Payday advance lenders targeted
Jesus Rodriguez knew he was going to come up short on his bills, so on a recent Friday afternoon he took his accustomed trip to a Baldwin Park strip mall.
The produce-truck driver walked into a payday lending business nestled alongside a Chinese fast-food joint and a dental office. He wrote out a personal check for $300 and walked out with $255 cash. The 33-year-old Mexican immigrant basically gave away $45 to get the advance, but he said he didn’t see a lot of other options.
“Seen a certain way, it is a lot of money,” Rodriguez said as his young daughter waited nearby, clutching a jump rope. “But it’s a help. You can’t get a loan like this from a bank.”
But Baldwin Park officials don’t think such businesses are helpful and are taking steps they hope will drive payday lending and check-cashing businesses away. City officials had voted to enact a moratorium prohibiting more shops from opening. Maybe the rest will just shrivel away, Baldwin Park Mayor Manuel Lozano said.
“These places are like vultures,” he said. “In Baldwin Park, we wish they would close up and get out of the city.”
Baldwin Park was the latest city to target businesses that conduct payday lending and check cashing; others include San Francisco, Sacramento, Oakland, Oceanside, Pico Rivera and Montebello. Cities across the country and in Canada have mulled or passed restrictive measures on such businesses.
And last year, the Marine Corps and the Navy successfully lobbied the California Legislature to pass a law dramatically reducing the amount payday lending businesses -- common near military bases -- can charge service members. Military commanders said debt from payday loans had increasingly been threatening troops’ reenlistment and the security clearance of key personnel.
The Marines and the Navy started their own quick no-interest loan programs to counter the payday lenders -- which, for the most part, have stopped lending to troops, said Marine Maj. Gen. Michael Lehnert.
Critics call it “predatory lending,” with businesses opening in largely poor and working-class neighborhoods; the industry calls it serving the underserved.
State regulators say that with 2,500 outlets, the industry seems more visible than ever.
Officials in some cities, including Baldwin Park, argue that the proliferation of such businesses reinforces their reputations as poor communities.
State regulators say that there are “bad apples” but that the number of complaints from consumers against these businesses are relatively low, especially considering the volume of transactions.
The amount customers can borrow at payday lending stores is limited to $255. To do so, a customer might walk in and sign over a check for $300. The payday advance store agrees to defer deposit of the check for two weeks or more. The rates are usually clearly laid out for customers, regulators say.
“The industry may not be very popular, but it’s very transparent,” said Mark Leyes, a spokesman for the California Department of Corporations. “Why ever risk penalties by cheating somebody out of an extra $5 when you can just do it” legally?
“A lot of people see these types of businesses as predatory,” he said. “I guess that’s in the eye of the beholder.”
Where there’s a market
Despite concerns from some city leaders, many customers swear by payday lenders, saying the loans help cover costs when money is short.
On a recent afternoon, Olivia Lobato, 31, walked out of a Baldwin Park payday advance store with $255. Her 3-year-old squirmed in her arms. A single mother of two boys and an analyst for Kaiser Permanente, Lobato said the money was for their trip the next day to Disney World in Florida.
“This is more just spending money,” she said. “It helps you on a vacation, or Christmastime. It really helps Christmastime.”
In neighboring West Covina, Oscar Mendoza, 32, recently walked into a payday advance store with neon signs touting that it does not check for bad credit.
“Bye, Virginia! Thanks! Send me customers,” an employee who gave her name as Laura said to another customer. Mendoza is a regular at the store even though he lives in Baldwin Park.
“I just don’t want people to see me there,” Mendoza said.
He said he thinks Baldwin Park has larger problems than check-cashing and payday lending business. A few days ago, someone broke into his Chevrolet Suburban.
“By a hair I almost caught the guy,” he told the employees, who nodded sympathetically.
Another employee said she somewhat understands where the city is coming from. She grew up in Baldwin Park and thinks the city is trying to make itself better.
Mendoza, a tractor driver, said payday advances helped get him and his wife through a rough patch after he lost his job at a bank about a year ago. He almost lost his house, he said.
“I did it because I was making good money, and then I lost my job,” Mendoza said. “I felt the bills coming on, and I started with one loan, and then two. My wife went to [another quick loan company]. They were rude and they charged way higher. But they also disclosed their fees upfront.”
It wasn’t cheap, he said.
“But that’s the price you have to pay. I’d rather pay the fee and get over with it. I don’t want to ask my relatives or friends for money.”
As Mendoza walked out with $200, an employee said, “Bye, Oscar! Bring us some customers!”
Laura said she would never seek a payday loan herself.
“Some people say, ‘I’ll pay $45. OK, no big deal,’ ” she said. “For me, I can do a lot with $45.”
Regulations prohibit payday advance stores from issuing loans to customers who already have a loan outstanding.
Laura said some customers hop from one payday advance store to another; she even knows payday advance employees who do this.
And not every customer is poor. Laura said one man went to the business after having an affair and getting another woman pregnant. He made good money, she said, and used payday loans to discreetly make child support payments, she said.
But many other customers just don’t have a lot of choices, she said.
Baldwin Park decided to go after the industry shortly after a check-cashing company two years ago proposed putting a manned kiosk with bullet-proof glass in a McDonald’s restaurant.
“That was the last straw,” said City Planner Amy Harbin.
In addition to four stand-alone check-cashing and payday advance stores, Baldwin Park has 23 other locations where people can cash their checks -- in liquor stores, grocery stores, bakeries and meat markets. Those businesses are not affected by the ban.
Edward D’Alessio, attorney for the Financial Service Centers of America, an industry group, said that the industry offers an array of services and that customer satisfaction remains extremely high.
And he said that if a lot of cities “were honest, they would be saying, ‘We’re not directing the ordinances at these businesses. We’re directing them at people who use these businesses.’
“If you look at Baldwin Park, for example, they talk a lot about aesthetics in their study and reports,” D’Alessio said. “They’re throwing out other things like crime. What are they saying, that the people who come to these businesses are criminals?”
Lozano, the mayor, said that the businesses charge customers “astronomical rates” and that he had talked to residents who had gotten into far worse debt after dealing with payday loan stores.
But customers are not mentioned in the February report on which the City Council based its vote to place a moratorium on these businesses. The report instead cited the potential for the businesses to harm the city through “a negative image, increased crime and visual impacts.”
“Within the past 10 years, the City of Baldwin Park has made it a priority to improve its image,” the report stated.
The city has tried to reverse its identity as a largely poor community. Lozano said Baldwin Park is a “city in transition,” with a large first-, second- and third-generation Latino community.
But many outside developers still show up and try to focus on projects aimed for immigrants, he said. It was only after a lot of work that Target and Wal-Mart came to town, Lozano said.
Having payday lending and check-cashing businesses doesn’t help, he said.
“They’re just an eyesore in areas that we may potentially look at for future development,” he said. “They’re out there preying on the poor and those people in desperate straits. They’re not a business I welcome in Baldwin Park.”