OAKLAND, CALIF. – The Center for Responsible Lending (CRL) is calling on California Governor Jerry Brown to veto AB 237, a bill which would expand unsound lending practices in ways that do not address the real needs of low income and underserved communities. In fact, the changes proposed in this bill put consumers at risk of unaffordable and even predatory loans of more than 100% annual percentage rate (APR).
The bill would raise the loan limits so that lenders under an existing pilot program can make larger loans, up to $7,500 without addressing ongoing concerns about high costs and has weak underwriting requirements that would allow lenders to put borrowers into unaffordable loans. For example, lenders are not required to account for rent payments in the calculation of a borrower’s existing debt load. The pilot should not be expanded to higher dollar loans under the current terms.
Further, the bill would continue to allow Pilot Program lenders to market loans through other companies, called “finders,” whose activities essentially involve paid brokering without a license. One company’s business model relies on finders, Insikt. They are also the proponents of this bill. Many of these “finders” are check cashing and payday lending stores that offer loans with triple-digit interest rates. There is a real risk of borrowers getting steered toward these higher interest rate loans that are more lucrative for lenders.
Finally, this bill fails to address the practices most harmful to borrowers through the state of California by doing nothing to address the saturation of payday lending at tripe-digit interests, and in fact further expands a lending program reliant on them.
CRL California Policy Director Graciela Aponte-Diaz released the following statement urging Governor Brown to veto AB 237:
If the California legislature wants to pass meaningful financial reform then it should put a rate cap for loans above $2,500. AB 237 is a tailored bill primarily for the financial benefit of one Wall-Street backed company in California and which increases Californians’ exposure to unsafe lending practices. As the Trump administration attempts to roll back important federal consumer regulations, including delaying rules on payday and car-title lending, the need for California to curb predatory lending is more important than ever. Governor Brown should veto this legislation and urge our Assembly and Senate to pass a commonsense bill that prioritizes consumer protection.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at email@example.com.