Leveraging Local Voices in Addressing Predatory Lending

By Haven Shannon, Program Associate

SCCV initiative Familas con Mas focuses on education and advocacy around predatory lending. This work was born out of the finding of our Mamas Con Mas study, a project with UCSC Blum Center. This study focused on Latina mothers' financial experiences with both traditional and alternative financial institutions. Mamas con Mas found that despite having bank accounts, many women found alternative lenders easier to access than traditional banks due to confusing fees and limited cultural competency of staff. However, the convenience of these services often comes at an interest rate as high as 459%! 

Mothers used these alternative lenders to obtain funds to pay for basic needs such as rent and emergencies. The study results shed light on the fact that a lack of financial options and education often lead vulnerable community members to fall prey to predatory loan practices. SCCV created the Familias con Mas initiative to educate community members, and advocate to address predatory lending. 

Payday lenders are predatory businesses that target low income, minority communities, and the elderly. In the city of Watsonville, where 82% of the population Latino, many residents experience barriers accessing mainstream banking services. As a result, alternative lenders such as payday loans, pawn shops and check cashing stores are perceived as easier to access. The high rates and density of these businesses is predatory on the community. 

In California, the State Legislature is expected to pass the Fair Access to Credit Act, which blocks lenders from charging more than 36% on loans of $2,500 to $10,000. While this is progress in addressing predatory lending, it does not address the small dollar amount loans that hurt consumers' pockets the hardest.  

At the local level, cities such as Gilroy and San Jose have adopted strategies to protect their residents. To explore what could be done in Watsonville, a community conversation is being planned to discuss the issue on October 15, 2019 at 9am at the Watsonville Civic Plaza Community Room with support of the City of Watsonville. The event is free and open to the public. 
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Register here!