Feb. 16, 2018: LOS ANGELES TIMES - Pricey personal loans would be outlawed by bill that would reshape state lending industry

February 16, 2018

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By James Rufus Koren

California lawmakers are once again trying to cap the interest rate that lenders can charge on large personal loans, renewing an effort to eliminate the state's flourishing market for super-expensive debt.

A bill introduced Thursday by Assemblyman Ash Kalra (D-San Jose) could dramatically reshape California's lending industry by capping interest rates at roughly 20% for consumer loans between $2,500 and $10,000. Since rate caps were removed by the Legislature in the 1980s, there's been no limit to the amount of interest lenders can charge on those loans.

That has led to startling growth in the market. In 2016, more than half of the loans between $2,500 and $5,000 and about 21% of larger loans charged interest rates of 100% or higher. In all, Californians in 2016 — the most recent year for which state data are available — borrowed $1.1 billion at triple-digit interest rates.

"This would take us back to a time when there were stronger consumer protections," Kalra said. "My first goal is to really eliminate the high-interest-rate practices, the triple-digit APRs. This bill would certainly do that."

The loans targeted by the bill are different from payday loans, which are far smaller and meant to be repaid in a few weeks. These larger, longer-term loans with such high rates were once rare but have surged in popularity. Finance companies with big marketing budgets, as well as economic factors including rising medical costs and high rents have driven the growth, the Times reported last month.

Last year, Kalra authored a similar bill that called for a rate cap on loans up to $5,000, but the bill died in committee. So did a related bill he coauthored with Assemblyman Matt Dababneh, an Encino Democrat who later resigned amid allegations of sexual misconduct.

The current bill, AB 2500, is coauthored by Sen. Holly Mitchell (D-Los Angeles) and nine other legislators.

Graciela Aponte-Diaz of the Center for Responsible Lending, an advocacy group that is sponsoring the bill, called these

super-expensive loans predatory and "disgusting" products that are pitched to desperate consumers.

"These are marketed as quick fixes, quick cash, but the truth is once people take these out, it's far worse," she said. "They lead to overdraft fees from banks, wage garnishment and bankruptcy."

But Kalra's bill would do much more than ban lenders' priciest offerings. The bill would extend an existing set of rate caps that now apply...