As millions of Americans lose jobs, shifts and other sources of income during the coronavirus health crisis, financial experts fear that people may fall prey to the loan sharks who profit.

“We saw this during the foreclosure crisis, where people were in distress and the crooks took the opportunity to promise to help people connect for help for an amount they couldn’t afford,” said Kevin Stein, deputy director of the California Coalition for Reinvestment, a San Francisco-based nonprofit that advocates for consumer protection.

In 2018, there were 133 payday lenders in the central San Joaquin Valley, according to California records. But there were nearly 198 ten years earlier, when the valley began to feel the effects of the 2008 recession and soaring unemployment.

Across the state of California, 1,645 approved websites offer payday loans, according to the Department of Business Oversight, and the number has declined by a quarter over the past decade.

Payday lenders in California under state law can lend up to $ 300 and charge a maximum of $ 45 in fees, depending on the Department of Business Supervision. The average annual percentage rate (APR) for payday loans in the state was 376% last year, which is exponentially higher than the APR for most credit cards.

The payday loan industry claims that its companies provide a needed service at an affordable cost. But advocates say they are preying on financially vulnerable families. MMost payday loan offices in California are located in zip codes with above average poverty rates.

A weekly record number of Californians, nearly 187,000, filed an initial claim for unemployment insurance last week, according to the US Department of Labor.

By June, private sector job losses could climb to more than 55,000, or 11% to 12% of employment in the central San Joaquin Valley, according to a recent analysis by Sacramento Bee Study by the Institute for Economic Policy.

“We are facing one of the worst unemployment crises we have ever seen,” said Adam Briones, director of economic equity at the Greenlining Institute in Oakland. “I think it goes without saying that when families are in crisis, these payday lenders are some of the easiest ways to get money fast. However, it is really difficult to get out of this debt.

A new law enacted last year capped interest rates at 36% for loans of $ 2,500 to $ 10,000, but it doesn’t apply to payday lenders, only to large lenders.

If you’ve recently been laid off and need a loan, experts advise you on how to get help without falling into the debt trap.

Go to your bank or credit union first

If you have trouble making a payment, contact your credit institution first. Rosa Pereirra, manager of the Self-Help Federal Credit Union branch in Fresno, said she allowed all of its members to skip their payments in April, as they sometimes do during the holidays.

“I would urge the public to call the institution they already owe the payment to, as a lot of them are getting frantic,” Pereirra said. “We tell them: take care of yourself, stay home. I can promise you that 99% of lenders can help people skip their payment. “

Banks like Wells Fargo, Citi, Chase and Capital One are encourage cash-strapped customers to contact them to see what they can do. Many may offer hardship plans, which could mean lower interest rates or lower fees.

Briones, of Greenlining, said banks may not come up with hardship plans out of the blue, so customers should do their research first and ask for what they need. For additional resources, search housing counselors approved by the Ministry of Housing and Urban Development or credit counselors from non-profit organizations.

Regulators are also responding to this pandemic asking big banks and community development finance institutions to start offering low-value loans. Briones said customers should apply for a small loan from their banks before resorting to a payday lender.

“Everywhere we’ve seen payday loans, they lend themselves to predatory lenders. But if it’s big national banks making small dollar loans, there is at least a regulatory aspect. There is a structure there, ”he said. “What worries us the most are the non-bank lenders who are not federally regulated and have much less responsibility than the large national lenders.”

If lenders ask for a void check, that’s a red flag, according to Self-Help Federal Credit Union’s Pereirra.

“Most banks and credit unions can make direct deposits. Many predatory lenders are going ahead and wanting access to your account. With a check, they have the routing number and the account number so they can try to withdraw it multiple times. “

Pereirra said small loans should generally be between 2.5% and 10%. If a rate exceeds 20%, she encouraged consumers to go to a credit union for refinancing help.

“I just saw one at 480% APR,” Pereirra said. “Often times, we are able to pay off their high rate loans.”

The Consumer Financial Protection Bureau also created several guides on navigating loans and debts.

Coronavirus help available

Trump signed a $ 2 trillion recovery bill for coronaviruses Friday with significant relief for families and small businesses.

Individuals who have filed their 2018 or 2019 income tax returns can receive a check for up to $ 1,200, plus $ 500 for each child. You can calculate how much you get here.

For many, advocates say, this will not be enough to cover rent or other expenses.

“We are really concerned because we believe that for an economic stimulus package to have an impact, these funds have to be consistent. We believe families will need 12 to 24 months of payments to get out of these economic fallout, ”said Briones.

For now, however, this payment is a one-time transaction.

The stimulus package also includes $ 10,000 disaster relief loans through the Small Business Administration to provide paid sick leave to employees, maintain payroll, and make payments. rent or mortgage. You can apply through SBA.

“This is a historic decision on the part of the SBA,” said Tara Lynn Gray, president of the Fresno Metro Black Chamber of Commerce. “You can apply for the loan without a response yet and receive $ 10,000 within three days. If you don’t qualify, they won’t sue you for $ 10,000. This is unheard of for small businesses. And SBA loans are very difficult for us to obtain. Most people of color find it very difficult to obtain these loans. “

the Fresno Metro Black Chamber of Commerce and Partnership with downtown Fresno have listed other resources for small businesses on their websites.

Manuela Tobias is a reporter for the Fresno Bee. This article is part of California division, an editorial collaboration examining income inequality and economic survival in California.