Outside a payday loan store on Market Street in San Francisco, we met a man named John, who didn't want to show his face. He says he's a first-time customer there, "The holiday season, I overspent a little bit too much money and I had to take care of some bills with this."
For a hundred dollar loan, he'll pay $17 in finance charges two weeks from now. It works out to an annual percentage rate of over 400 percent. Believe it or not -- that's legal for payday loans. But for bigger loans that take a few months to pay off -- it's not.
"You're limited 36 percent APR," said San Francisco City Attorney Dennis Herrera. "Anybody who's doing 400 percent APR is violating the law."
However, Herrera says he caught Check 'n Go doing just that. Not with the loans it offers in stores, but with similar loans it sold online.
"They partnered with an out of state bank to say we are now only subject to federal legislation, not state limits," Herrera said. "And then they charged annual APR of 400 percent."
The city attorney sued and Check 'n Go settled, meaning they'll now have to pay back the excess interest to customers. The payday lender has committed $4.3 million for refunds for eligible borrowers.
A Check 'n Go spokesperson says though they've admitted no wrongdoing, they've ended that bank partnership and they're cooperating with the settlement. But now, customers only have 90 days to claim their money.
Herrera's office launched a viral video about a similar settlement a few months ago, with Money Mart. As for the Check 'n Go settlement, Herrera said, "I'm not gonna tell you our marketing secrets."
As local leaders work to get the word out about the settlement, they're also working to get the word out about a city-backed alternative to payday loans, one they say could get you much lower interest rates if you qualify.
"A loan between 50 dollars and 500 dollars and with an interest rate of no more than 18 percent APR," said Marco Chavarin with the San Francisco Treasurer's Office.
Called PayDay Plus SF, it's a partnership with credit unions for people who live, work, or worship in San Francisco.
Check 'n Go's spokesperson points out it won't take the place of those larger loans. But for folks like John, he says, "If it pays lower interest than this place does, of course it'd be better, it'd be better for everybody."
Information about Check 'n Go's settlement can be found here.