California Lawmakers Urged To Pass Bill Limiting Payday Loan Interest Rates

SACRAMENTO, Calif. — Civil rights and labor advocates are urging California lawmakers to pass AB 2558, a measure supporters say would help protect families from predatory payday lending practices that trap borrowers in cycles of debt.

Dolores Huerta, one of the most respected leaders in the labor movement and a longtime advocate for civil rights in California, called on the Legislature to approve the bill, which seeks to prevent Californians from being exploited through controversial payday loan schemes.

In her statement regarding AB 2558, Huerta expressed support for the proposal, which would cap the annual percentage rate, or APR, on loans provided by payday lenders at 36%. Supporters say passage of the bill would bring California in line with regulations already adopted in other states.

“Too many Californians are struggling with a serious affordability crisis,” said Marc Berman. “It is making this crisis worse by trapping Californians in a cycle of reborrowing, raking in huge profits off of their hard-earned wages that they need for rent, groceries, medical care, and other basic needs.”

Many researchers contend the payday loan system places additional pressure on people already burdened by rising living costs and the struggle to afford housing and other necessities.

Robert Herrell, executive director of the Consumer Federation of California, agreed with Huerta that payday lending relies on repeat borrowing. He said 64% of payday loan business comes from clients taking between five and nine payday loans per year.

Borrowers who receive 10 or more payday loans account for 72% of all profits generated by payday lenders, he added.

“The payday lending industry is built on a predatory model, which is repeat borrowing,” Herrell said. “Consumers who get 5 to 9 and from 10 or more loans per year with payday lending make up an overwhelming amount of the revenue of that industry.”

Among supporters of the measure, Andrea Luquetta of the Center for Responsible Lending in Oakland pointed to the economic challenges facing California residents.

“No lender should be allowed to profit from worsening financial hardship. With federal cuts to the social safety net and the increasing cost of living, our families need more affordable options […]” she said. “We deserve better.”

Similar views were shared by Mónica Lazo of Economic Security California Action, who characterized payday loans as exploitative and said hundreds of millions of dollars have been taken from people struggling to pay rent.

Those practices only worsen financial hardship and underscore the need for stronger borrower protections, Lazo said.

Supporters of AB 2558 said California payday lenders collect $246 million in annual fees from loans issued in the state. They argue most of those fees come from repeat borrowing because state law requires loans to be repaid on the borrower’s next paycheck.

As a result, when borrowers are unable to repay the loan while also covering basic expenses, they often must take out another loan.

Supporters also said 47% of people borrow again within seven days after repaying previous loans. In addition, a majority of industry revenue comes from individuals obtaining 10 or more loans per year.

By backing the bill, Huerta joins a campaign led by the Dolores Huerta Foundation and dozens of other groups seeking consumer protection reforms in California’s credit market.

The bill aims to align California law with other states by limiting payday loan interest rates, reducing reliance on costly credit and encouraging safer lending alternatives.

According to the Dolores Huerta Foundation, its support for AB 2558 is consistent with its broader efforts to organize communities around economic justice, education, public health and predatory lending, particularly in rural communities and the Central Valley.

Follow the Vanguard on Social Media – X, Instagram and Facebook.  Subscribe the Vanguard News letters.  To make a tax-deductible donation, please visit davisvanguard.org/donate or give directly through ActBlue.  Your support will ensure that the vital work of the Vanguard continues.

Categories:

Breaking News State of California

Tags:

AB 2558 California Legislature Consumer Protection Dolores Huerta Economic Justice Payday Loans