminate consumer demand for payday loans. The Sunnyvale law, the mayor noted, was developed due to complaints about high interest rates charged by payday lenders that can trap borrowers in a cycle of borrowing and repayment.