California’s Convoluted Relationship with Payday Loans
Everyone knows that California is a very rich, diverse and complex state. Perhaps the only state in the country that attracts visitors for surfing and skiing, beach vacations, mountain climbing and even wine-tasting.
California is also home to a very diverse population, with strong immigrant presences from South and Central America, and the Pacific island nations off the East coast of Asia.
As you can imagine, all these groups bring their own needs, concerns and opinions. So, few political topics are simple, most are very complex and convoluted – and the subject of payday loans is no exception.
Not mentioned above is the fact that California is perhaps the most recognized and visible state in terms of economic stratification. Obviously, the majority of immigrants come to California with little money and few possessions, here to work and escape economic conditions in their home countries. California is also home to the majority of the country’s celebrities, Hollywood being the haven for the rich and famous.
The subject of payday loans is certainly a matter of economic stratification. Payday lenders are more prevalent in low-income areas where the population is typically under-banked. On the other hand, the wealthy like to champion the causes of the poor, and while they are not the ones who take out payday loans, they are certainly the ones fighting against them.
California has a strong record of being aggressive on issues of consumer financial protection. They house the largest Consumer Affairs department in the country, which served as a model for the new Consumer Financial Protection Bureau in DC.
Several local governments, including Sacramento, San Francisco, Oakland and Oceanside have already passed legislation restricting the location of cash advance stores. Several others are considering similar legislation to restrict payday lending.
Yet, the industry within the state is still growing and one legislator, Assemblyman Charles Calderon, has authored a bill to increase the maximum loan limit from $300 to $500.
Calderon, who grew up in East Los Angeles and has strong support from the Latino community, argues that the payday advance loan is one of the few tools available to the poor who don’t qualify for traditional bank loans.
As stated above, the Center for Responsible Lending shows that most payday loan lenders operate in the Latino and black communities. This creates a troublesome and complex dynamic where these minority populations are the ones using the product, while the predominantly white and wealthy legislators are the ones trying to restrict it.
A spokesman for the California Financial Service Providers Association points out that consumers of payday loans are overwhelmingly pleased with their lending experience, and that payday loans should never be used as a long-term solution to money problems.
Should the mishaps and misfortunes of the few who end up in debt cycles trump the needs of the many who use the loans responsibly and successfully? Should the wealthy legislators who have never used a deferred deposit loan be making decisions for the poor who need access to lending products?
As you can see, the payday loan debate in California is a very complex one that won’t be solved by special interest groups, lobbying or greed. People, both consumers and legislators alike, need unbiased facts in order to make well-founded decisions for the good of the all the citizens of California.