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California bill capping consumer loan interest rates moves closer to enactment

AB 539 was cleared by the California Senate’s Banking Committee on June 26.  The bill would change several aspects of the California Financing Law (CFL), including by setting new interest rate caps, imposing new rules governing loan duration, and prohibiting prepayment penalties.  For example, while the CFL does not set a maximum interest rate on loans of $2,500 or more, AB 539 would cap the interest rate at 36% plus the federal funds rate on loans of $2,500 or more but less than $10,000.

In the Banking Committee, the bill was amended to require finance lenders to report a borrower’s payment performance to at least one nationwide consumer reporting agency and offer the borrower at no cost an approved credit education program or seminar before disbursing loan proceeds.

The bill cleared the California Assembly in May 2019 and now moves to the Senate Judiciary Committee, which observers also expect it to clear.  The Judiciary Committee hearing is scheduled for tomorrow, July 9.

Copyright © by Ballard Spahr LLPNational Law Review, Volume IX, Number 189
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About this Author

Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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