Officials in Daly City, Calif., expect to adopt an ordinance to regulate payday lenders and prevent the businesses from clustering in low-income neighborhoods. Proposed legislation would prohibit new payday lenders from opening within 2,000 feet of existing lenders.
The Youth Leadership Institute has complained that four of the city’s payday lenders are located within 1.5 miles of each other and argued that these businesses are more likely to be found in neighborhoods with high concentrations of minorities. According to Youth Leadership Institute representative Fahad Qurashi, the 15 percent fees that many establishments charge can translate into annual percentage rates of 459 percent. It is illegal to issue a payday loan to pay off another payday loan, but Qurashi says a concentration of payday lenders in Daly City could encourage borrowers to rotate their debts from one lender to the next.
Councilman Mike Guingona said the Bank On San Francisco consortium offers safer, more affordable alternatives. Cities lack the authority to regulate financial products, and so several council members called on youth activists to lobby for stricter payday lending laws across the state.