Action/ Update – Call/Email to support AB 539 – California Financing Law: consumer loans.
Yesterday, we presented Assemblymember Monique Limón with an almost-life-size poster to celebrate her CourageScore, (see her report card here) a desk-size version, brownies, and some new great bills we hope she’ll support this year. She discussed how bills can be altered on their journey to become laws, and we know we’ll be revising this list as new information comes in.
We asked her about legislation that was important to her and she described her bill AB 539. It targets predatory lenders that entrap families in unaffordable loans that they can’t repay quickly, “expos(ing them) to the risks of devastating financial consequences, including damaged credit, wage garnishments, bank account levies, and car repossessions.”
Similar bills failed in previous years because of industry lobbyists, so let’s turn up the heat. It’s in the Committee on Banking & Finance now (Limón is the chair. Members are Phillip Chen (Vice Chair), Rebecca Bauer-Kahan, Autumn R. Burke, Sabrina Cervantes, Steven S. Choi, Ph.D., Jesse Gabriel, Timothy S. Grayson, Melissa A. Melendez, Mark Stone, Shirley N. Weber, Buffy Wicks) but drop a quick email to your legislators that this time, it needs to pass.
Minimal script for Limón/supporters: I’m calling from [zip code] and I want to thank Assemblymember [___] for supporting AB 539 – California Financing Law: consumer loans.
- Fact: “The dollar amount of loans made in 2017 by non-bank lenders in California – $347.2 billion – exceeded the entire economic output of 33 states.” Lobbying against any controls is intense.
- Fact: In California, 1 in 20 people a year take out a payday loan, amounting to $2.9 billion annually.
- Fact: One Cal State study found California now has more payday lenders than it does McDonald’s. More than 60 percent of payday storefronts are located in zip codes with higher family poverty rates than the rest of the state, according to California’s Department of Business Oversight. And nearly half are located where the poverty rate for African-Americans and Latinos is higher than the statewide poverty rate for those groups. Most borrowers make an average annual income between $10,000 to $40,000.
Federal: According to the Federal Reserve, one in four families does not have adequate savings to cover an unexpected $400 expense. These families often turn to short-term high-interest loan products to make ends meet. But most aren’t able to pay back these loans in time and will be forced to roll them over or renew them, accumulating a new set of fees. This process, which entraps college students as well, can turn what was once a small financial setback into financial tragedy. Car-title lenders, for example, routinely repossess cars of borrowers who fall behind on ever-increasing payments, which can lead to job loss and homelessness. Meanwhile, the Trump administration is busy eroding federal protections against predatory lenders, while his extended shutdown forced many federal workers and government contract employees to use their services for the first time. The shutdown was great news for payday lenders and pawnshop chains, spiking their stock prices, while our Commerce Secretary Wilbur Ross offered workers this comforting advice “Now true, the people might have to pay a little bit of interest…”
CA: AB 539 would put California in line with 39 other states that cap interest rates on these loans. The bill would institute an interest rate cap of 36% on loans of $2,500 – $10,000. Yeah, 36% seems crazy high, but that’s the limit on most types of consumer loans for active duty military personnel and their dependents. (Elizabeth Warren talked about these loans here in 2014.) Non-military borrowers in CA get no protection, facing an industry that’s had no rate limit caps since the ’80’s. Interest rates on these loans, when calculated out annually (APR), are commonly over 100% and can reach over 400%. (How to calculate APRs) (States with highest APR here – up to ±700%!)
Here’s the history of CA bills on this issue, thanks to calmatters.org.
- SB 365: Authored by Sen. Alan Lowenthal, D-Long Beach, in 2011, the bill proposed creating a payday loan database, but it also languished.
- SB 515: This 2014 bill by Sen. Hannah-Beth Jackson, D-Santa Barbara, aimed to extend the minimum length of a payday loan and require lenders to offer installment plans, as well as develop a database and cap loans at four per year per borrower. It died in committee.
- AB 2500: Authored in 2018 by Assemblyman Ash Kalra, D-San Jose, the bill aimed to cap interest rates at 36 percent for installment loans between $2,500 and $5,000. It died on the Assembly floor.
- AB 2953: Also authored by Limón in 2018, it aimed to stop lenders from charging more than 36 percent on auto-title loans, also known as pink-slip loans, but failed to secure enough votes to advance in the Senate.
- AB 3010: Authored in 2018 by Assemblywoman Monique Limón, D-Ventura, it sought to restrict people from taking out more than one payday loan at a time, and proposed creating a database requiring licensed lenders to record their loan transactions. Without the votes, Limón pulled the bill.
This is our chance!
- AB 539: Authored in 2019 by Assemblywoman Monique Limón, D-Ventura.Prohibits California Financing Law (CFL) licensees from receiving charges on a consumer loan at a rate exceeding 36% per annum plus the Federal Funds Rate for loans with a principal amount from $2,500 to $10,000. (Bill Summary here.)
For us visual learners…