California AB 377 aims to reform payday lending laws
In California, a new assembly bill -- AB 377 -- is working its way through the legislature. The AB 377 bill is intended to reform payday lending laws in California and has provisions that both expand and regulate the payday lending industry in the state.
Article Resource: California AB 377 aims to reform payday lending laws
New limitations on payday lending with AB 377
The payday lending industry in California will be limited by assemblyman Mendoza’s AB 377 . First, AB 377 implements a 2008 recommendation from California's Department of Corporations. Consumer disclosures will be required to contain "explicit information regarding the actual costs of payday loans." AB 377 will also require a 24-hour "cooling off" period when a customer can return the loan with no penalties. Lenders who offer online payday loans will also be required to give extra disclosures with every loan that they offer.
AB 377 will increase limit of lending
Currently in California, loans from payday loan stores are limited to $ 300. AB 377 will raise that lending cap to $ 500. This particular move is intended by the bill’s author to bring the available short-term loans in California more in line with the high cost of living in California. This increased lending limit also comes with a limit of 15 percent interest on the amount of the check advance. The California budget would also see some benefit from AB 377, with a five-cent per loan tax.
Responsible lending and responsible borrowing encouraged
Thus far, there have been three major amendments on AB 377. In 2006, ten million individual payday loans were taken out in the state of California. Responsible borrowers and responsible lenders will be encouraged by AB 377. AB 377 will protect the consumer by giving them more information as well as more of an ability to rescind loans. By allowing payday lending businesses to place a higher cap on lending amounts, the bill allows a service that millions of Californians use every year to be more flexible in meeting their customer's needs.
Read the full text of AB 377 here