By Flickr user Taber Andrew Bain (Creative Commons license)
Once again, San Francisco is lending a helping hand to its hardworking residents. On Thursday, Mayor Gavin Newsom and City Treasurer Jose Cisneros will launch Payday Plus SF, a low cost emergency loan program as an alternative to the city’s many payday lenders.
The program is the natural result of adding a dense concentration of highly-motivated asset building advocates to a dense concentration of high-interest payday lenders. And in contrast to some payday loans, its numbers make sense.
Start with the typical payday loan product- a small cash advance of, say, $200. PaydayPlus SF subtracts the 459% APR, the two week repayment period, and therefore the almost universal “roll-over” that results from the inability to repay in full. However, it saves the benefits of the payday lending model: the neighborhood locations and the quick access to emergency cash. It then adds in a maximum APR of 18% for those loans (comparable with what some people with good credit scores are now paying on their credit cards), plus repayment periods as long as a year, the opportunity to consolidate loans, and financial education. This all adds up to improved credit, perhaps the greatest long term benefit of such a program.
PayDayPlus SF has already garnered positive buzz in advance of its press conference launch and New America Foundation-hosted community discussion this Thursday (want to attend? Click here) in the city’s Mission District:
The SF Citizen calls this numbers game a no-brainer: “Does the Money Mart at 7th and Market actually charge more than 400% interest when it gives you a payday loan? No se, but I’m betting you’ll get much better terms from PDP SF.”
The neighborhood blog Mission Mission notes that something positive is actually happening on Capp Street (which incidentally is surrounded by payday lenders) and calls upon area residents to join the conversation.
Activist news organization Mother Jones reports that while North Carolina and Washington, D.C. outlawed the payday loan industry in 2006 and 2007, the practice is still going strong in California. With PaydayPlusSF, San Francisco is the first city in the country “with a program designed to bring disenfranchised residents into the financial main stream."
Turns out that the old payday loan model perhaps just needed a little addition and subtraction to become a true tool to the working poor.
