California AB 377 aims to reform payday lending laws
In California, a new assembly bill — AB 377 — is working its way through the legislature. The AB 377 bill is intended to reform payday lending laws in California and has provisions that both expand and regulate the payday lending industry in the state.
California AB 377 creates new limitations
AB 377, a bill originally introduced by assemblyman Tony Mendoza, creates new limitations on payday lending. First, AB 377 implements a 2008 recommendation from California’s Department of Corporations. Consumer disclosures will be required to contain “explicit information regarding the actual costs of payday loans.” AB 377 will also require a 24-hour “cooling off” period when a customer can return the loan with no penalties. AB 377 will also require online payday lenders to provide additional notices and disclosures.
AB 377 increases lending limits
Currently in California, loans from payday loan stores are limited to $300. AB 377 will raise that lending cap to $500. Raising the cap is a measure intended to bring the California regulations on payday lending more in line with California’s cost of living. This increased lending limit also comes with a limit of 15 percent interest on the amount of the check advance. AB 377 also brings more income into the California budget with a 5-cent tax on each payday loan transaction.
Responsible borrowing and lending
AB 377 has been amended three times as it makes its way through the legislature. In 2006, about 10 million payday loans were taken out in California. AB 377 is a major payday lending reform that will, in general, encourage responsible lending and borrowing. By giving customers more information and more rights, AB 377 protects the consumer. By allowing payday lending businesses to place a higher cap on lending amounts, the bill allows a service that millions of Californians use every year to be more flexible in meeting their customer’s needs. Read the full text of AB 377 here.