California Calls for Payday Loan Regulation

In California, men and women are growing increasingly wary of the payday loan industry. Authorities aim to cut the triple-digit interest rates that are common with payday loans and bring them down to a low base rate of 36 percent. Payday lenders are worried that this cap will severely cut the amount of payday lenders in the state, and limit men and women in their choices. Citizens need options when they need some cash between paychecks, they claim.

A spike in concern with payday loans began with an investigative article, published Sunday, which explains the harms and hazards of payday loans. The article also pointed to the political figures giving the industry a warm reception in Sacramento. Payday loan companies have been funding political campaigns in order to boost their popularity with the government.

A group of Californian politicians aim to help their payday lending friends by raising the amount of money a Californian can borrow from a payday lender. Currently, the amount is capped at a low $300, and these politicians want to raise that amount to $500 a month. Also, this bill would raise any one-time transaction fees from $45 to $75.

Some authorities are against this bill. They believe that California should follow in the footsteps of the 17 other states which have effectively banned payday lending. In particular, two state senators have partnered with the Insurance Commissioner to call for new regulations on the payday lending industry. They are looking to tighten a focus on payday loan companies and oust subversive activity. They believe that this will stop Californians from falling victim to payday loan debt cycles and getting caught in roll-overs.

The senators are not sure how they are going to regulate the industry yet, but expect to use ballot-measure or new legislation to do so.

A former state assembly member told Mercury News that "people are having to forgo food on the table or clothes on their backs or transportation in order to pay back these loans." This assemblyman has already attempted to enact at 36 percent interest rate cap on California lenders, but to no avail. Payday lenders were able to convince this man to shelf his bill. He responded by explaining that they are "extraordinarily influential."

The general consensus is that lenders are forcing Californian households into irreconcilable debt. Though there are stories of debt and difficulty when it comes to payday loans, these are not necessarily the norm. If borrowers are cautious, they will more than likely be satisfied with their payday loan, like 87 percent of borrowers according to the CFSAA.

Consumers often use these short term loans because they appear to be the quickest way to get cash. These loans can often get a borrower the money he or she needs in a matter of hours. The convenient loans are the perfect solution for a financial emergency that demands immediate attention, such as a medical bill or automobile trouble.

Low-income consumers sometimes find themselves caught in debt because they cannot repay their online payday loan. This is common among men and women who are not financially stable. Payday loans are meant to help a middle-class American make ends meet between paydays, and will never be an effective long-term strategy. Borrowers must be cautious to use these loans only for their intended purpose or they may find themselves stuck in a debt cycle that is hard to escape.

In San Jose, California, a local assemblyman stated that he would push for a payday lending moratorium as soon as the state concluded their research project on the industry. The local council is already discussing ways to deter payday lenders from setting up shop in their town.

While towns are taking little actions to oust the industry, the bulk of the decision lies with the men and women in Sacramento. These towns are receiving funding from the Silicon Valley Community Foundation, which is the largest funder in the Bay area for non-profits. The foundation has donated near $1 million to anti-payday loan causes.

All payday loan actions in California will stay in limbo until the state has finished its research on the industry.


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California Calls for Payday Loan Regulation


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