California Labor Urges Legislature to Rein in Out-of-Control High-Interest Lenders by Passing AB 539

Most working people experience extreme financial hardship at one time or another. It’s the sad reality of an economy that prioritizes wealth-hording by the super rich over the basic needs of everyday people. Compounding the problem of so many of us living paycheck-to-paycheck is the largely unregulated market for high-interest loans.

These modern-day loan sharks prey on low-income and financially strapped families. While current law regulates interest rates on loans of less than $2500, there’s a loophole. Unscrupulous lenders can charge customers any amount of interest they want if the loan is $2500 or more. Often, these loans carry interest rates of 200% or 300%, meaning hard-working folks who have a financial emergency are indebted for years. Making matters even worse, monthly minimum payments on these loans, which are almost all interest, are $400 or more, depending on the amount borrowed. In the long run, this creates a cycle of debt that is devastating to families.

Lawmakers have taken up this issue before, but powerful payday-lending lobbyists have always been able to kill bills reining in the industry. That may change this year.

Jeremy White in Politico:

Central to the effort is a bill by Assemblywoman Monique Limón (D-Santa Barbara), the newly elevated chair of the Assembly Banking and Finance Committee, that would cap interest rates for loans with principals of more than $2,500 at the 36 percent rate that California law currently applies to lower-principal loans. Limón and allies call the policy long overdue.

“For 14 years, the Legislature has been trying to get policy out in this area and it has been one of those bills that quietly die in a state that’s blue, progressive, and pro-consumers,” Limón said. “This product is actually growing much faster than the other products,” she added. “It’s a very high, fast increase for a product that’s not regulated, for a product that we’re finding more and more evidence of the harm and the damage it’s doing to California.”

The California labor movement strongly supports Limón’s AB 539 to cap interest rates that are gouging working people. While the negative ramifications of high-interest loans reverberate far beyond union families, this is precisely the kind of issue California unions look to champion. An injury to one working person is an injury to all of us.

It’s past time we rein in the out-of-control payday lending industry. Too many families are grievously hurt by greedy, fly-by-night lenders who are taking advantage of families when they’re at their most vulnerable. We strongly urge the legislature to take action by passing AB 539.