The Board of Supervisors Tuesday voted its unanimous support of federal regulations targeting predatory lending practices by payday, car title and installment lenders.
“We believe protecting families and their pocketbooks is good public policy,” Supervisor Hilda Solis said.
The city of Los Angeles has the highest number of payday lenders in the state, with about 800 stores found mostly in communities of color, according to Solis.
“Californians now pay over $700 million in fees on these loans every year,” Solis said. ” Our families are trapped in cycles of high-cost debt.”
The Consumer Financial Protection Bureau, created in the wake of the 2008 financial crisis, has proposed rules requiring lenders to assess a borrower’s ability to repay a loan, restrict lenders from requiring access to a borrower’s checking account and cap annual percentage rates for some short-term loans at 36 percent.
Payday loans typically have a 14- or 30-day term and are payable in full upon receipt of a paycheck, tax refund or other expected cash payment.
California law limits the fee on payday loans to $15 per $100, up to a maximum of $45. That charge translates to an APR of 460 percent for a two-week loan.
The majority of payday customers are repeat customers. The CFPB found that borrowers at payday loan stores took out a median of 10 loans and more than 80 percent of loans were rolled over or renewed within two weeks.
Roughly 75 percent of fees generated come from borrowers who take out 11 or more loans each year.
California law is tougher than that in many states and prohibits lenders from writing a new loan to pay off an existing debt or making a new loan while an existing loan is outstanding.
The public may comment on the proposed rules through Oct. 7 at consumerfinance.gov.
–City News Service
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