State Sen. Noreen Evans says that in her 10 years as a Sacramento lawmaker, "the biggest part of what I have done is to kill bad bills."
There have been a lot of them.
But one stands as a sort of benchmark for Evans, whose 2nd District seat comprises much of the North Bay: Assembly Bill 1158 from 2011, which would have lifted a $300 state cap on individual "payday loans"—one of few restrictions placed on a financial-services lobby that holds sway among Sacramento lawmakers.
The bill from retired Assemblyman Charles Calderon (D-Los Angeles), would have let an individual borrow up to $1,000 against a future paycheck, in an attempt to expand small-dollar loan opportunities for people of limited means—while also pleasing a lobby that's poured more than $16,000 into Calderon's campaigns.
The fight over 1158, Evans says, was "basically hand to hand combat. I killed it several times," she says, before the bill was finally brought to heel in the Senate judiciary committee.
That fight was emblematic. California is one of 32 states that have allowed the proliferation of payday lenders over the past two decades. Others, like New York, have had longstanding bans on the controversial lending practice.
Payday lenders are a popular borrowing option for people of lesser means without access to credit. And the deal looks good, at least on paper: The lenders offer small-dollar loans meant to be paid off in weeks, for a fee ($15 for every $100 loaned under California law).
But the repayment often drags out for months, and the loans are frequently re-upped as soon as they're paid off. And then there's the small print: Outsized service charges and interest-rate spikes along they way, if the borrower happens to miss a payment.
The state has struggled to enact any limits on payday lenders beyond what's already on the books, says Evans. Since payday lending became legal in California in 1996, the industry has been on hand at every turn to stymie reform, and has relentlessly called for greater lending limits than allowed under California law.
It's a stalemate, and state efforts to reform the industry have been an "epic fail," says Liana Molina, an organizer on payday reform with the California Reinvestment Coalition.
One problem: Compliant politicians whose pockets have been lined with payday-loan cash.
Online records show that Calderon is among the top ten recipients of payday lender campaign contributions. He accepted $16,100 from the industry between 2009 and 2012, according to data assembled by the watchdogs at Maplight.org.
There are hundreds of payday lenders spread around the state, with high concentrations in urban areas with significant Latino populations.
The low-dollar lenders are also online, an unregulated market described as the "Wild West of the Internet" by Evans, where there are underwriting regulations or limits of up to $1,000—and late fees and fines deducted from your checking account if you miss a payment.
Even the most seemingly common-sense-level reforms have failed in Sacramento. For example, the state says you can't borrow money off a future paycheck more than once at a given payday lender.
What it doesn't say is that you can't just go to another payday lender and get another loan. And another. And another.
"There is widespread recognition that this financial product can create problems for consumers, especially those living paycheck to paycheck," says Molina.
"Folks that are willing to talk about the payday lender will often say, 'I love the payday lender, I love that they are here, I got what I came for, I got what I needed," she adds. "But there's a hate relationship when they are in that cycle, because it is hard to get out of it. That's when they say things like: 'I wish I had more time to pay it off. I wish it cost less.'"
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"There is a legitimate need for small dollar loans and small-dollar credit," Molina argues, "but the payday model doesn't meet the consumers' need. It is debt slavery."
Molina shares the experience of a Californian named Michael, whose dalliance with payday loans shows how a product advertised as a short-term emergency infusion can create financial havoc.
Michael is on disability and gets government checks every month. He was getting advances on his government checks from a half-dozen payday lenders on each check by the time he met with Molina's organization, about six months ago.
He was living on a meager income from Social Security and disability, about $12,000 a year, and every month would have to get on a bus to pay off his six payday lenders. "It was his day of personal hell," Molina says.
In spite of her opposition to its "predatory lending" practices, Sen. Evans also received campaign funds from payday lenders in recent years.
"I am generally known as not supportive of the industry," Evans says. "I have not been their favorite person for quite a while."
In the past several years, she says, "I have really taken on the payday lending industry."
Records at Maplight.org, an online site that tracks money's influence on politics—and which uses data compiled by the National Institute on Money in State Politics—show that Evans accepted $7,500 from the industry between 2008 and 2012.
Each of the contributors has set up shop in her district. The contributions include:
The Ohio-based Check 'n Go donated $3,000 to Evans in separate contributions made in 2008 and 2010. They've got a brick-and- mortar operation in Santa Rosa.
Advance America Check Advance, based in South Carolina, donated $1,000 to Evans in 2011. They've set up shop in Santa Rosa and around the state.
Check into Cash of California, based in Tennessee, donated $3,500 to Evans between 2008 and 2012. They've got outlets in Windsor and Petaluma.
Evans says her constituents expect her to raise money for her campaigns—but also expect that she'll put the public interest before those of her corporate contributors. She's adamant that she has done just that—even if there was a learning curve, of sorts, on the payday loan issue.
"I definitely did learn a lot more about the payday lending industry," Evans says, "and there came a time in 2011, [when] the industry made a big push to expand predatory lending practices."
"I have also taken contributions from banks," she notes, "but I also wrote the Homeowners Bill of Rights."
Molina cautions against looking too closely at contributions as a bellwether of support for the industry.
"Money in politics is a big issue beyond payday lenders," she says. "If everyone is taking money, yeah, they should stop. But, it's more about how are you protecting your constituents from egregious financial predatory entities?"
The state as a whole, she says, has failed when it comes to meaningful payday-loan reform.
The situation the hapless Michael found himself in would seem a problem in search of an easy fix: A regulation that says you can only take out one loan of up to $300 per paycheck.
"We tried for years to get that to happen," Evans says. "We tried to set up a comprehensive database so that the state could track where they get these payday loans, but there isn't any support in the legislature."
The North Bay has payday lenders all over the map—in Rohnert Park, San Rafael, and other operators in Santa Rosa beyond those mentioned above. Wells Fargo and U.S. Bank are also in the payday-loan business.
The North Bay is well-represented by various payday lenders, but San Diego, Sacramento, Fresno and Los Angeles, according to the California Reinvestment Coalition, "have the highest numbers of payday lenders in the state."
Many operate as a multi-function financial services center for poor and marginal folks, people who don't have bank accounts, undocumented immigrant workers and others.
Some municipalities have taken steps through zoning to rein in or otherwise "shame-zone" their payday lenders.
In San Francisco, for example, payday lenders are described as "fringe financial services" and the city limits areas where they can set up shop.
In Windsor, lawmakers reined in the industry, symbolically, through zoning regulations designed to cluster other sorts of "non-Shoppe" businesses—pawnshops, tattoo parlors—into one area with the lenders, out of view of the monied class.
The California Reinvestment Coalition was among a group of advocacy groups from around the country that fielded a 2013 report on the payday loan industry. It notes that the industry's predation on the poor has played out on geographic lines.
The report identifies "a regional divide among legislators, with San Francisco Bay Area and northern California members more often voting in support of proposals to rein in the payday loan industry, and those from the greater Los Angeles region siding with the trade associations and payday loan corporations."
That plays out in campaign contributions: The top recipients generally represent areas where the payday industry has proliferated.
The basic set of rules for payday lenders is that the fee paid to the lender is capped at $15 per $100 lent, and the borrower is typically give two weeks—until the next paycheck—to pay back the loan.
The rules feed a convenient myth that the loans are usually used for short-term emergencies. Many people don't pay the loan back in two weeks, Molina says.
"They are advertised as for a short-term emergency, but that is very, very far from the actual truth," Molina says.
"People get into a cycle, and there's pretty solid evidence at this point that people take out 8 to 10 loans in a cycle, and that's because if you don't have the money today for necessities or medical bills, it's very unlikely you will have the money in two weeks," she says.
The payday lender is also first-up for getting paid when the paycheck hits, which creates a downward spiral for borrowers who find that they have to pay off the lender before the landlord.
The lender will either have a post-dated check on hand, or, more typically, will have access to the borrower's checking account.
"They are going to get paid first," says Molina, "before the rent or anyone else."
At that point, the debt-multiplier sets in: The payday lender got paid, but the landlord didn't. Now what?
All too often, says Molina, it means another loan from another payday lender, as in Michael's case.
Or, borrowers are increasingly going online to an emergent online industry that's emerged with looser lending limits.
Those lenders have been getting a looking over from the U.S. Department of Justice, but Evans says not to expect much of it.
Later this year, the Federal Consumer Protection Board is expected to issue new proposed guidelines for the payday-loan industry, subject to congressional approval.
"I think it would be nice," Evans says. "I'm not holding my breath, though, because nothing productive comes out of this Congress."
Molina hopes new federal rules will kick-start meaningful reform in California, which, she says, should start with limits on a now-unregulated annual percentage rate (APR), which can double or triple a loan in short order (and which kick in if you've missed a payment).
Even as it fails on the payday-loan front, the state has made strides to open credit to those of lesser means and lower credit ratings.
Those efforts come from some of the same lawmakers who have accepted thousands from the payday industry lobby in recent years.
For example, according to online records, Sen. Lou Correa (D-Santa Ana), is 10th on the list of state Senate recipients of payday lender cash in recent years ($14,700) but he's also author of the latest in a series of bills from the last few legislative sessions designed to make it easier for people to borrow—especially in the range between $300 and $2,500.
That range is a black hole for borrowers of limited means. In short: California's underwriting rules make loans in that range unappealing to banks or other licensed lenders—especially if the borrower is of limited means or has a sketchy credit report.
"A lot of the banking institutions don't want to provide the short-term loans," says Evans. Under Correa's bill, non-profits can now underwrite loans in that range.
In an email, Correa says his law "provides needed flexibility to non-profits that are offering a bridge to Californians whose incomes or credit scores have limited their access to affordable financial products."
For customers who now rely on payday lenders, the new Correa law might be of some help—even if there's no payday lender reform in it, or anywhere on the legislative horizon for that matter.
"It's been a long struggle just to maintain the current protections," says Evans.