The California legislature has been extensively considering AB 377. 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.
AB377 will limit payday lending
Originally introduced by Tony Mendoza, AB 377 will create new legal limitations on the payday lending industry. First, AB 377 implements a 2008 recommendation from California’s Department of Corporations. Every consumer disclosure about payday loans will have to contain “explicit information regarding the actual costs of payday loans.” A new cooling-off period will also be implemented – a 24 hour period where no penalties will be charged for a customer returning a loan. Lenders who offer online payday loans will also be required to give extra disclosures with every loan that they offer.
Lending limit will be increased by AB 377
California payday lenders are currently limited to loans of no more than $ 300. That lending cap would be raised by AB 377 – to $ 500. Raising the cap is a measure intended to bring the California regulations on payday lending more in line with California’s cost of living. The higher limit on payday loans also contains a limit on interest – no more than 15 percent on the amount of the loan. A five cent per loan tax would also add money to the California budget.
Being responsible with short term loans
As it has been working through the legislature, AB 377 has been amended three times. In 2006, about 10 million payday loans were taken out in California. In general, AB377 is written in a way that will encourage more responsible borrowing and lending. By giving customers more information and more rights, AB 377 protects the consumer. The higher caps on lending mean that customers who use payday loans in California will be better-served by a more flexible industry.
Read the full text of AB 377 here
http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_0351-0400/ab_377_bill_20090623_amended_sen_v96.html
