(Sacramento, CA) – Yesterday, legislation authored by Assemblymember Monique Limón (D-Santa Barbara) and Assemblymember Tim Grayson (D-Concord) to cap interest rates on consumer loans of $2,500 - $10,000 passed the Assembly Banking and Finance committee. AB 539 comes in response to the growing threat of predatory lending practices that entrap financially vulnerable families in unaffordable loans that they cannot repay.
“Californians deserve real access to capital, not exploitative loans that trap them in perpetual payments and compounding debt,” said Assemblymember Grayson. “We must do more to protect financially vulnerable, hardworking families from predatory lenders who profit off their devastation. And that starts with ending the worst kinds of abusive loans in our state.”
Specifically, AB 539 would institute an interest rate cap of 36% plus the federal funds rate and a small fee on loans of $2,500 - $10,000. This rate cap ensures a sustainable lending environment for both borrowers and responsible lenders by incentivizing lenders to underwrite loans and offer products that fit within a borrower’s monthly budget.
Since the start of the Great Recession in 2008, California has seen an explosion in high cost predatory lending into the sub-prime market. From 2008 to 2017, the last year we have data, triple digit loan volumes have increased over 17,000 percent. According to the Department of Business Oversight approximately one third of all high cost loans end in default.
AB 539 represents a historic opportunity to rein in predatory lending here in the state and would put California in line with 39 other states that cap interest rates on these loans. Having now passed the Assembly Banking and Finance Committee, AB 539 will next be heard in the Assembly Appropriations Committee.
Tim Grayson represents the 14th Assembly District that includes the communities of Benicia, Concord, Clayton, Martinez, Pleasant Hill, Vallejo, Pittsburg and Walnut Creek. For more information please visit the Assemblymember’s website, www.assembly.ca.gov/a14.