DALY CITY (KCBS) – A Daly City council member is introducing legislation that would permanently ban any new payday loan businesses from opening in the city and phase out the seven lenders who are already in town.
Payday loans are advertised as small, short-term loans that cover the borrower’s expenses until their next payday. But when borrowers don’t pay them back immediately, the loan’s high fees can put them in deeper debt.
Daly City council member David Canepa calls these lending practices predatory and said the interest rates charges at the end of the year are on average 406 percent.
“If you take a payday loan out today for $300, at the end of the year, you’ll pay $1100. 14 states throughout the United States have banned this,” said Canepa. “This is a response to payday loans at the outskirts of military bases taking advantage of our veterans.”
KCBS’ Anna Duckworth Reports:
In 2006, Congress enacted legislation making it illegal to charge U.S. service members more than 36 percent interest on a loan. Canepa is calling on the legislature to do the same since fees are set up by the state of California.
Earlier this year, the city of Pacifica imposed a two-year moratorium on new payday lenders. Pacifica Mayor Mary Ann Nihart said that she and the city council continue to look into the lender’s practices.
“As we have more foreclosures and more job losses, people turn with credit tightening to places that offer these sorts of payday loans and then end up in this trap,” she said.
Canepa’s legislation also calls for creating a partnership between Daly City and credit unions to secure short-term loans for residents with maximum interest rates of 18 percent.
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