Although many states have enacted legislation to cap interest rates for pay-day loans, California has yet to. Here, predatory lenders — who target low-wage workers who struggle to cover rent, food, and services for their families — can charge more than 400% annualized interest.
It's a problem for many low-income families in Silicon Valley, and the practice can lead to a cycle of indebitude. Improving the economic well-being of low-income families in Santa Clara and San Mateo counties has been a priority of the Silicon Valley Community Foundation since 2009, and the foundation recently made a big move to tackle predatory lending in the area. (See Silicon Valley Community Foundation: Bay Area Grants).
SVCF has awarded $500,000 in grants to Silicon Valley organizations working to curb predatory lending practices and educate the community about their dangers. The grants were made available to five organizations, and they range from $26,000 to $250,000.
A $250,000 grant went to Law Foundation of Silicon Valley for the Coalition Against Payday Predators (CAPP). Formed three years ago, the coalition has been building community support for local ordinances to limit the practice. One area the organization covers is developing alternatives at credit unions in the Valley.
Last May, CAPP had a big success in San Jose, when the SJ City Council approved an ordinance that capped the number of payday lenders that could offer services in the city, and the new ordinances included rules for the density of payday loan business and the neighborhoods they could operate in.
Similar ordinances had earlier been passed in Pacifica and East Palo Alto, and last year, ordinances or moratoria were enacted in Los Altos, Menlo Park, and the counties of Santa Clara and San Mateo. The foundation's partners continue their efforts throughout the region. Since targeting payday lending in 2009, the foundation has awarded more than $2 million to organizations that advocate against the lending practice.
The Youth Leadership Institute (YLI) also received a $125,000 grant to help educate and promote youth advocacy against payday lending. The grant will help the institute develop a training curricula, as well as enhance the organization's advocacy efforts for getting an ordinance passed in Daly City.
"[The grant] will add the powerful voice of youth to anti-payday-lending advocacy efforts," a statement from the foundation said. (Read SVCF president, Emmett Carsons IP profile).