CC Ordinance No. 16-2152 Interim Urgency Ordinance Establishing a Moratorium on the Establishment, Expansion, or Relocation of Payday Lending and Check Cashing Businesses with the CityURGENCY ORDINANCE NO. 16-2152
AN INTERIM URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUPERTINO ESTABLISHING A MORATORIUM ON THE ESTABLISHMENT,
EXP ANSI ON, OR RELOCATION OF PAYDAY LENDING AND CHECK CASHING
BUSINESSES WITHIN THE CITY OF CUPERTINO PENDING COMPLETION OF
AN UPDATE TO THE CITY'S ZONING CODE.
The City Council of the City of Cupertino does hereby ordain as follows:
SECTION 1. Authority. This Ordinance is adopted pursuant to the provisions set forth
in Government Code sections 36937(b) and 65858(a), (b) and pursuant to other
applicable law.
SECTION 2. Findings. In adopting this Ordinance, the City Council finds:
A. The inability of low-income consumers with poor credit history to
obtain certain services from federally-insured banks has resulted in a two-tiered
financial services industry. More financially-stable consumers are generally able to use
traditional banks, which charge low fees for checking and issue loans regulated by the
federal government, while lower-income, financially-vulnerable consumers often have
to rely upon the alternative financial services (AFS) industry for the same services.
Payday lending and check cashing businesses are part of the growing AFS industry.
B. Payday lending businesses typically offer small, 14-day loans for
which they charge effective interest rates upwards of 460% annual percentage rate
(APR). California law currently caps individual payday loans at $300, from which a 15%
fee can be deducted. As a result, payday lending businesses in California generally
charge $45 for a two-week $300 loan. According to a 2007 survey conducted by the
California Department of Corporations, 48% of payday loan borrowers in California
take out payday loans at least once per month. Because payday loan consumers tend to
engage in cyclical borrowing, research has demonstrated that the typical borrower
ultimately pays $800 for a $300 loan.
C. Check cashing outlets cash checks for a large fee, a significant
percentage of the amount of the check, or deposit funds onto prepaid debit cards
that incur a per-transaction fee. The fees withdrawn from cashed checks are generally
significantly higher than the fees that would be charged by most federally-insured
banks.
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D. With limited state and federal legislation restricting payday
lending and check cashing, the growth of these industries has been extremely rapid.
Since 1997, when payday lending became legal in California more than 2,000 payday
lending businesses have been established. In 2010, California payday lenders issued $12
million in loans to 1.6 million borrowers. The check cashing industry has experienced
similarly rapid growth. A study by the Consumer Federation of America found that the
check cashing industry doubled in size between 1994 and 2000, and again between 2000
and 2005.
E. The proliferation of these businesses has had significant
detrimental effects on the financial stability of low-income communities throughout
California and low-income neighborhoods in the surrounding cities. These businesses
operate almost exclusively low-income neighborhoods and prey upon the most
financially vulnerable community members, drawing them into a cycle of debt or
causing them to lose a significant share of their income to exorbitant fees for simple
financial transactions.
F. The City of Cupertino Zoning Code (Cupertino Municipal Code
Chapter 14) does not adequately regulate the establishment, expansion, or relocation of
payday lending and check cashing businesses within the City of Cupertino.
G. In light of the foregoing, the City Council finds that the
establishment, expansion or relocation of payday lending and check cashing businesses
within the City of Cupertino presents a current and immediate threat to public health,
safety and welfare. The City Council further finds that a temporary moratorium on the
establishment, expansion or relocation of payday lending and check cashing businesses
within the City of Cupertino is warranted so that the City Council may review and
consider possible amendments to the City of Cupertino Zoning Code to address this
threat on a permanent basis.
H. Government Code sections 36937 and 65858 authorize the adoption
of an interim urgency ordinance to protect the public health, safety, and welfare, and to
prohibit land uses that may conflict with land use regulations that a city's legislative
bodies are considering, studying, or intending to study within a reasonable time.
I. Failure to adopt this moratorium could impair the orderly and
effective implementation of contemplated amendments to the Municipal Code.
J. The proposed Ordinance is not a project within the meaning of
se ction 15378 of the California Environmental Quality Act ("CEQA") Guideline s
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because it has no potential for resulting in physical change in the environment, either
directly or ultimately. In the event that this Ordinance is found to be a project under
CEQA, it is subject to the CEQA exemption contained in CEQA Guidelines section
15061(b)(3) because it can be seen with certainty to have no possibility of a significant
effect on the environment.
SECTION 3. Imposition of Temporary Moratorium. In accordance with the authority
granted the City under Government Code sections 36937(b) and 65858(a), (b), and
pursuant to the findings stated herein, the City Council hereby finds that: (1) the
foregoing findings are true and correct; and (2) there exists a current and immediate
threat to the public health, safety, and welfare from unregulated payday and check-
cashing businesses operating in Cupertino; and (3) this Ordinance is necessary for the
immediate preservation of the public peace, health, and safety as set forth herein; and
(4) hereby declares and imposes a temporary moratorium for the immediate
preservation of the public health, safety and welfare as set forth below:
A. Payday lending and check cashing businesses are prohibited in all zones
in the city and shall not be established or operated anywhere in the city.
B. No Permits, grading permit, building permit, building plans, zone change,
business license, certificate of occupancy or other applicable approval will be accepted,
reviewed, approved or issued for the establishment or operation of payday lending or
check cashing activities.
C. As used in this Ordinance, the terms "payday lending businesses" shall
mean retail businesses owned or operated by a "licensee" as that term is defined in
California Financial Code section 23001 (d), as amended from time to time.
D. As used in this Ordinance, the terms "check cashing business" shall mean
retail businesses owned or operated by a "check casher" as that term is defined in
California Civil Code Section 1789.31 as amended from time to time.
E. Any use or condition caused or permitted to exist in violation of any of the
provisions of this Ordinance shall be and is hereby declared a public nuisance and may
be abated by the City pursuant to the procedures set forth in Article 50 of this Code.
SECTION 4. Effective Date and Duration. Pursuant to Government Code section
65858(a), this Ordinance shall take effect immediately but shall be of no further force
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and effect 45 days from its date of adoption unless the City Council, after notice and
public hearing as provided under Government Code section 65858(a)(b) and adoption
of the findings required by Government Code section 65858(c), subsequently extends
this Ordinance.
SECTION 5. Report of Interim Moratorium. Pursuant to Government Code section
65858(d), 10 days prior to the expiration or any extension of this Interim Ordinance, the
City Council will issue a written report describing the measures taken to alleviate the
conditions which led to the adoption of this Interim Ordinance.
SECTION 6. Compliance with CEQA . The City Council finds that this Ordinance
is not subject to the California Environmental Quality Act (CEQA) because the
activity is not a project as defined by Section 15378 of the CEQA guideline. The
Ordinance has no potential for resulting in physical change to the environment
either directly or indirectly. Furthermore, pursuant to Section 15060(c) (2) of the
CEQA Guidelines, the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment because this Ordinance prevents
changes in the environment pending the contemplated review of City of Cupertino
Zoning Code amendments applicable to payday lending and check cashing
businesses.
SECTION 7. Severability. The City Council hereby declares every section, paragraph,
sentence, cause and phrase is severable. If any section, paragraph, sentence, clause or
phrase of this ordinance is for any reason found to be invalid or unconstitutional, such
invalidity, or unconstitutionality shall not affect the validity or constitutionality of the
remaining sections, paragraphs, sentences, clauses or phrases.
SECTION 8: Publication. The City Clerk is directed to cause this ordinance to be
published in the manner required by law.
Ordinance No. 16-2152
Pages
THE FOREGOING URGENCY ORDINANCE was INTRODUCED and ENACTED at a
regular meeting of the City Council of the City of Cupertino the 20th day of September
2016, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Members of the City Council
Chang, Vaidhyanathan, Paul, Sinks, Wong
None
None
None
APPROVED:
Grace Schmidt, City Clerk
STATE OF CALIFORNIA )
COUNTY OF SANTA CLARA )
CITY OF CUPERTINO )
I, GRACE SCHMIDT, City Clerk and ex-officio Clerk of the City
Council of the City of Cupertino, California, do hereby certify the attached
to be a true and correct copy of Ordinance No. 16-2152, which was
enacted on September 20, 2016, and that it has been published or posted
pursuant to law (G.C. 40806).
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 23rd day of September, 2016.
GRACE SCHMIDT, City Clerk and Ex-officio Clerk
of the City Council of the City of Cupertino, California