Fate of Payday Loans in California to be Decided This Week
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UPDATED: Feb 8, 2021
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California lawmakers will meet this week to discuss legislation to restrict and further regulate payday lending practices.
Senate Bill 515 aims to limit the number of loans a borrower can take out to four per year and would give consumers 30 days to pay back their loans for every $100 borrowed. All payday would also be tracked in a state database. Payday lenders would also be required to standardize their lending criteria and more thoroughly investigate a borrower’s ability to pay.
The measure, introduced by Democratic state Senators Jim Beall and Hannah-Beth Jackson, will be discussed on Wednesday in front of the Senate Banking and Financial Institutions Committee. Given the reaction ahead of that meeting, the bill may be amended to be less strict. It is anticipated that borrowers may receive 30 days to pay back all loans, not 30 days per $100, and may be allowed to take out up to six loans a year.
Currently, the law limits the length of payday loans to a maximum term of 31 days, but sets no minimum. In California loan amounts cannot exceed $300 and fees are limited at 15% on cashed checks.
The bill was co-sponsored by the National Council of La Raza, the California Reinvestment Coalition, Public Interest Law Firm and the Center for Responsible Lending. In a letter to Senator Lou Correa, the chair of the Senate Banking and Finance Committee, the CRL argued that SB 515 would reduce borrower’s need for additional loans, limit payday loans to short term emergency use and ensure that families can afford to repay loans.
“Without some consistent standards, lenders who do not use underwriting will attract the most vulnerable borrowers with the least ability to pay to their products,” the letter reads.
The California payday lobby, meanwhile, has donated heavily to California politicians over the years. The Daily Democrats reports that four of the nine members on the committee set to meet tomorrow, including Senator Correa, are among the top 10 recipients of payday lobby funds.
In recent years, bills to limit payday lending have received limited support, while bills to increase the spending limit have had greater success.
AB 1158, discussed in June 2011, would have “increase[d] the maximum face value of a check used to obtain a payday loan from $300 to $500.” Assuming lenders charged the maximum fees, this would have raised the amount of money lent from a max of $255 to $425. The bill was passed by the state assembly but rejected by the Senate.
The Senate Banking and Financial Institutions committee will meet tomorrow at 1:30 PM.