Herrera sues payday lenders for exploitive practices
City Attorney Dennis Herrera
By Brent Begin
April 26, 2007
The San Francisco city attorney's office filed a lawsuit today
against two short-term loan establishments for exploiting borrowers
with high interest rates and devious business practices.
Check 'n Go, which operates three stores in the city, and Money
Mart, which operates 12 stores in the city, are the targets of
the city attorney's litigation.
Money Mart on the corner of 7th and Market streets
According to the lawsuit, both businesses offer short-term loans
with interest rates over 400 percent, which violates state law.
The suit also claims that the businesses have attempted to circumvent
state law by working with an out-of-state bank, the First Bank
City Attorney Dennis Herrera said these payday loan establishments
prey on low-income and working-class families who live from paycheck
"Check 'n Go and Money Mart have targeted working families
with an illicit lending scheme that would make a loan shark blush,"
Herrera said in a statement. "With annual interest rates
exceeding 400 percent, these business practices are not merely
unconscionable, they're illegal -- and we intend to put an end
to them in California."
A survey completed in March by a San Francisco group reported
that most short-term loan establishments don't warn their customers
of the dangers of high-cost payday loans despite several laws
meant to force businesses to provide full disclosure.
According to the California Reinvestment Coalition, a group of
245 nonprofit organizations and public agencies across the state,
payday lenders have been taking advantage of lax California regulations
In 2004, Californians spent more than $757 million in loan fees.
According to the survey, that number would have dropped severely
if only payday lenders had been more diligent in educating borrowers,
a promise that the industry made to consumers through an advertising
Charisse Ma Lebron, who organized the study, said the lawsuit
is a long time in coming.
"CRC commends City Attorney Herrera for protecting consumers,
which is unfortunately what the state legislature has failed to
do for all Californians," she said in a statement.
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