Payday lenders busted by San Francisco City Attorney for excessive interest charges: You may be eligible for a settlement

by on August 23, 2012 · 2 comments

in Activism

by Jim Bliesner

City Attorney Dennis Herrera was joined at a news conference today by City Treasurer José Cisneros, San Francisco Labor Council Executive Director Tim Paulson,and S.F. Interfaith Council Executive Director Michael Pappas to highlight the upcoming final 60-day mark of the City’s statewide push to locate consumers who may be eligible for restitution from Money Mart and Loan Mart in amounts ranging from between $20 to $1,800. Victims of the payday lenders ‘predatory lending schemes were also on hand to speak to the news media about their own experiences.

The restitution outreach program is among the terms of an agreement Herrera’s office negotiated to settle his office’s 2007 consumer protection lawsuit against payday lenders Money Mart and Loan Mart and an affiliated out-of-state bank for unfair and fraudulent business practices. The alleged wrongdoing stemmed from the lenders’ marketing of short-term installment loans and oversized payday loans, usually targeted to low-income borrowers, at exorbitant and illegal interest rates. While the settlement requires the lenders to engage an independent administrator to make “reasonable efforts” to contact all eligible claimants, Herrera’s office is authorized to undertake additional outreach efforts in advance of the Oct. 1, 2012 deadline to reach all potential claimants who may have moved, or who may have dismissed or misunderstood letters from the restitution administrator.

California consumers who obtained short-term installment loans from Money Mart and Loan Mart from2005 through 2007, and oversized payday loans from Money Mart and Loan Mart in 2005, may be eligible for restitution of most of the interest, fees and finance charges they paid.

Potential claimants can learn more by:

  •  Visiting the San Francisco CityAttorney’s website to complete a claim form.
  •  Calling the City Attorney’s Money Mart Settlement Hotline at (866) 497-5497
  •  Emailing further inquiries to: MoneyMartSettlement@sfgov.org

Also under terms of the settlement agreement, Money Mart and Loan Mart are required to forgive $8 million in other debt owed by California consumers. In addition, the company will pay the City and County of San Francisco $875,000.

San Francisco Treasurer José Cisneros is an acknowledged national leader in creating model programs to empower consumers who are most often targeted by predatory lending practices. Three groundbreaking programs in particular, both run by Cisneros’s Office of Financial Empowerment, have shown great success in removing institutional barriers that can trap low- and moderate-income borrowers in a cycle of debt to payday lenders: Payday Plus SF, Bank on San Francisco, and CurrenC SF. Payday Plus SF is a City partnership with a number of San Francisco Credit Unions that offers borrowers alternative short term, small-dollar loans of between $50 and $500 at 18 percent APR or below, which are repayable over six to 12 months. Loans are available to borrowers with low or no credit, and can help build a positive credit score.

Bank on San Francisco is a comprehensive partnership between the City, the Federal Reserve Bank of San Francisco, the nonprofit EARN, and more than a dozen financial institutions to offer accessible, entry-level checking account products and mainstream banking services for the estimated 15 percent of San Franciscans who lack a mainstream banking relationship. CurrenC SF is a citywide initiative with the goal of achieving a fully electronic paperless payday, helping to bring thousands of San Francisco households into the financial mainstream and reducing reliance on high-cost check cashing services. More information is available on the San Francisco Office of Financial Empowerment’s website at sfofe.org.

The litigation involving the Money Mart/Loan Mart

Now come back to the San Diego reality.

Money Mart/Loan Mart have stores throughout San Diego County. They all charge the same rates as the stores in San Francisco. They did during 2005. The San Diego City Council Public Safety and Neighborhood Services Committee was asked to investigate the excessive interest rates being charged by these same lenders.  A request was also made to limit the frequency of the payday lender stores in low income communities duplicating an ordinance that was in place in National City and Oceanside. The item was referred to the mayor’s office and has never been heard from since.  In response, the Mayor’s office has responded that the staff lacks the time and resources needed to investigate and report back to the City Council.

avatar Anna Daniels August 23, 2012 at 9:14 am

Jim- the final section of your article “Now come back the San Diego reality” is where the rubber hits the road. City Heights has lots of payday lenders. Will they be required to prominently post in clear language the details about the settlement to customers? (And the clear language needs to be in multiple languages.)
So this issue disappeared in the stinking black hole of strong mayor Jerry Sanders’ office? This site- the San Diego Free Press- needs some articles that critique Sanders putrid legacy. Those critiques will serve two purposes- citizens need to know what they got for voting for the strong mayor form of government, and they need to evaluate Filner and DeMaio on the degree to which they will continue that legacy.

avatar Jim Bliesner August 23, 2012 at 12:19 pm

These predatory lenders are licensed by the state. However, cities have discretion over how many and where they locate. Coincidentally they tend to be in low income communities for reasons of “need”. Its like liquor stores offering shopping assistance to people on food stamps.
Buyer beware!

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