When lower-income people need a source of emergency money between paychecks, many turn to payday loans: high-interest, short-term loans that can trap the borrower into an endless cycle of debt. Payday Plus SF offers the opposite: a payday loan designed to break the cycle of debt, help people build a credit history, and financially empower borrowers.

THE PROBLEM WITH PAYDAY LOANS

Because lower-income borrowers often have no other options, commercial payday lenders often take advantage. Interest rates can run as high as 400% APR, or $15 per $100 borrowed, and the loan’s terms often require repayment in full within two weeks.

This one-two punch often kicks off a vicious cycle of debt. To pay off the old loan, many borrowers take a new one – again, and again, and again. According to the Center for Responsible Lending, the typical customer repays $800 on a $300 loan.

Even worse, in the current economy, predatory lending is thriving. Volume in the US is estimated at $28 billion a year, and has grown by over 100% in the past five years.

PAYDAY PLUS SF: AN EMPOWERING ALTERNATIVE

To help lower-income residents get free of payday loans, the San Francisco Office of Financial Empowerment partnered with five San Francisco credit unions to create Payday Plus SF: a fair, community-minded payday loan program designed to carry borrowers through financial emergencies without causing a new one.

Payday Plus SF loans offer fair interest rates and realistic repayment terms. Clients can borrow up to $500 and repay it over 6 to 12 months at a maximum APR of 18%, even if they have low or no credit scores.

By borrowing through Payday Plus SF, lower-income people can build relationships with healthy financial institutions, work towards a strong credit record, and take advantage of financial education.

A final goal of the Payday Plus program is to reduce predatory lending, a goal furthered in 2005 by a zoning moratorium on new check cashers and payday lenders in low-income communities.

SUCCESSES

PREDATORY LENDING REDUCED. Since launch, Payday Plus SF has made more than 300 small dollar loans each year.

KEY PARTNERS:

PAYDAY PLUS LENDERS:

  • Community Trust (a division of Self-Help FCU)
  • Northeast Community FCU
  • Redwood Credit Union
  • San Francisco Federal Credit Union
  • Spectrum Federal Credit Union

SUPPORTERS

  • Stanford University
  • The Pew Health Group
  • Community Financial Resources

FURTHER READING:

Payday Plus Brochure (PDF)
Payday Plus SF
An Evaluation of Payday Plus SF (PDF)

Frequently Asked Questions (PDF)

WEBSITE:
www.paydayplussf.org

CONTACT:

Jacob DuMez,
Manager, Policy and Programs
Jacob.Dumez@sfgov.org