California Governor to Consider Capping Rate on Finance Lender Loans
The California State Assembly passed Assembly Bill 539, the Fair Access to Credit Act (FACA), with a vote of 61 to 8. FACA prevents licensed finance lenders from charging more than 36% (plus the federal funds rate) on consumer loans between $2,500 and $10,000. Reports from California’s Department of Business Oversight (DBO), as previously discussed here, found that many loans carried triple-digit annualized interest rates and were often issued to repeat, low-income customers.
Among other things, FACA requires lenders to report the borrower’s credit information to a national consumer reporting agency and offer a DBO-approved credit education program while largely prohibiting prepayment penalties. Notably, FACA allows for the collection of an administrative fee under certain conditions in addition to the interest cap. The bill also modifies existing loan term requirements. Now, the Governor must decide whether to sign FACA into law or veto it.