Bill Would Cap Interest Rates For 'Payday Lenders'
The personal loan industry, also called “payday loans,” has not been regulated in California for decades. But that could soon change.
A bill making its way through the legislature would cap the amount lenders can charge. The bill is called the Consumer Loan Reform Act. It’s co-sponsored by San Diego Democratic Assemblywoman Lorena Gonzalez.
Gonzalez moderated a panel discussion on the bill in downtown San Diego Friday. The bill would cap the interest rate that lenders can charge at 35%.
Gonzalez said the bill is necessary to keep so-called payday lenders from charging what she said are exorbitant interest rates on short-term loans.
"It's time to re-regulate this industry and to ensure that we're providing a situation by which individuals aren't getting themselves into a cycle of debt that they can never get out of," she said.
The trade group representing the lenders — the California Financial Service Providers — claims the bill would effectively eliminate access to capital for people who can’t get approved by banks and other lenders.
Gonzalez said her bill would rein in the worst abuses in the industry.
“The absolute ridiculousness of the rates being charged, we’re talking 100% interest, 200% interest. Once you actually find out the facts about it, and you open yourself up to all the facts of the situation, you realize this is not something that’s sustainable or something we should be doing.”
The bill has moved out of the assembly. Eight Republicans joined Democrats in supporting it.
Next, it goes to the Senate finance committee and if it passes there, to the full Senate. Governor Gavin Newsom has promised he’ll sign the bill if it reaches his desk.