CC Ordinance No. 16-2156 Extending a Temporary Moratorium on the Establishment, Expansion, or Relocation of Payday Lending and Check Cashing Businesses within the City of CuprtinoURGENCY ORDINANCE NO. 16 -2156
AN INTERIM URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUPERTINO EXTENDING A TEMPORARY 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 ca sh 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 The fees withdrawn from cashed checks are generally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 19) 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.
Urgen cy O rdina n ce
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J. The proposed Ordinance is not a project within the meaning of
section 15378 of the California Environmental Quality Act ("CEQA") Guidelines
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; and before taking action on this Ordinance, using its
independent judgment, finds such CEQA exemptions to apply;
SECTION 3. Extension of Moratorium. In order to protect the public health, safety and
welfare, the City finds that it is necessary to extend the Urgency Ordinance and
prohibitions imposed by Ordinance No. 16-2152 on the establishment, expansion, or
relocation of any payday lending business or check cashing business within the City of
Cupertino.
SECTION 4. Effective Period. This Ordinance is an extension of Ordinance No. 16-2152,
an urgency measure adopted pursuant to the provisions of Government Code Section
65858. This Ordinance shall be in effect until the earlier of the following, and shall
thereupon be repealed and of no further force or effect, unless extended by subsequent
enactment of the City Council:
i) The completion of the study, evaluation, consideration, and legislative
action and effective date of the amendments to Cupertino Municipal
Code, Title 19, Zoning, to address payday lending and check cashing
facilities on a permanent basis, or
ii) Ten months and fifteen days beyond November 4, 2016.
SECTION 5: Report of Interim Moratorium. Ten days prior to the expiration of
Urgency Ordinance No. 16-2152, the City provided a report describing the measures
taken to alleviate the urgency pursuant to Government Code section 65858(d). Further,
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. 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
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Urgency Ordinance No. 16-2156
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invalidity, or unconstitutionality shall not affect the validity or constitutionality of the
remaining sections, paragraphs, sentences, clauses or phrases.
SECTION 7: Publication. The City Clerk is directed to cause this ordinance to be
published in the manner required by law.
THE FOREGOING EXTENSION OF THE URGENCY ORDINANCE was introduced
and adopted at a regular meeting of the City Council of the City of Cupertino held on
November 1, 2016, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Members of the City Council
Vaidhyanathan, Paul, Sinks, Wong
None
Chang
None
APPROVED:
~I/~~
Grace Schmidt, City Clerk Savita Vaidhyanathan, Vice Mayor,
City of Cupertino
Urgen cy Ordinance
Co unci l Da te : Nove mb e r 1, 201 6
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. 16-2156, which was
enacted on November 1, 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 3rd day ofNovember, 2016.
GRACE SCHMIDT, City Clerk and Ex-officio Clerk
of the City Council of the City of Cupertino, California