San Francisco Mayor Gavin Newsom unveils the Payday Plus SF program at the Mission Neigborhood Center on December 17, 2009. The program is meant to offer an affordable alternative to payday lending for low-income earners.

This report is part of a series called Quick Cash, Quicksand looking at Payday loan lending in the Mission District.

In a challenge to the payday loan industry, San Francisco unveiled a new micro-lending program with six local credit unions today, meant to offer a more affordable alternative for quick cash to low-income people.

Payday loan lenders often require repayment in two weeks at an interest rate that can add up to over 400 percent annually, according to the Center for Responsible Lending.

Payday Plus SF offers an alternative. The loans range from $50 to $500, at a maximum annual percentage rate of 18 percent, and can be paid off in 12 months.

The program was unveiled today at a press conference attended by District 9 Supervisor David Campos, Mayor Gavin Newsom, City Treasurer Jose Cisneros and Congresswoman Jackie Speier.

“As mayor I want to get rid of them,” Newsom said, referring to the payday lenders, but acknowledging the need for quick cash to meet unexpected expenses, “they need to exist in the absence of an alternative.”

While the city cannot shut down payday lenders, Cisnersos said this program is intended to provide just that alternative, to help families “get out of the debt cycle” and “provide access to healthy financial institutions.

Payday Plus SF will give loans  at a “non-predatory rate” of 18 percent maximum interest – something that both Newsom and Campos, in a rare moment of agreement between the two, indicated that they would like to decrease further.

At a payday lender, state laws allow $15 per $100 to be deducted as fees, for a maximum loan of $255, which costs $300 with fees. Representative Jackie Speier, who serves the 12th Congressional District (San Francisco and the peninsula), spoke of attempts to cap interest rates in California at 36%, a goal already attained in 14 states.

Despite the high cost, part of the appeal of payday loans and check cashers is their ubiquity and convenience – with more than 2,400 locations, there are more payday loan lenders in California than McDonald’s and Starbucks combined, carrying out 10 million transactions a year, according to Anne Stuhldreher, Fellow with the California Asset Building Program of the New America Foundation, which helped to develop the program.

Previously, New America also helped conceive the “Bank on San Francisco” program, which helps families open their first bank accounts.

The six participating credit unions have 13 locations throughout the city. Acknowledging that they can’t mandate involvement in the plan, city officials said their goal is community outreach and organizing more credit unions to jump on the bandwagon.

Of these, only one, the Mission SF Federal Credit Union, is in the Mission District, on Mission Street between Valencia and 29th Streets.

To receive a loan, an individual needs an ID and proof of residency and income source, according to Steven Stapp, president and CEO of the San Francisco Federal Credit Union. Depending on the credit union’s policies, loans can either be received on the spot or within a couple of days.

There is also another limitation – residents can only take out three loans per year, and can have only one outstanding loan at a time.

Armand Emamdjomeh

Armand is a photojournalism and multimedia student at the UC Berkeley Graduate School of Journalism, and is originally from Baton Rouge, La. His work history includes being a paper pusher in Los Angeles...

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