Tag Archives: predatory loans

Zoning Payday Lenders Out of the City

1297704824352_ORIGINALNew Orleans    Payday lenders are weeds that crack the sidewalk. Payday lenders are “broken window” signposts advertising lower income neighborhoods and tending to push communities and families over the edge. There may not be an area in North America that has been more effective in using city zoning policies to aggressively root out payday lenders and their practices that cities in British Columbia where ACORN Canada has made this a signature issue. Meeting with the staff over recent days, one thing is crystal clear: we’re winning!

We’ve discussed the city bylaw or ordinance in the fast growing Vancouver suburb of Surrey in the past. There is a 400 meter restriction on opening a new payday lending storefront based on the distance from other financial institutions or other payday shops or check cashing stores. There also has to be a 400 meter distance between schools. ACORN organizers believe that it will nearly impossible for another outlet to be opened.

And, then there is Burnaby, another Vancouver suburb, where we are organizing, that responded to ACORN’s demands by doing an extensive study over the last more than six months on payday lenders and their value and placement in the community. The Planning Department’s report was a model of comprehensive, straight talk. They didn’t hedge their words. They made it clear that ACORN had asked them to do the study, and they were going to ask ACORN and other groups to help implement the results. I’m not going to lie: I loved that part!

Reading the report, the Planning Department puts one nail after another in the payday lending coffin. They reviewed the Surrey work and the steps taken by other cities in British Columbia. They offered an extensive review of surveys done by various groups including an ACORN/Stratcom survey establishing how small the client base for payday lending was – about 3% of the population – despite its predatory nature, and this 3% became a cornerstone for their recommendations arguing against proliferation of payday lending sites compared to customer base. They didn’t mince words on the relative interest rates allowed by law for payday lending which, despite many hard won ACORN reforms, are still usurious and confiscatory ranging between 500 and 600% if they were applied on an annual basis.

The recommendations almost seemed anticlimactic. Payday lenders and gold exchanges, a close cousin, would require a special zoning classification rather than being seen as “banking.” Existing stores outside of these currently fixed zoning districts would be seen as nonconforming uses, meaning they could neither be duplicated nor could a new store come in if an old one abandoned the site. The writing wasn’t on the wall, it was in the report. It would be next to impossible in Burnaby to open another payday lending outlet in the city, and the ones there now are on borrowed time.

In community organizing this is what we call a big win. Now the task is to duplicate this victory and the good work of the Burnaby Planning Department throughout British Columbia, Ontario, the rest of Canada, and, heck, maybe the world.


Payday Lending Regs, Good; Not Going Far Enough, Bad!

CFPBClarkKentNew Orleans      I was sitting next to an organizer from British Columbia while reading the reports on the new set of regulations being proposed by the Consumer Financial Protection Bureau on payday lending.  We have fought payday lenders in Canada for over a decade and we’re batting over .500, but a long way from a perfect score with our biggest victory having been to get enough federal support to devolve the regulations to the provinces, where we have won significant protections in some areas and nothing in others.  In the patchwork quilt of little to a lot of regulations on payday lenders in the United States, we have been pushing for the CFPB to hit a home run, not a scratch single.  We got a hit, but it seems way more “bureau” than it feels like “financial protection.”

Almost by definition payday lending is a product that seems to invite predatory corporate behavior, because these are loans that low and moderate income families are taking because they are so desperate for cash for whatever the reason, and studies show most frequently the reason is simply that there is “more month than money,” that they are willing to allow the company to take a big bite of their check with interest before it gets in their hands where they urgently need it.  Interest rates go through the roof and studies ACORN Canada has done and analysis that the CFPB has done indicate that payday lending is the crack of contemporary finance.  Once you have one, you keep going back month after month, usually 10 times over a 12 month period, to get more loans to pay the old loans, and on and on and on.

There are real steps forward in the CFPB proposal.   The movement to make “affordability” the litmus test for a loan and cap the levels of repayment amounts is one breakthrough, and my Canadian colleague gave that oohs and aahs.  The other step forward is the recognition that we need federal regulation, because not only does the patchwork quilt victimize families, but the access to these products through the internet makes a mockery of many of the better state regulations.  That’s also a step ahead of Canada.

The CFPB offers options though, which I find weird for federal regulations, particularly ones that have evolved over an extensive time period and after a survey of millions of loans.  What, they couldn’t decide what protection really was?  Are you kidding, they want the predatory lenders themselves to decide how they are going to fleece the consumer? For a young government agency, this seems like a bureaucratic stranglehold more than a breakthrough. Furthermore the other option limits lenders on the number of loans per year with some restrictions, but given the lack of love the Republican Congress already has for the CFPB, you just know that they will never have the enforcement capability to monitor this well.

This isn’t over yet.  The rules aren’t final.  There will be more comments and a lot more lobbying, but it’s still disappointing.

Often, when I visit my mother late in the afternoon, she and anyone around would be watching the television show, Jeopardy.  Once when I was dropping stuff by, they had a week of former great champions competing against each other.  To my surprise there was Richard Cordray, the CFPB’s director, as one of the contestants.  He didn’t do all that well. I worry that he may have forgotten one of the cardinal rules of that game. When the bell rings that it’s “double jeopardy,” the contestants have an opportunity to double-down, especially if they are behind, and bet everything that they will get the answer right and win.  Cordray needs to go for broke here and win, not just try to have a little prize to take home when the game is over.