With the recent signing of Governor Gavin Newsom to pass AB 539, California becomes the 38th state with an interest limit for loans greater than $ 2,500.
AB 539 or Fair Access to Credit Law, written by Assembly members Monique Limón and Tim Grayson, was signed this week by the governor who was accompanied by representatives of the Californians for Economic Justice coalition – which includes community groups, local governments, leaders Religious and responsible lenders.
AB 539 sets an interest rate limit of 36%, plus the federal funds rate in the consumer fee, on loans of $ 2,500 and less than $ 10,000.
Borrowers such as Jessica Castillo, 32, celebrate the approval of the law. She said that she has asked for several loans and that although they are small, the interest has become high.
"It becomes like a cycle of loan after loan," said the woman, who usually takes amounts of $ 250 but ultimately has to pay $ 301.
Castillo said that he has limited himself in asking for larger loans since he has come to see that they can have an interest of up to 240%.
"I do not want to put myself in a situation of more difficulties but sometimes it is impossible when there are so many places of loans available and you think it is easy … In the long run you end up paying more," said Castillo.
Assemblyman Limón said that the struggle of more than two years to make this law come true has been worthwhile.
He said Governor Newsom's signature on AB 539 sends a strong message that California will not allow lenders to get rich with high-cost loans, which often leave consumers in a worse situation than when they started.
"When we see that loans are given with more than 100% or 200% interest, for us it is a concern because we see that almost 40% of people who take these loans cannot pay them," said the assemblyman.
In figures
For example, a Californian who gets a four-year unsecured loan of $ 3,000 with 100% interest ends up paying more than $ 9,263 interest only, the California Department of Commercial Supervision showed data.
Under AB 539, that same loan would now cost approximately $ 2,876 in interest, a savings of $ 6,387.
In 2018, almost 350,000 loans, in the range of $ 2,500 to $ 9,999, had an interest rate of more than 100% in California.
Supporters celebrate the new law
Supervisor Hilda Solís, representative of District 1 of Los Angeles County, thanked that AB 539 was signed into law, as the county fully supports the interest limit.
"For a long time, low-income communities of color have been easy prey for high-cost lenders, who trap consumers in loans they can't afford, undermining their financial well-being and impacting their families, businesses and communities," he said. the supervisor in a
release.
Solis added that with the AB 539 law passed, she agrees to continue working with needy communities and their partners to establish secure loan options and a range of economic opportunities for the most economically vulnerable residents.
Marisabel Torres, California's policy director with the Center for Responsible Lending, said they are very pleased to be part of the coalition that pushed for AB 539.
"We managed to work with a diverse group to advocate (for this law), from Republicans and Democrats to veterans, students, activist Dolores Huerta and others," Torres said.
"All with the same goal of ending the stalking of people of color and Latinos."
Torres said that in 2018 almost 350,000 people who asked for money in California obtained loans greater than $ 2,500 to $ 9,999 with an interest greater than 100%.
AB 539 will take effect from January 1, 2020 and it is important to mention that the law will not apply to current loans.
"Only the new loans qualify starting on January 1, 2020," Torres said.
