California’s new legislation prohibits triple-digit interest rate loans

California’s new legislation prohibits triple-digit interest rate loans
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CRC applauds efforts by community leaders, lawmakers and Governor Newsome for signing into law a bill that curbs the power of payday lenders to hike interest rate loans in California

Yesterday, California Governor Gavin Newsome signed into law Assembly Bill 539, the Fair Access to Lending Act. This legislation will prohibit the practice of charging unaffordable interest rates on consumer loans of $2,500 – $10,000. Existing law does not limit the interest rate that lenders can charge on loans of $2,500 – $10,000.


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The basics

The lack of an interest rate cap has resulted in loans with annual interest rates in the range of 100 percent – 225 percent and above. According to the California Department of Business Oversight (DBO), the market for triple-digit interest rate loans went from nearly nonexistent ten years ago to having an annual loan volume of $1.1 billion in 2017. Triple-digit interest rate loans harm all Californians, particularly households of color. It kicks off a cycle of debt that buries families into poverty and hardship.

For instance, when a borrower defaults on a loan, the lender can “charge-off” the loan, giving the lender a federal and state income tax write-off. But the debt never goes away for borrowers who default – they face harmful consequences, including damaged credit, car repossessions, lawsuits, wage garnishment, bank levies, tax intercepts and even bankruptcy.

CRC experts made the following statements on interest rate loans and AB 539 becoming state law:

“In a time when it’s harder than ever for working class households to make ends meet, I am glad that the Governor lived up to his word in reining in predatory lenders. Thanks to the dedication and work of grassroots advocates and organizers directly impacted by payday scams, California is making progress. This positive step, however, remains a step. Latinos and other immigrants are on the front lines and will continue to be. It remains vital that we use this opportunity to jump start efforts to do everything we can to root out financial predators preying upon all people living in California.” – Paulina Gonzalez-Brito, Executive Director California Reinvestment Coalition (CRC)

“It’s a good day for everyday Californians. Triple digit interest rate loans have no place in California other than to strip the dignity and self worth of people trying to get by and survive. CRC looks forward to working with lawmakers wishing to boost further efforts to root out predatory lending practices running rampant throughout our economy and state.” – Vijay Das, National Policy and Communications Director, California Reinvestment Coalition (CRC)

Leading CRC members also shared their views on interest rate loans:

“In a time when keen attention is being paid to issues of fairness, access and equality, I am glad to see the Governor keeping his word and begin to root out predatory lending in Fresno and beyond. Exploitation has no role in our economy. Safe banking services and real access to capital do.” Tate Hill, Director, Access Plus Capital.

“Los Angeles has seen an explosion of predatory lenders preying upon members of our communities. Street corner after the next, cyber scammer after another, we see how these bullies ruin lives. We are grateful that progress is coming to our barrios and homes.” – Erika Toriz, Executive Director, HAVEN Neighborhood Services

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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