Campbell: City considering new rules for payday lending and check cashing businesses in city

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Campbell officials are looking to clamp down on check cashing and payday lending businesses in the city.

The planning commission on Oct. 27 unanimously voted to recommend to the city council a proposal that would change city zoning to limit where in the city the businesses could be located as well as various new rules for storefront aesthetics and operating hours.

The city council is set to review the recommendation on Nov. 17.

The revamped ordinance could restrict check cashing and payday lending services within five specified “general commercial” zoned areas within the city. The commission is recommending that the businesses be permitted to operate only in general commercial areas and away from low-income neighborhoods.

“In creating the proposed ordinance, the staff’s approach was to still allow payday lending and check cashing businesses, but in certain location under certain conditions,” said Naz Pouya, a city project planner.

In addition, the commission is recommending the council require such businesses to be located at least 500 feet from liquor stores. One of the six existing businesses is located within a liquor store.

There are currently six check cashing and payday loan businesses in Campbell. Five of the six businesses offer check cashing, with three businesses also providing payday lending services. Two establishments offer just check cashing, and one provides just payday loans.

The commissioned recommended that only three establishments should operate in the city within the proposed areas. Those areas include: West Hamilton Avenue west of the San Tomas Expressway; East Hamilton Avenue east of South Winchester Boulevard; South Bascom Avenue north of Dry Creek Road; Camden and South Bascom avenues south of Camden Avenue; and South Winchester Boulevard south of Sunnyoaks Avenue.

According to the Oct. 27 city staff report, the area between San Tomas Expressway and South Winchester Boulevard is recognized as a predominantly low-income neighborhood even though the city as a whole is considered a high-income community.

If the council approves the recommendation, establishments would also have to adhere to operation hours of 7 a.m. to 7 p.m. The same hours are required in the cities of Sunnyvale and East Palo Alto. Signage promoting check cashing and payday lending would also be limited to no more than 10 percent of storefront doors and windows. The decrease in signage would allow police officers a better view inside the businesses when on patrol and reduce the possibility of luring additional customers.

Security bars on doors and windows would also be prohibited as the additions are “found to negatively impact the aesthetics of storefronts and buildings, as well as the surrounding neighborhood,” according to the staff report.

The city is considering amending its current ordinance to address what the city is saying are “social and safety concerns” associated with such businesses. Earlier in the year the city council made payday lending issues a priority in an effort to prevent the city’s most financially vulnerable residents from an endless cycle of loans.

Payday loans usually have 14-day terms; the borrower provides a post-dated check for the amount of the loan plus the lender’s fees. The borrower immediately receives cash, and the check is cashed on the borrower’s next payday unless the loan is paid back. Under state law, $300 is the maximum loan amount with a maximum fee of 15 percent of the loan for a maximum of 31 days. The fees work out to a higher interest rate than most credit cards, according to city staff.

Payday lenders tend to operate in low-income neighborhoods, promoting a borrowing cycle for those who have a chronic income shortage, according to Kyra Kazantzis, who spoke at the Oct. 27 meeting as a representative for the Law Foundation of Silicon Valley. The foundation is also part of the Coalition Against Payday Predators.

These businesses are “designed so people have to take loan after loan,” Kazantzis told the planning commission.

Campbell police representatives told the commission that the supply of cash at these businesses make them targets for crime, although there hasn’t been a robbery at a payday lender or check cashing business in the city in the last two years. Campbell police also noted that alarm activations and theft-related incidents are more common at these types of businesses.

If approved by council, the zoning changes would go into effect in two years. The six existing businesses must then apply for a conditional use permit with the city and relocate if they are not already in one of the designated five areas in the city.

“I couldn’t close down my business and relocate within two years without severe economic loss,” said Paul Soter, who spoke to the commission Oct. 27 on behalf of one of the current businesses.

Business owners could be granted an extension to continue operating while seeking a new location, according to city staff.

Planning Commissioner Yvonne Kendall said she would like to see payday lending business prohibited in the city in the future. She added that the 39 businesses located in San Jose were enough for Campbell residents to use.

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