The payday loan industry claims that its companies provide a needed service at an affordable cost. But advocates say they are preying on financially vulnerable families. Most payday loan offices in California are located in zip codes with above average poverty rates.
A weekly record number of Californians, nearly 187,000, filed initial unemployment insurance claims last week, according to the US Department of Labor.
By June, private sector job losses could reach more than 55,000, or 11-12% of jobs in the central San Joaquin Valley, according to a Sacramento Bee analysis of a recent Study by the Institute for Economic Policy.
“We are facing one of the worst unemployment crises we have ever seen,” said Adam Briones, director of economic equity at the Greenlining Institute in Oakland. “I think it goes without saying that when families are in crisis, these payday lenders are some of the easiest ways to get money fast. It’s really hard to get out of this debt though.
A new law enacted last year capped interest rates at 36% for loans between $ 2,500 and $ 10,000, but it doesn’t apply to payday lenders, only to larger lenders.
If you’ve been recently laid off and need a loan, the experts have advice on how to get help without falling into the debt trap.
Go to your bank or credit union first
If you have trouble making a payment, contact your credit institution first. Rosa Pereirra, branch manager of Self-Help Federal Credit Union in Fresno, said they allowed all of their members to skip their payments in April as they sometimes do during the holidays.
“I would urge the public to call the institution to which they already owe the payment, as a lot of them are getting into a frenzy,” Pereirra said. “We tell them, take care of yourself, stay home. I can promise you that 99% of lenders have a way to help people skip their payment.
Banks like Wells Fargo, Citi, Chase and Capital One are encourage cash-strapped customers to contact them to see what they can find. Many may offer hardship plans, which could mean lower interest rates or lower fees.
Briones, of Greenlining, said banks may not offer contingency plans, so customers should do their research first and ask for what they need. For additional resources, search for the Approved by the Ministry of Housing and Urbanism housing counselors or credit counselors from not-for-profit organizations.
Regulators are also responding to this pandemic asking big banks and community development finance institutions to start offering low-value loans. Briones said customers should apply to their banks for a small loan before resorting to a payday lender.
“Everywhere we’ve seen payday loans, they lend themselves to predatory lenders. But if these are large national banks giving small loans, there is at least a regulatory aspect. There is a structure there, ”he said. “What worries us the most are the non-bank lenders who are not federally regulated and have much less responsibility than the large national lenders.”
If lenders ask for a void check, that’s a red flag, according to Self-Help Federal Credit Union’s Pereirra. “Most banks and credit unions can do direct deposit. A lot of predatory lenders are going ahead and wanting access to your account. With a check, they have the routing number and the account number so they can try to withdraw it multiple times.
Pereirra said small loans should generally range from 2.5% to 10%. If a rate exceeds 20%, she encouraged consumers to approach a credit union for refinancing assistance.
“I just saw one at 480% APR,” Pereirra said. “Often times, we are able to pay off their high rate loans. The Consumer Financial Protection Bureau also created several guides on navigating loans and debts.
Coronavirus help available
President Trump signed a $ 2 trillion coronavirus stimulus bill Friday with significant relief for families and small businesses. Individuals who have filed their 2018 or 2019 income tax returns can receive a check for up to $ 1,200, plus $ 500 for each child. You can calculate how much you get here.
For many, advocates say, this will not be enough to cover rent or other expenses.
“We are really worried because we believe that for an economic stimulus package to have an impact, these funds must be coherent. We believe families will need 12 to 24 months of payments to get out of these economic fallout, ”said Briones.
For now, however, this payment is a one-time deal.
The stimulus also includes $ 10,000 injury relief loans through the Small Business Administration to provide paid sick leave to employees, maintain payroll, and make rent payments or mortgage. You can apply through SBA.
“This is a historic decision on the part of the SBA,” said Tara Lynn Gray, president of the Fresno Metro Black Chamber of Commerce. “You can apply for the loan without a response yet and get $ 10,000 within three days. If you don’t qualify, they won’t come after you for $ 10,000. This is unheard of for small businesses. And SBA loans are very difficult for us to obtain. Most people of color struggle tremendously to get these loans.