Payday loan providers and check-cashing outlets work as a substitute for conventional banking institutions by providing short-term loans and will charge interest that is effective as high as 460 %, county officials stated. Board of Supervisors President George Shirakawa stated they passed the ordinance because such loan providers are “predatory” and target residents that are low-income.
In accordance with the Center for Responsible Lending, such financing companies are disproportionately situated in African-American and Latino communities, county officials stated. Supervisor Mike Wasserman stated he thinks such pay day loans only drive borrowers deeper into debt.
“The high interest rates charged by payday loan providers entangle borrowers in a vicious cycle,” Wasserman stated.
The board made a decision to ensure lending that is payday check-cashing businesses usually do not transfer to the unincorporated county areas if San Jose along with other towns and cities additionally pass comparable ordinances, relating to Andrea Flores Shelton, deputy chief of staff for Shirakawa’s workplace.