Payday loan providers and check-cashing outlets behave as a substitute for conventional banking institutions by providing short-term loans and may charge effective interest levels as high as 460 per cent, county officials stated. Board of Supervisors President George Shirakawa stated they passed the ordinance because such loan providers are «predatory» and target low-income residents.
In line with the Center for Responsible Lending, such financing companies are disproportionately based in African-American and Latino communities, county officials stated. Supervisor Mike Wasserman stated which he thinks such pay day loans only drive borrowers deeper into debt.
«The high interest levels charged by payday loan providers entangle borrowers in a cycle that is vicious» Wasserman stated.
The board made a decision to make sure that payday financing and check-cashing companies usually do not transfer to the unincorporated county areas if San Jose along with other metropolitan areas additionally pass comparable ordinances, based on Andrea Flores Shelton, deputy chief of staff for Shirakawa’s workplace. The San Jose City Council is planned to take into account one such ordinance May 15.