Quick cash markets

Got debt? Sacramento’s payday loan borrowers sure do.

The city has almost three times more outlets for payday loans per person than any other city in the state, according to the California Reinvestment Coalition. The outlets offer small, short-term loans intended to cover a borrower’s expenses until his or her next payday.

In fact, Sacramento, with its population of nearly half a million, has 81 payday lender locations, according to the state Department of Corporations. That figure is the second-highest in the state; the city of Los Angeles, with its population nearing 4 million, leads California with 161 payday sites.

Payday lenders are often seen as exploiting low-income workers, because those who resort to payday lending are typically poor or young people with few assets who may not understand that associated high-interest rates are likely to trap them in a cycle of debt.

SN&R asked Mark Leyes, spokesman for the Corporations Department, which licenses and regulates the 2,187 payday loan outlets in the state, to lay out the process of taking out a payday loan. To borrow $100, a California consumer would need to write a $117.65 check (post-dated to a future payday), for an interest rate of 17.65 percent, he said. That cost to borrow the $100 calculates to a 460 percent annual rate. (17.65 percent divided by 14 days, for a 1.26 percent daily interest rate over the two-week loan term. Now multiply the 1.26 percent rate over a year—365 days—for a whopping annual rate of 460 percent.)

A payday loan is due in two weeks. If borrowers can’t repay the original loan, state law requires them to close out the prior loan (unpaid balance and fees). Then borrowers can take out a new loan.

What makes Sacramento so attractive to payday loan companies such as Advance America Cash Advance Centers? According to Jamie Fulmer, vice president of public affairs for the company, it’s simply because there’s a demand for them here.

“Advance America operates seven centers in the city of Sacramento, and a total of 16 centers throughout Sacramento County, which is comparable to other population centers around the state and nation,” Fulmer said. “In general, we locate our stores in areas where middle-income consumers live, work and shop to ensure our service is convenient.”

Payday lenders collect more than $8 million in fees annually from Sacramento borrowers, according to the Center for Responsible Lending in Oakland. “Payday lenders tend to target and cluster in low-income communities of African-Americans and Latinos,” said Ginna Green, CRL spokeswoman.

Liana Molina, an organizer with the California Reinvestment Coalition in San Francisco, agrees. “Payday lenders target vulnerable populations such as low- and moderate-income workers and working families, single parents, and communities of color,” she said.

However, the Corporations Department does not collect data on payday borrowers by gender, income and race.

U.S. Census Bureau figures are worth noting in terms of Sacramento’s concentration of payday lenders. Census data shows that 20 percent of people in the capital city lived below the poverty level, vs. 22.1 percent in L.A., and 14.2 percent for California. Blacks and Latinos were 36.1 percent of the populace in the city of Sacramento, vs. 57.7 percent for Los Angeles and 39.1 percent statewide.

No California legislation to regulate payday loans is now pending. What’s up with Uncle Sam?

Congress just passed and President Barack Obama signed into law the Sen. Christopher J. Dodd-Rep. Barney Frank financial-reform bill. It includes expansion of the federal Consumer Financial Protection Bureau. If the CFPB can produce rules and regulations such as capping the annual percentage rate of payday loans at 36 percent, Green said, borrowers would benefit. “But that’s a big if.”