Supervisors approve 45-day moratorium on new check cashing and pay day businesses

From the Office of the Treasurer and Tax Collector

January 10, 2006

The San Francisco Board of Supervisors voted unanimously today in favor of a 45-day urgency moratorium on new check cashing and pay day lending businesses in the City.

The moratorium, sponsored by Treasurer José Cisneros and Supervisor Tom Ammiano, seeks to temporarily halt the proliferation of predatory lending businesses which dominate low-income neighborhoods, while allowing time for permanent controls to be established.

"I am encouraged by the strong support of the Board for this important legislation," said Treasurer Cisneros. "These businesses have been allowed to grow unchecked for too long. They prey on our low-income citizens and all too often trap them in a spiraling cycle of debt."

The moratorium becomes effective when signed by Mayor Newsom. During the 45-day period, no new check cashing and pay day lending businesses can open in San Francisco, and no existing business can convert to a check casher or pay day lender.

Within 25 days of becoming effective, the Planning Department will submit a written report to the Board recommending permanent controls. These controls could include limiting the proximity of these businesses to public housing or social service providers, and capping the density of check cashers and pay day lenders.

"Treasurer Cisneros and I have championed this issue because we believe the City deserves better. My district, the Mission, has been overwhelmed with fringe financial service providers. It's time to start regulating these businesses and making sure all San Franciscans have access to real banks and credit unions," said Supervisor Ammiano.

There are no existing local controls regarding check cashers and pay day lenders, which are currently regulated as any other retail sales business. The estimated 56 check-cashing and payday lending businesses in San Francisco are concentrated in the city's poorest neighborhoods. They cash payroll, government and personal checks for a fee that can range between two and ten percent. Payday lenders also offer short term personal loans, with interest rates that can approach 1,000 percent for a one-week loan when expressed as an annual percentage rate.

"By charging exorbitant rates and fees, these institutions deprive hard working people of the chance to get ahead and build assets," said Kevin Stein, Associate Director of the California Reinvestment Coalition.

####