Please ensure Javascript is enabled for purposes of website accessibility
California Might Finally Put a Lid on High-Interest Lenders
gvw_calmatters
By CalMatters
Published 6 years ago on
June 12, 2019

Share

The California Assembly has passed legislation to end a 34-year era during which non-bank lenders have been free to charge consumers unlimited interest rates on loans from $2,500 to $10,000.


Tom Dresslar
Special to CALmatters

By setting a 36% annual rate cap on such loans, Assembly Bill 539 by Assembly Banking and Finance Committee Chairwoman Monique Limón, a Democrat from Santa Barbara, would provide Californians with protections against high-cost loans similar to safeguards now enjoyed by an estimated 232 million Americans.
With the Assembly moving in a more pro-consumer direction over the past year, the most intriguing unknown surrounding AB 539 is its ultimate fate in the Senate.
In 2018, the upper house killed every bill passed by the Assembly to crack down on predatory lending.
Now, the Senate stands as industry’s best hope to preserve a system that harms vulnerable consumers’ financial well-being as it transfers wealth to high-cost lenders, and private equity and venture capital firms that own and fund them. AB 539 is set for a June 19 hearing in the Senate Banking and Finance Committee.
It’s important to understand the nature of AB 539’s opposition.
It includes industry trade groups that have for decades dictated the Legislature’s anti-consumer actions on lending issues – organizations such as the California Financial Service Providers Association and the Online Lenders Alliance.

Rolling Back Landmark Protections for Consumers

These outfits represent lenders who trap borrowers in unaffordable loans, but don’t care because they charge such exorbitant rates they reap their profits before consumers suffer the financial harm caused by non-payment.
The groups’ counterparts that focus on federal lobbying have built a mutually profitable relationship with President Donald Trump. The Community Financial Services Association of America puts money in Trump’s pockets by holding its annual conference at his golf resort in Doral, Florida.
The Trump administration returns the favor by rolling back landmark protections for consumers against predatory lending previously adopted by the U.S. Consumer Financial Protection Bureau.
Then, there are organizations which give the opposition the appearance of advocating for communities most harmed by predatory lending.
The California NAACP opposes AB 539. Its president, Alice Huffman, has parroted the industry’s scaremongering about reduced access to credit. That’s an odd stance, since the national NAACP’s governing board in 2016 ratified a resolution that blasted high-cost loans and predatory lending for “robbing households of hard-earned wages and savings” in African American and Latino communities.
The California Hispanic Chamber of Commerce also opposes AB 539 – hardly surprising, given the organization lists California Financial Service Providers as a corporate sponsor.
Then there’s the Habematolel Pomo of Upper Lake.
The Indian tribe runs an online lending operation comprised of four lenders and a lead generator. Sovereignty generally exempts the tribe from most state laws.

High-Cost Lenders Will Spare No Expense

But a 2016 California Supreme Court ruling subjects tribal lending operations to greater state regulatory scrutiny. The tribe opposes AB 539 unless it is amended to include sweeping exemption language that seems targeted, in part, at the court decision.

High-cost lenders will spare no expense, and hawk every variety of their snake oil, to maintain the predatory system that serves them so well. Hopefully, the Senate will not allow opponents to once again carry the day against the interests of California consumers.
For consumers’ sake, lawmakers should reject the amendment.
At a 2016 hearing of the Assembly Banking and Finance Committee, tribal Chairwoman Sherry Treppa said the tribe’s loans averaged $700 and had an average APR of 680%.
Such loans would violate California’s consumer lending law if the tribe’s operations were subject to the statute.
Like the trade groups, the tribe is allied with Trump in his administration’s assault on consumers. In the March 2017 edition of the tribal newsletter, “Arrow,” Treppa railed against what she called the CFPB’s “destructive and baseless rulemaking efforts surrounding short-term, small-dollar products.”
Less than a year later, in January 2018, Trump’s Consumer Financial Protection Bureau dropped an enforcement action alleging the tribe’s four lenders illegally tried to collect on triple-digit APR loans that were unlawful and void in at least 17 states. The complaint alleged that for an $800 loan, borrowers typically had to pay $3,320 over 10 months.
High-cost lenders will spare no expense, and hawk every variety of their snake oil, to maintain the predatory system that serves them so well. Hopefully, however, the Senate will not allow such a crowd of opponents to, once again, carry the day against the interests of California consumers.
About the Author
Tom Dresslar is a former reporter and retired deputy commissioner at the California Department of Business Oversight, which regulates financial service providers covered by AB 539, t.dresslar@comcast.net. He wrote this commentary for CALmatters, a public interest journalism venture committed to explaining how California’s Capitol works. Please read Dresslar’s past CALmatters commentary here.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

World’s Largest Almond Processor Will Shutter Sacramento Plant. 600 Workers Impacted

DON'T MISS

Trump Eyes Major Funding Cuts for California, Including All Public Universities

DON'T MISS

Farming Regulation Costs Rise 1,300% Since 2006: Cal Poly

DON'T MISS

Southern California Air Regulators Weigh a Plan to Phase Out Gas Furnaces and Water Heaters

DON'T MISS

US Supreme Court Allows DOGE Broad Access to Social Security Data

DON'T MISS

Doctors Were Preparing to Remove Their Organs. Then They Woke Up.

DON'T MISS

Abrego Garcia Is Returned to US From El Salvador

DON'T MISS

Proud Boys Convicted in Jan. 6 Attack Sue Government on Claims of ‘Political Persecution’

DON'T MISS

FDA’s AI Assistant ‘Elsa’ Fails Its First Day on the Job

DON'T MISS

Documentary Series Goes Inside Trump’s Bubble

UP NEXT

We Are Being Governed by the Trump Organization Inc.

UP NEXT

California’s Economy Is Just Limping Along. Why Is Newsom Always Boasting?

UP NEXT

Really, Secretary Rubio? I’m Lying About the Kids Dying Under Trump?

UP NEXT

After Years of Undrinkable Water, Our Rural California Community Finally Has Hope

UP NEXT

Why Trump Is Mad at ‘Sleazebag’ Leonard Leo

UP NEXT

Newsom Tussles With Local Officials Over Homelessness

UP NEXT

California’s War Over Charter Schools Rages On in Court

UP NEXT

Why Did the California Senate Shunt a Cost-Cutting Housing Bill?

UP NEXT

Fresno’s Crime Beat Didn’t Prepare Me for What I Saw on a Ride Along

UP NEXT

The MAGA Revolution Threatens America’s Most Innovative Place

Southern California Air Regulators Weigh a Plan to Phase Out Gas Furnaces and Water Heaters

9 hours ago

US Supreme Court Allows DOGE Broad Access to Social Security Data

9 hours ago

Doctors Were Preparing to Remove Their Organs. Then They Woke Up.

10 hours ago

Abrego Garcia Is Returned to US From El Salvador

10 hours ago

Proud Boys Convicted in Jan. 6 Attack Sue Government on Claims of ‘Political Persecution’

10 hours ago

FDA’s AI Assistant ‘Elsa’ Fails Its First Day on the Job

10 hours ago

Documentary Series Goes Inside Trump’s Bubble

11 hours ago

Tulare County Gang Member Convicted of Trying to a Murder Police Officer

11 hours ago

Newsom Promises Funding to Jump-Start ‘Science of Reading’

11 hours ago

Feds Indict SoCal Hospice CEO for Medicare Fraud in Fresno and Kern Counties

12 hours ago

World’s Largest Almond Processor Will Shutter Sacramento Plant. 600 Workers Impacted

The world’s largest almond processor, Blue Diamond Growers, says it will close its Sacramento processing plant this year The almond co...

8 hours ago

8 hours ago

World’s Largest Almond Processor Will Shutter Sacramento Plant. 600 Workers Impacted

9 hours ago

Trump Eyes Major Funding Cuts for California, Including All Public Universities

9 hours ago

Farming Regulation Costs Rise 1,300% Since 2006: Cal Poly

10 hours ago

Southern California Air Regulators Weigh a Plan to Phase Out Gas Furnaces and Water Heaters

10 hours ago

US Supreme Court Allows DOGE Broad Access to Social Security Data

11 hours ago

Doctors Were Preparing to Remove Their Organs. Then They Woke Up.

11 hours ago

Abrego Garcia Is Returned to US From El Salvador

11 hours ago

Proud Boys Convicted in Jan. 6 Attack Sue Government on Claims of ‘Political Persecution’

Help continue the work that gets you the news that matters most.

Search

Send this to a friend