Fresno pushes payday loan limits, critics stress financial dangers

FRESNO, Calif.

A majority of the council approved a plan to require special permits for any new payday loan operation. One goal is to use zoning and land use laws to keep them out of the poorest parts of town.

Critics say they damage the city's economy by charging huge interest rates that trap financially struggling people in an endless cycle of debt. City regulations will not impact the stores already open.

66 payday lenders are licensed in the city of Fresno, with seven stores in a half-mile stretch of Kings Canyon Road in Southeast Fresno.

Critics say these payday lenders are targeting the working poor, setting up shop in the parts of Fresno with lower income levels. They say that creates a vicious borrowing cycle. State officials even say payday loans create annual interest rates of about 460 percent.

A recent Pew Research report shows the average payday loan consumer ends up paying nearly double the loan amount, just in fees.

"When it's all said and done six, seven months later, on average, folks are way further in debt than they were to begin with," said Faith In Communities Executive Director Andy Levine. "They're still struggling to get by."

Levine says he backs the stunning Pew report. Ministers in his group are constantly seeing people running to payday lenders, only to end up worse off.

"It was a clear case of usury, which across our faith traditions and very clear in our faith teachings is immoral and unacceptable," Levine said.

FIC is one of the lead supporters for stricter regulation of the already 66 payday lenders in Fresno.

Here's how these loans work in California: all a borrower needs is a source of income and a bank account. You can take out up to $300 per loan, which typically needs to be repaid in two to four weeks. Before walking out the door, with cash in hand, the store keeps 15 percent. That leaves the borrower with $255.

According to Pew Research, if you don't pay back in time you can pay the average fee of $55 to extend the loan.

The average payday borrower extends for about five months and can end up paying nearly double the loan, more than $500, only in fees. That's in addition to paying back the actual loan.

A large group of payday loan employees pleaded with Fresno council members Thursday that their industry is already heavily regulated.

"Where do you go when you need extra cash for your child's medicine, who do you turn to when that unexpected bill arrives at your door," said Advance America employee Brian Rivera.

Payday lenders also worry strict regulation will send people to borrow online, which they and consumer advocates say can be even more dangerous.

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