California Reinvestment Coalition

L.A County Board of Supervisors Unanimously Approve Motion to Address High-Cost Payday, Car Title and Installment Loans

Published December 12, 2017 12:01

Today the Los Angeles County Board of Supervisors passed a motion directing staff to develop a comprehensive approach toward protecting consumers from the harmful effects of high-cost loans.

Last year, the Supervisors took a unanimous vote to support a proposal by the federal Consumer Financial Protection Bureau (CFPB) to regulate short-term, high-cost payday loans. On October 5th of this year, the CFPB issued their final rule to rein in abusive payday lending. That rule is set to go into effect in 2018.

Earlier this month, however, Florida Representative Dennis Ross introduced a bipartisan House resolution that would use the Congressional Review Act to repeal the CFPB’s payday rule. Of equal concern, the leadership of the Bureau is in flux and under threat, given the recent resignation of former director Richard Cordray and the ensuing conflict over who should assume the role of acting director. The Trump Administration recently appointed Mick Mulvaney to act as interim director. Mulvaney received more than $31,000 in campaign contributions from the payday industry during his 2015-2016 Senate campaign cycle.

It’s in this larger context that the County Board of Supervisors is seeking to address predatory lending and strengthen consumer protections at the local level.

“While licensed high-cost loans are a legal industry, these products often trap our communities in an unrelenting cycle of debt,” said Los Angeles County Supervisor Hilda L. Solis, the author of today’s motion. “Today's action strikes a balance between ensuring that borrowers have access to affordable emergency loans, while protecting them from those who would prey on our most vulnerable low-income residents.”

The California Reinvestment Coalition and dozens of faith-based and community organizations across the county are advocating for an ordinance to limit the expansion of payday, car title and installment lending storefronts in Los Angeles County, and for statewide lending reforms such as an interest rate cap. Major California jurisdictions including the cities of San Francisco, Sacramento, San Jose, Long Beach and Fresno and the counties of Santa Clara and San Mateo have enacted local policies that restrict the number and location of such businesses.

“Payday lenders cluster in low-income neighborhoods and communities of color. They target consumers who are already struggling to make ends meet with loans that carry outrageous interest and fees, which hurt people more than they help,” said Liana Molina, director of community engagement with the California Reinvestment Coalition. “Given the inaction of state and federal policy makers to reform lending laws, it’s critical for local government to use their authority to tackle the problem and initiate reforms from the ground up.”

The motion, co-sponsored by Supervisors Hilda Solis and Sheila Kuehl, instructs the LA County Department of Business and Consumer Affairs, the planning department, the Treasurer and Tax Collector and County Counsel to evaluate possible regulatory approaches, develop a consumer outreach and education strategy, track relevant legislation, and identify safe and affordable financial products for county residents. Staff will report back with findings and recommendations in spring of 2018.

“Payday lenders and other businesses that seek to get people to commit to high-interest installment loans and car title loans are simply preying on the poor. Their short-term, high-interest lending inevitably leads to deeper and deeper indebtedness. With this motion, the County is extending our commitment to protecting consumers from predatory lenders," said Supervisor Kuehl.

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