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Exhibit CC 09-20-2016 Item No. 10 Written Communication on Payday Lending SENT VIA E-MAIL: citycouncil@cupertino.org. September 19, 2016 Mayor Barry Chang Members of City Council 10300 Torre Ave. Cupertino, CA 95014 Re: Item 10 (September 20, 2016)—Payday Lending Dear Mayor Chang and City Council: We write on behalf of the Coalition Against Payday Predators (CAPP), 1 a broad coalition of individuals and over 40 community-based organizations who support policy reforms regarding payday lending and local restrictions on payday lenders in Santa Clara County. CAPP believes that sensible regulation of payday lending will lead to greater economic security and prosperity. We support staff’s recommendation to adopt moratorium on the establishment of payday loan and check cashing stores as an interim urgency ordinance, and we urge the City to move forward quickly to establish a long-term policy to ban the establishment of payday lenders in Cupertino. Payday Loans and Payday Lending 2 Payday loans are lending transactions in which a borrower provides a lender with a post- dated check and receives immediate cash from the lender. The borrower’s check includes not only the principal loan amount, but also any interest and fees charged by the lender. The lender then cashes the borrower’s check on the borrower’s next payday unless the loan has been repaid by that date. Payday loans, sometimes called deferred deposit transactions or cash advances, comprise one corner of a larger universe of “alternative” or “fringe” financial services, which also 1 CAPP’s core leaders include the Law Foundation of Silicon Valley, Asian Law Alliance, West Valley Community Services, United Way of Silicon Valley, Working Partnerships USA, the Opportunity Fund, and Sunnyvale Community Services. CAPP’s efforts are funded in part by a grant from the Silicon Valley Community Foundation. 2 The text of this section is taken largely from a memo submitted by CAPP to the City of Cupertino in March 2016; staff include a copy of that memo in the Council packet. 2 includes check cashing services, pawn brokers, and rent-to-own stores. 3 In California, payday loans are small-dollar loans; state law caps them at $300. 4 However, these loans, including the relatively large fees associated with them, must be repaid quickly; the average term of a payday loan is 16 days. 5 Due to this short repayment timeframe, their average APR 6 is 366 percent. 7 Payday lending is widespread in California. In 2015, payday lenders issued over 12 million payday loans. 8 Although payday loans are advertised as short-term credit products for use in emergencies, data show that most payday loan borrowers are unable to repay their loans in lump sum and that payday loan borrowers are indebted for an average of five months per year. 9 Further, the average payday loan borrower takes out eight loans per year, “often renewing an existing loan or taking out a new loan within days of repaying the previous one.” 10 In 2015, there were more payday loan borrowers who took out 10 payday loans than there were payday loan borrowers who took out only a single loan. 11 Sixty-four percent of the total fees collected by the payday lending industry in California were collected from borrowers who took out 7 or more payday loans in a year. 12 Nearly half of all repeat payday loans made to repeat borrowers were made to the borrower the same day that the borrower paid his or her prior loan. 13 Payday lenders and other fringe financial services tend to be more densely concentrated in lower-income areas and communities of color. 14 One study found that “[e]ven after controlling for income and a variety of other factors, payday lenders are 2.4 times more concentrated in African American and Latino communities. On average, controlling for a variety of relevant factors, the nearest payday lender is almost twice as close to the center 3 See, e.g., Sharon Hermanson and George Gaberlavage, “The Alternative Financial Services Industry,” AARP Public Policy Institute (Aug. 2001) (available at http://www.aarp.org/research/credit- debt/credit/aresearch-import-198-IB51.html). The San Francisco Municipal Code also uses the term “fringe financial services” to refer to these types of establishments. San Francisco Muni. Code § 790.111. 4 Cal. Fin. Code, § 23035, subd. (a). 5 California Department of Business Oversight , Summary Report: California Deferred Deposit Transaction Law—Annual Report and Industry Survey (2016) 6 (available at http://www.dbo.ca.gov/Licensees/payday_Lenders/payday_lenders.asp). 6 The APR, or Annual Percentage Rate of Interest, was developed by Congress “as a standard measure that calculates the simple interest rate on an annual basis (including most fees), accounts for the amount of time the borrower has to repay the loan, and factors in the reduction in principal as payments are made over time.” Center for Responsible Lending, “APR Matters on Payday Loans” (June 23, 2009) (available at http://www.responsiblelending.org/payday-lending/research-analysis/apr-matters-on-payday-loans.html ). 7 DBO, supra note 5 at 7. 8 Id. at 6. 9 The Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why (Jul. 2012), 6 (available at http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Payday_Lending_Report.pdf ). 10 Id. at 9. 11 DBO, supra note 5 at 7. 12 Id. at 8. 13 Id. at 7. 14 See, e.g. , Brookings Institution, “From Poverty, Opportunity: Putting the Market to Work for Lower Income Families,” (2006) (available at http://www.brookings.edu/reports/2006/07poverty_fellowes.aspx ). 3 of an African American or Latino neighborhood as a largely white neighborhood.” 15 In 2015, approximately 60 percent of California payday loan borrowers had incomes of $30,000 per year or less. 16 Local, State, and Federal Policy Efforts CAPP and its allies throughout California have been advocating for stronger consumer protections for payday loan borrowers, as well as local land use policies that limit the proliferation of payday lenders. In California, payday lenders are governed by the Deferred Deposit Transaction Law (Fin. Code, §§ 23000 et seq.) and by regulations promulgated by the Department of Business Oversight (Cal. Code Regs., tit. 10, ch. 3). These laws govern the maximum loan amounts, fees, and other aspects of how payday lenders operate. Because California has adopted this comprehensive regulatory scheme, local jurisdictions are prohibited from regulating the terms of payday loans under the legal doctrine of preemption. However, local jurisdictions are legally permitted to enact local policies that combat the proliferation of payday lenders in their communities and the overconcentration of these types of businesses in low-income and minority neighborhoods, as well as the blight, nuisance, and other problems caused by payday lending stores. Silicon Valley voters are in favor of such local measures according to a 2010 poll, which found that an overwhelming majority of respondents supported restrictions on payday lenders, and over half believed that such restrictions were appropriate actions for city government. 17 In Santa Clara County, the cities of Los Altos, Gilroy, and Morgan Hill, as well as the County itself, have all imposed permanent moratoria on payday loan stores. While existing stores may continue operation, they may not expand or move, and no new payday loan stores may locate in those cities. San Jose, Sunnyvale, and Campbell also cap the number of payday loans stores and limit their placement. Several cities (and the County) imposed temporary moratoria on payday lenders while they considered the policy options for longer term regulation of payday lenders. Although check cashing outlets are a different type of “fringe financial service” that are licensed differently than payday lenders, they often exist in the same store fronts with payday lenders, and many cities have elected to regulate payday lenders and check cashers together. 15 Wei Li, et al. , “Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California,” Center for Responsible Lending (Mar. 26, 2009), 25 (available at http://www.responsiblelending.org/payday-lending/research-analysis/predatory-profiling.pdf ). 16 DBO, supra note 5 at 8. 17 Goodwin & Simon Strategic Research, San José Payday Loan Store Restrictions Survey (Dec. 2010) (available at http://www.responsiblelending.org/california/ca-payday/research-analysis/San-Jose-Payday- Lending-Voter-Poll-Memo.pdf ). 4 At the federal level, the Consumer Financial Protection Bureau (CFPB) issued draft regulations regarding payday lenders in June and will be receiving public comments until October 7, 2016. 18 Recommendations Cupertino does not currently have any payday lenders, so now is an ideal time for the City Council to act to prevent payday loan stores from opening in the City. We support staff’s recommendation to adopt a temporary moratorium on payday lenders and check cashers as an urgency ordinance on September 20, and we further urge the city to move forward quickly with a long-term policy. We encourage the City to consider—and to adopt, a permanent ban on payday lenders in Cupertino. Thank you for your time and careful attention to this important policy question. If you have any questions about the CAPP Coalition or about our position, please contact Melissa Morris at 408-280-2429 or melissam@lawfoundation.org. Many thanks, Melissa A. Morris Senior Attorney, Law Foundation of Silicon Valley /s/ Richard Konda Executive Director, Asian Law Alliance Sujatha Venkatraman Associate Executive Director, West Valley Community Services /s/ Gwendy Brown Vice President, Research and Policy, Opportunity Fund [ADDITIONAL SIGNATORIES ON NEXT PAGE] 18 To view the draft regulation and submit comments, see: https://www.regulations.gov/docket?D=CFPB- 2016-0025. 5 /s/ Marie Bernard Executive Director, Sunnyvale Community Services /s/ Derecka Mehrens Executive Director, Working Partnerships USA /s/ Liana Molina Director of Community Engagement, California Reinvestment Coalition cc: Angela Munuhe, Assistant City Attorney Jaqueline Guzmán, Assistant to the City Manager 1201 K Street, Suite 1840 Sacramento, CA 95814 P: 916.400.4372 F: 916.491.4098 September 20, 2016 Honorable Barry Chang City of Cupertino City Hall 10300 Torre Avenue Cupertino, CA 95014 Dear Mayor Chang and City Councilmembers: This letter is in response to the staff report dated September 20, 2016 to consider adopting a Moratorium on the Establishment, Expansion, or Relocation of Payday Lending businesses.. The members of the California Consumer Finance Association (CalCFA) are committed to providing access to a range of affordable, state-regulated, small dollar credit options so consumers and small businesses can choose legitimate products and services that suit their specific financial needs. CalCFA member companies have always worked with legislators and local government officials to create laws and regulations that allow regulated credit options that serve the needs of California residents. Consumers are best served when they have a variety of legitimate, competing financial options from which to choose the best solution for their needs. The proposed ordinance will limit choices for consumers and their access to credit. It will also limit business competition in the local financial marketplace. The proposed ordinance will negatively impact both consumers and businesses. A payday loan is just one option consumers have for short-term credit. To qualify, a consumer must have a bank account and a steady source of income. Often, a payday loan is the most economical dollar-for-dollar option when compared to the higher costs of bouncing a check, paying overdraft protection fees, or incurring late payment penalties. Consumers need to be able to choose which is best for their individual situation. But, the proposed ordinance would curb access to the payday loan option, even if it is the most cost-effective option. Is that good for Campbell consumers? Please see the attached article, “Overdraft Fees Continue to Weigh on Bank Customers”, by Anna Maria Andriotis (The Wall Street Journal - May 12, 2015). And, often consumer choose payday loans because of more than just cost. Some prefer payday loans because of their convenience, ease and extended hours of operation. In fact, according to one study, borrowers’ preference for payday loans over similar credit union products is driven “most strongly by credit unions’ shorter hours of operation”. (Anti-Payday Lending Zoning Restrictions Can Harm Consumer Welfare, Community Financial Services Association of America.) 1201 K Street, Suite 1840 Sacramento, CA 95814 P: 916.400.4372 F: 916.491.4098 Page 2 of 2 The proposed interim urgency ordinance will limit options and competition for legitimate, short- term credit. But it will certainly do nothing to curb consumer need and demand. Consumers will continue to seek short-term, small dollar credit. And they will find it. If regulated, legitimate options are limited as proposed in the ordinance, consumers could be forced to use unregulated, unlicensed sources of credit risking much higher costs and unknown collection practices. These unregulated lenders, many of them on the Internet, operate beyond the reach of state and federal law. In fact, this challenge has sparked a significant Department of Business Oversight effort to stop illegal, unregulated Internet payday loans. Please see the attached article, “Payday loans thwart regulators”, by Claudia Buck published in The Sacramento Bee (February 21, 2015) and CalCFA’s response, “CalCFA Applauds DBO Action Against Unlicensed Lenders” (February 24, 2015). The bottom line is that a range of competitive choices of legitimate short-term credit products, including payday loans, are needed by consumers in the community. Without these “non- traditional”, state-regulated financial products in the marketplace, many community members would not be able to access cash when they need it most. We appreciate your consideration of our concerns regarding the issues discussed in this letter and appreciate the opportunity to submit comments. Sincerely, Natasha Fooman President California Consumer Finance Association (CalCFA) CC: City of Cupertino, City Manager City of Cupertino, City Attorney City of Cupertino, Project Planner City of Cupertino, Planning Manager City of Cupertino, City Clerk Attachments: Wall Street Journal Article Sacramento Bee Article CalCFA Statement CA Department of Business Oversight Payday Loan Trifold (English & Spanish version) Payday Loans in the State of California (CFSA document) Comuníquese al Departamento de Supervisión de Empresas de California (California Department of Business Oversight) para comprobar el estado de la licencia de un prestamista de día de pago, consultar el historial de acciones disciplinarias contra un prestamista de día de pago o presentar una queja contra un prestamista de día de pago. Para obtener copias adicionales de esta publicación, envíe una solicitud por correo electrónico a forms@dbo.ca.gov CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT llamada gratuita 1-866-275-2677 TTY 1-800-735-2922 www.dbo.ca.gov CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHTConsejos financieros de sentido común Evite problemas de dinero en el futuro: • Haga un presupuesto (enumere todas las fuentes de ingresos y todos los gastos mensuales, incluido el total de sus deudas). • Dé prioridad a sus deudas (pague las tasas de interés más caras primero); elimine todos los gastos innecesarios. • Cree un fondo de emergencia guardando una pequeña cantidad de cada cheque de pago en una cuenta de ahorros. Adquiera el hábito de hacer depósitos con regularidad. • Contacte un servicio local de asesoramiento en créditos para obtener ayuda para hacer un presupuesto mensual o un plan de pago con sus acreedores. Préstamos de día de pago en línea: ¡PRECAUCIÓN! El departamento pide urgentemente a los consumidores que verifiquen que un prestamista cuente con una licencia antes de compartir su información personal. Puede verificar la licencia en el sitio www.dbo.ca.gov o llamando al 1-866-275-2677. • Es posible que los prestamistas sin licencia retiren dinero directamente de su cuenta bancaria de manera ilegal y sin su permiso, incluso si usted no puede pagar el préstamo. • Podrían cobrarle ilegalmente una tasa de interés mucho más alta que las leyes de California permite. • Los prestamistas de día de pago por Internet sin licencia pueden vender o piratear su información financiera personal. • Es posible que los prestamistas operen fuera del estado o en el extranjero, por lo que puede ser difícil rastrearlos y recuperar sus fondos perdidos si violan la ley. Si desea presentar una queja formal contra un prestamista sin licencia, visite www.dbo.ca.gov y presente un Formulario de queja del consumidor ante el Departamento de Supervisión de Empresas. LLAMADA GRATUITA 1-866-275-2677 State of California Business, Consumer Services and Housing Agency CD D T L 0 0 1 S p a n i s h ( R E V 8 / 1 3 ) DEPARTMENT OF BUISNESS OVERSIGHT State of California Business, Consumer Services and Housing Agency Lo que usted necesita saber sobre Los Préstamos de Día de Pago DEPARTMENT OF BUISNESS OVERSIGHT ¿Qué es un préstamo de día de pago? Los préstamos de día de pago también se conocen como “adelantos de efectivo” o “depósitos diferidos”. Con un préstamo de día de pago, el prestatario escribe un cheque a nombre de un prestamista a cambio de un préstamo de dinero en efectivo a corto plazo. Por ejemplo, un prestatario escribe un cheque por $300, paga una tarifa de $45 y recibe $255 en efectivo. El prestamista cobra el cheque el próximo día de pago del prestatario, hasta 31 días después. Las tarifas de los préstamos de día de pago: De acuerdo con las leyes de California, el monto máximo que un consumidor puede pedir en un préstamo de día de pago es $300. La tarifa máxima que puede cobrar un prestamista es el 15% del monto del cheque (hasta un máximo de $45). Se aplican restricciones adicionales para los préstamos a los miembros del servicio militar y sus dependientes. Una tarifa del 15% es equivalente a una tasa anual de intereses (annual percentage rate, APR) del 460% para un préstamo de dos semanas. En comparación, un préstamo para un automóvil nuevo por lo general tiene una APR de entre el cuatro y el siete por ciento. APR es la tasa anual de intereses total que un prestatario paga por un préstamo, incluidos todos los cargos y tarifas. APR se usa para revelar el costo total de pedir dinero prestado. Si usted pide un préstamo de día de pago: Pida prestado sólo lo que puede pagar en su totalidad en su próximo día de pago. Algunos prestatarios se dan cuenta de que no pueden pagar el préstamo cuando llega la fecha de vencimiento del préstamo. Se recomienda a lo s prestatarios no sacar un segundo préstamo de otro prestamista de día de pago para pagar el primero, ya que esto puede llegar a un ciclo de deudas costosas y difícil de recuperar. Préstamos a miembros del servicio militar y sus dependientes: Debido a los cambios recientes en las leyes federales y de California que limitan las tarifas de los préstamos de día de pago para los miembros del servicio militar y sus dependientes, es posible que algunos prestamistas de día de pago decidan no conceder préstamos a los miembros del servicio militar y sus dependientes. Las leyes de California lo protegen: • En California, todos los prestamistas de día de pago, ya sea en un local físico o en línea, deben contar con una licencia autorizada por el Departamento de Supervisión de Empresas para poder hacer negocios en el estado. Visite el sitio web del departamento para verificar la licencia de un prestamista. • Un prestamista de préstamo de día de pago sólo puede hacerle un préstamo (que no puede ser superior a $300), y sólo puede cobrar un costo máximo de 15% del importe total del cheque (hasta $45). Se aplican restricciones adicionales sobre la comisión para los miembros de las fuerzas militares. • Los prestamistas deben mostrar su licencia de California y una tabla de tarifas en todas las ubicaciones. • Un prestamista de día de pago no puede darle un nuevo préstamo para pagar un préstamo existente. • Un prestamista de día de pago no puede darle un nuevo préstamo mientras exista un préstamo pendiente, incluso si el saldo combinado del préstamo existente y el nuevo préstamo no supere los $300. • Si su cheque es rechazado, el prestamista sólo puede cobrar un cargo por cheque rechazado (hasta $15). (Tenga en cuenta que su banco puede cobrar cargos adicionales por falta de fondos.) • No se le pueden cobrar cargos adicionales si usted solicita una extensión del plazo o un plan de pago. Sin embargo, el prestamista no tiene la obligación legal de aceptar su petición. • Por ley, deben proporcionarle el contrato del préstamo de día de pago en el idioma que usted haya utilizado principalmente para negociar con el prestamista. • Un prestamista de día de pago no puede amenazar con llevarlo a un tribunal penal por fondos insuficientes. • Además, es posible que usted tenga otro tipo de protección legal de acuerdo con las leyes de California. Si necesita ayuda o sospecha que se están violando las leyes, comuníquese al Departamento de Supervisión de Empresas. Si tiene problemas de crédito: Llame a sus acreedores y pídales perdonar los cargos por pagos atrasados, reducir la tasa de interés o trabajar con usted para establecer un calendario de pago que funcione para usted. Si tiene pagos de facturas atrasados u otros problemas de crédito, los servicios de un asesor financiero pueden serle útiles. Los asesores le ayudan a revisar su situación financiera en general y le ayudan a desarrollar un plan personalizado de manejo de dinero. Tenga en cuenta que una agencia de gestión de deudas dice ser “sin fines de lucro” esto no garantiza que los servicios sean legítimos o accesible. Una agencia acreditada debe enviarle información gratuita sin que usted tenga que proporcionar datos personales. Busque una amplia gama de servicios, que incluyan asesoría para elaborar presupuestos y clases sobre ahorros y gestión de deudas. Evite aquellas que insistan en un plan de gestión de deudas como su única opción antes de analizar su situación financiera. Visite el sitio web de la Fundación Nacional para el Asesoramiento Crediticio (National Foundation for Credit Counseling, NFCC), www.nfcc.org, o llame a la línea gratuita 1-800-388-2227 para obtener ayuda con problemas de crédito y con acreedores. Si está en riesgo de quedar en bancarrota: Las leyes federales recientes exigen que reciba asesoramiento crediticio obligatorio antes de declararse en bancarrota. Visite el sitio http:// www.consumer.ftc.gov/articles/0224-filing- bankruptcy-what-know para obtener información y ayuda acerca del asesoramiento crediticio. El Programa Fiduciario Federal del Departamento de Justicia de EE. UU. aprueba organizaciones para que proporcionen asesoramiento obligatorio antes de que usted pueda declararse en bancarrota y educación obligatoria al deudor después de que se declare en bancarrota. Visite el sitio http://www.justice.gov/ust/eo/ bapcpa/ccde/ para encontrar una organización aprobada cerca de usted. CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT LLAMADA GRATUITA 1-866-275-2677 TTY 1-800-735-2922 www.dbo.ca.gov Payday Loans in the State of California • To Get A Payday Advance You Must Have The Following: o A checking account (proof of your checking account) o Two valid forms of identification (generally a drivers’ license or ID and an utility bill) o A job or steady income (with two recent paystubs) • A payday loan is a flat fee per transaction product. o California law mandates: § Stores can charge NO more than 15% of the face amount of the check. The maximum loan of $255 plus the $45 fee equals a total of $300. § There are NO accruing interest charges and NO late fees. § It is illegal to charge any more than the initial fee. • How are payday loans regulated? o Payday loan companies are regulated by the Department of Business Oversight (DOB) and are subject to audits. o Every payday loan store is individually licensed and must abide by federal, state, county and city laws. o State law governs payday loan terms, fees, and consumer protection. • In the State of California … o The vast majority of customers pay back their loan, on time, in two weeks. o The average customer earns approximately $55,000/year and more than half own a home. o It is illegal to ‘rollover’ a loan - a customer cannot take out a new loan to pay off an existing one. o Payday loan companies are regulated by the Department of Business Oversight (DOB) and are subject to auditors by the DOB every two years • APR vs. Fee-based Product: (Federal Truth and Lending Guidelines) The industry is mandated by the federal government to display Annual Percentage Rate (APR). o Though this is only a two-week loan, if amortized (one took out this loan every two weeks for an entire year), it would amount to 391 percent. o Under California law, payday lenders are only allowed to charge a one-time upfront fee for a transaction. Compounding interest or late fees are NOT allowed. • Payday advance compares favorably to many consumer alternatives, even when expressed as annual percentage rates for two-week terms: o $100 payday advance with $15 fee is 391% APR.; o $100 bounced check with $54.87 NSF/merchant fee is 1431% APR; o $100 credit card balance with $37 late fee is 965% APR; o $100 utility bill with $46.16 late/reconnect fees is 1203% APR; o $100 off-shore Internet payday advance with $25 fee is 651.79% APR; o $29 overdraft fee on $100 is 755%. • How Do Payday Lenders Compare As Employers? o The entry-level employee makes between $10-15/hour - offering employees full medical insurance and 401k options.