Business & Tech

Payday Lenders Targeted By Local Foundation

The Silicon Valley Community Foundation is giving more than $500,000 to organizations working to curtail high-interest payday loans.

 

It's called predatory lending.

Borrowers – typically low-wage workers who do not earn enough to cover living expenses – use their paychecks as collateral for a short-term, high-interest loan.

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The loans originate at storefronts with names such as ineedcashnow, speedycash, cashcall, checkintocash, and checkngo.

Many states have enacted percent interest rate caps on payday loans, but California is not among them, according to the Silicon Valley Community Foundation (SVCF). As a result, the Foundation says, some payday lenders in California are charging more than 400 percent annualized interest. By the time the loan is due, borrowers often experience another cash crisis and take out another loan to pay back the first debt.

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What was intended to be relief from debt sometimes becomes a financial burden of immense proportions.

Recently, SVCF announced it has awarded more than $500,000 to organizations working to pass local ordinances curtailing payday loans and raise public awareness about their dangers. 

$581,000 in grants will be given to five organizations whose aim is to increase economic security for low-income residents of San Mateo and Santa Clara counties.

This is not the first time the SVCF Board has gone after predatory lenders. Since awarding its first anti-payday-lending grants in 2009, the Foundation has provided about $2 million in funding related to this issue.

So far, San Mateo and Santa Clara Counties and the cities of Menlo Park and Los Altos have adopted anti-payday-lending moratoria or ordinances in 2012, according to the Foundation.

According to a press release sent to Patch by SVCF, work made possible by this year’s grants include:

  • Law Foundation of Silicon Valley received $250,000 for the 10-member Coalition Against Payday Predators, which over the past three years been working to build community support for municipal ordinances to limit payday lending. CAPP will work to pass land-use ordinances in additional South Bay municipalities and encourage development of responsible alternatives to payday loans at local credit unions.
  • A $125,000 grant to Youth Leadership Institute (YLI) will add the powerful voice of youth to anti-payday-lending advocacy efforts. With the support of its partner agency, Mission SF, YLI will adapt training curricula for use in preparing youth advocates in rural communities on the San Mateo County coastside for anti-payday lending advocacy locally and around the state. Additionally, YLI will continue to carry out advocacy activities to help secure passage of an anti-payday-lending ordinance in Daly City.
  • Center for Responsible Lending ($130,000) will expand its statewide anti-payday-lending coalition and help enact state policy reforms to reduce the harmful impacts of payday lending on Californians. Particularly, it will create a new Latino-focused economic justice coalition, as well as conduct polling to expand on what the organization learned about Californians’ attitudes toward payday lending from a 2012 poll.

For a full list of grantees, you can visit SVCF’s website.

 

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