Local Ordinances

City Government Ordinances Against Check Cashing and Payday Lending

Millions of Americans do not rely on banks to meet their financial needs. Instead they pay huge fees at check cashing outlets, which makes it difficult for consumers to save money, accumulate assets and get ahead. Many take out payday loans with Annual Percentage Rates or interest rates ranging from 400% to 1000% when they run short of cash before their next paycheck. The financial impact of check cashing and payday lending can be devastating on households and neighborhoods. CRC estimates that check cashers and payday lenders suck out billions of dollars per year from California households.

To see CRC’s report, The Financial Divide, click here

Existing law does not go far enough to protect consumers from these predatory lenders. Consumers still pay too much in fees to cash checks and get payday loans, still are vulnerable to being sold multiple payday loans that trap them in a cycle of debt and are still burdened by short repayment plans that they cannot meet.

Several California cities have begun to fight back.

The City of National City passed a moratorium on new check cashing outlets and payday lenders so that it could determine how best to regulate them and minimize their harmful impacts. National City has been considering using its business licensing process to regulate payday lenders and limit the number of payday loans they can make to city residents.

The City of Oakland passed its own ordinance that limits the concentration of new check cashing outlets and imposes additional obligations on them to ensure they do not become blights on the neighborhood.

San Francisco has passed a moratorium on new check cashers and payday lenders and is considering how to permanently regulate them.

Los Angeles and Chula Vista are considering similar measures.

CRC supports efforts by local governments to further regulate check cashers and payday lenders through ordinances. Ultimately California consumers deserve better state laws that can protect them against predatory payday loans. In fact, thirteen (13) states do not even allow payday lending, and many cities throughout the nation have provided additional consumer protections for local residents.

Additionally, CRC advocates for banks to cease their financing of check cashers and payday lenders, and for banks and credit unions to develop alternative products like the Essential Bank Account and the Quick Consumer Loan to compete against the predatory lenders and to meet the credit needs of all consumers.