Gov. Gavin Newsom signed Assembly Bill 539, entitled the Fair Access to Credit Act, into law on Thursday, which will cap interest rates at 36% simple interest, for loans between $2,500 and $9,999 starting Jan. 1, 2020.
Under the existing law, there is no rate cap for loans of this size, with some loans carrying an annual rate of 100% or more. Currently, approximately 40% of these types of loans end in default, according to a study conducted by the National Consumer Law Center.
“Supervisor (Kathryn) Barger believes it’s a reasonable regulation that helps to curb real predatory lending, targeting those who exploit people when they are most vulnerable,” said Tony Bell, spokesman for Barger, who represents L.A. County’s 5th District, which includes the Santa Clarita Valley.
AB 539 is expected to change several other aspects of the California Financing Law, including imposing new rules governing loan duration to no less than 12 months and prohibiting prepayment penalties for any loan not secured by property.
This bill is also expected to require lenders making loans subject to these provisions to report the borrower’s payment performance to at least one national consumer reporting agency and to offer a credit education program or seminar approved by the commissioner at no cost to the borrower.
For more detailed information, visit leginfo.legislature.ca.gov.