Redwood City's representative on the San Mateo County Board of Supervisors approved a decision that would avoid payday lenders from setting up shop.
San Mateo County Supervisor Laura Gibson is leading an attack alongside businesses that offer SMS Payday Loans, claiming the lenders often attach unfair interest rates to the ones offered in poor neighborhoods.
The San Mateo County Board of Supervisors unanimously approved a resolution Tuesday, which examines the possibility of bringing alternative businesses that offer similar services to San Mateo County.
The resolution, sponsored by Jacobs Gibson, also directs county staff to look into the possibility of zoning and permitting restrictions that could prevent payday lenders from setting up shop in certain areas.
"This is a strong statement that we are concerned about the predatory nature of Payday Loans by text," said Jacobs Gibson, who represents Redwood City, Menlo Park, East Palo Alto, and other unincorporated areas.
In order to obtain a payday loan, a customer typically writes a check to the lender for a principal amount plus an additional fee. The business holds the check until the due date on the loan arrives, which is often the following payday.
The customer then must either pay off the debt in person, or the lender will cash their check. If the customer cannot afford to pay back the loan on the due date, an extension can be granted, at the expense of additional fees.
A county report says some lenders charge as much as 459 percent interest rate on short-term loans.
There are 24 hours payday lending businesses in San Mateo County, and many of them are located in underprivileged neighborhoods, said Jacobs Gibson. She said county residents paid more than $6 million combined in interest and fees to these lenders last year.
She also said that she understood there may be a need for such businesses to exist locally, but wanted to educate residents about the alternatives available that may offer similar services without such severe interest rates and costs.
Pacifica has established moratoriums on allowing payday lenders within city limits, and both Daly City and East Palo Alto are considering similar measures, said Jacobs Gibson.
The approved resolution also officially opposes state legislation in the works, which would increase the allowable limit to be borrowed from $300 to $500 by customers of payday lenders.
"Payday Text Loans are hurting our most vulnerable community members, and we must find an alternative to Payday Loans by Message," said Laura Gibson.
Laura Gibson, representing the California Financial Service Providers, spoke at the meeting briefly on behalf of the payday lending industry.
He said that he wanted to address any misconceptions that the Board of Supervisors may have about the nature of the payday lending industry. California Financial Service Providers also filed formal opposition with the County in advance of the Board of Supervisors meeting Tuesday in Redwood City.
He said unfortunately he had not been in contact with Jacobs Gibson in advance of the resolution being drafted and passed, but wanted to work together with the county in the future as further measures are pursued.
"I just wanted to make sure you understood there was a voice from the business community on this matter," said Pena.
Laura Gibson said her office will soon be offering resource guides that promote the available alternatives to county residents who need cash in advance of their payday.