California Governor signs AB 539, protecting borrowers from many forms of predatory payday lending
SACRAMENTO, CA (STL.News) California Governor Gavin Newsom today signed into law a measure protecting consumers from predatory lending practices that create “debt traps” for families already struggling financially. AB 539 by Assemblymember Monique Limόn (D-Santa Barbara) promotes affordable and accessible credit for consumers and encourages responsible lenders to offer safer loan alternatives. The bill bars payday lenders from charging high interest rates – sometimes as high as 200 percent – on loans between $2,500 and $10,000.
“Many Californians living paycheck to paycheck are exploited by predatory lending practices each year,” said Governor Newsom. “Defaulting on high-cost, high-interest rate installment loans push families further into poverty instead of pulling them out. These families deserve better, and this industry must be held to account.”
More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter, according to the Consumer Financial Protection Bureau.
“Governor Newsom’s signature on AB 539 sends a strong message that California will not allow lenders to thrive on high-cost loans that often leave consumers worse off than when they started. I am grateful to the broad coalition of community groups, faith leaders, local governments, and responsible lenders who supported this historic achievement and helped us achieve strong bipartisan support of this legislation,” said Assemblymember Limόn.
Earlier this month, the Governor signed the following legislation to protect Californians from predatory financial practices and create greater control of taxpayer dollars:
- AB 857 by Assemblymember David Chiu (D-San Francisco) creates a process for localities to establish public banks, subject to approval by the Department of Business Oversight and Federal Deposit Insurance Corporation. This allows public banks to leverage taxpayer dollars to address pressing local needs like affordable housing, small business loans, and public infrastructure projects such as rebuilding after wildfires.
- SB 616 by Senator Bob Wieckowski (D-Fremont) prevents debt collectors from emptying bank accounts by establishing an automatic exemption, equal to the minimum basic standard of adequate care for a family of four, ensuring a minimum balance to pay for necessities.
- SB 455 by Senator Steven Bradford (D-Gardena) creates the Financial Empowerment Fund to provide grants to nonprofit organizations that offer financial education and financial empowerment programs and services to at-risk Californians.