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Home My WebLink About2015-11-04 e-packet@6:01 SPECIAL MEETING S k 1,,, 11 CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO IFO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 Meeting to be held at: CITY HALL CONFERENCE ROOM 400 GRAND AVENUE SOUTH SAN FRANCISCO, CA WEDNESDAY,NOVEMBER 4, 2015 6:01 P.M. NOTICE IS HEREBY GIVEN,pursuant to Section 54956 of the Government Code of the State of California, the City Council of the City of South San Francisco will hold a Special Meeting on Wednesday,the 4"'day of November,2015,at 6:01 P.M.,in the City Hall Conference Room,400 Grand Avenue, South San Francisco, California. Purpose of the meeting. 1. Call to Order. 2. Roll Call. 3. Public Comments—comments are limited to items on the Special Meeting Agenda. 4. Agenda Review. 5. Approval of a Resolution by the Youth Leadership Institute requesting that the Federal Consumer Financial Protection Bureau (CFPB), the United States Congress, and the California State Legislature take action to protect consumers from unfair payday lending practices. (Tony Rozzi, Senior Planner). ADJOURNMENT Deputy qty Clerl e-x Staff Report DATE: November 4, 2015 TO: Mayor, Vice Mayor, and Councilmembers FROM: Alex Greenwood, Director of Economic and Community Development SUBJECT: APPROVAL OF A RESOLUTION BY THE YOUTH LEADERSHIP INSTITUTE REQUESTING THAT THE FEDERAL CONSUMER FINANCIAL PROTECTION BUREAU (CFPB), THE UNITED STATES CONGRESS, AND THE CALIFORNIA STATE LEGISLATURE TAKE ACTION TO PROTECT CONSUMERS FROM UNFAIR PAYDAY LENDERS RECOMMENDATION It is recommended that the City Council approve the draft resolution proposed by the Youth Leadership Institute to request the Federal Consumer Financial Protection Bureau, the United Stated Congress, and the California State Legislature to take action to protect consumers from unfair payday lenders. BACKGROUND Representatives from the Youth Leadership Institute (YLI) have spoken during public comments at City Council meetings recently to request that the City Council take actions to protect consumers from unfair payday lenders. For the Council and community's background, the YLI has been active in promoting youth development for over 20 years, working to build communities that invest in youth. From their website, ham://www.yli.or /aa. t, "YLI's youth-led engagement strategies include: • Adopting healthier community policy through civic engagement • Addressing and changing negative social norms • Abating predatory media messaging • Establishing better access to healthy choices." These strategies are consistent with the goals the Council has endorsed. Among YLI's sponsors are the Lucille Packard Foundation, Kaiser Permanente, County of San Mateo, and the Audubon Society. STAFF REPORT SUBJECT: YLI Resolution Request DATE: November 4, 2015 Page 2 of 3 DISCUSSION The City Council recognizes the need to regulate payday lending and check cashing operations within the City, and adopted regulations to restrict the location and operations in October, 2014. The City Council cited an overconcentration of potentially predatory lending businesses, particularly in the Downtown area, as support for the zoning ordinance amendment. At the time of adoption, there were four (4) businesses operating as "Alternative Loan Businesses", including: • SSF Check Cashing—309 Linden Avenue • J&J Check Cashing—220 Cypress Avenue • Dolex Dollar Express —609 Linden Avenue • Fast Money—947 El Camino Real The new regulations limit "Other Financial Services", which includes Alternative Loan Businesses such as check cashers and payday lenders from locating in the downtown area. They must be located on a major arterial such as El Camino Real or Airport Boulevard, can be no larger than 2,500 square feet, and cannot be located within 1,000 feet of any other financial services business. Since adoption of the regulations, no new Alternative Loan Businesses have opened within the City. Several have inquired about vacant locations in the downtown area, but have been prohibited by the zoning ordinance. Furthermore, Dolex Dollar Express at 609 Linden Avenue has closed, reducing the overall concentration within downtown. To date, the regulations are working effectively and the adopted performance standards have been sufficient to meet Council goals. City staff has met with the Youth Leadership Institute (YLI), to update them on the success of the City's new policies. Concurrently, YLI has been lobbying both the state and federal regulators to tighten payday lending rules and has requested that the City Council adopt a resolution to support their efforts. Student representatives from YLI plan to attend the City Council hearing to share their progress. Staff recommends Council approve the attached Resolution, which urges the Federal Consumer Financial Protection Bureau, Congress and State Legislature to adopt the following provisions, as those entities have the regulatory authority over the terms of payday lending; 1. Require a payday lender to determine the borrower's ability to repay the loan, including consideration of income and expenses; 2. Not support the issuance of any series of repeat loans or provide any safe harbor of poorly underwritten loans; Staff Report Subject: YLI Resolution Request Date: November 4, 2015 Page 3 of 3 1 Establish an outer limit on length of indebtedness that is at least as short as the Federal Deposit Insurance Corporation's (FDIC) 2005 guidelines — 90 days in a twelve-month period; ® Restrict lenders from requiring a post-dated check or electronic access to a borrower's checking account as a condition of extending credit; and 5. Limit the annualized percentage interest rates of the loans to 36% or less, consistent with the limits that Congress has authorized for loans to military personnel. CONCLUSION Staff recommends that the City Council approve the resolution submitted by the YLI to support efforts to restrict unfair payday lending activities in California with assistance of the Federal and State legislatures. By: App rove*d: Alex Greenwood Mike Futrel Director of Economic and City Manager Community Development Attachment: 1. Draft Resolution 2529939.1 RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO STATE OF CALIFORNIA A RESOLUTION REQUESTING THAT THE FEDERAL CONSUMER FINANCIAL PROTECTION BUREAU (CFPB), THE UNITED STATES CONGRESS, AND THE CALIFORNIA STATE LEGISLATURE TAKE ACTION TO PROTECT CONSUMERS FROM UNFAIR PAYDAY LENDERS. WHEREAS, according to the Department of Business Oversight and the Center for Responsible Lending, in the state of California there are over 2,000 of these high-cost payday lending storefronts, making over $3 billion in triple-digit interest rate loans to Californian families each year, and draining over $578 million in payday loan fees every year from our communities; and WHEREAS, according to the Insight Center for Community Economic Development,the hundreds of millions of dollars paid in payday loan fees is draining economic resources from our communities and leading to a net loss of$135 million in economic activity and loss of 1,975 jobs in the state; and WHEREAS, despite adopted City Council regulations that control the size,location, security requirements, and hours of operation for these uses, current state and federal laws still govern loan terms for consumers which remain high and potentially trap users in a cycle of high-cost debt; and WHEREAS,nationwide,the Consumer Financial Protection Bureau(CFPB) found that during a 12- month period,borrowers took out a median of 10 loans, and more than 80% of loans were rolled over or renewed within two weeks; and WHEREAS,the CFPB found that borrowers who take out 11 or more loans each year account for roughly 75 percent of the fees generated; and WHEREAS, data from the California Department of Business Oversight indicates that more than 75% of payday loan fees in CA are paid by borrowers taking out 7 or more loans per year, and 60% of fees are from those with 10 or more per year; and WHEREAS, 15 states including the District of Columbia have adopted a 36% or lower annual percentage rate cap for these small loans and the federal government has adopted a similar rate cap for payday and auto title loans to the military based on a Department of Defense finding that these loans, "undermine military readiness, harm the morale of troops and their families, and add to the cost of fielding an all-volunteer fighting force."; and WHEREAS, action is needed at the federal and state levels to enforce fair consumer lending standards in California. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francsico supports the Consumer Financial Protection Bureau(CFPB),the United States Congress and the California State Legislature to consider taking action such as the following,which have been supported nationwide by groups such as the National Association for the Advancement of Colored People (NAACP) that will: 1. Require a payday lender to determine the borrower's ability to repay the loan, including consideration of income and expenses; 2. Not support the issuance of any series of repeat loans or provide any safe harbor of poorly underwritten loans; 3. Establish an outer limit on length of indebtedness that is at least as short as the Federal Deposit Insurance Corporation's (FDIC)2005 guidelines —90 days in a twelve-month period; 4. Restrict lenders from requiring a post-dated check or electronic access to a borrower's checking account as a condition of extending credit; and 5. Limit the annualized percentage interest rates of the loans to 36% or less, consistent with the limits that Congress has authorized for loans to military personnel. I hereby certify that the foregoing resolution was adopted by the City Council of the City of South San Francisco at a special meeting held on the 41' day of November, 2015 by the following vote: AYES: NOES: ABSTENTIONS: ABSENT: Attest: Krista Martinelli, City Clerk 2529950.1