Lorena Gonzalez Bill Giving Increased Access to Small Dollar Loans to Unbanked Californians Signed into Law
Loans Made Under AB 237 Will Include Capped Interest Rates and Fees, Ability to Build Credit
SACRAMENTO – (September 30, 2018) – Unbanked and underserved Californians will now have increased access to small dollar loans after Governor Brown signed legislation authored by California State Assemblywoman Lorena Gonzalez Fletcher (D-San Diego).
Assembly Bill 237 will expand access to safe consumer loans available under the Pilot Program for Increased Access to Responsible Small Dollar Loans by raising the upper limit of interest-capped loans available to unbanked and underserved communities. This will allow borrowers with limited credit history to take out larger loans for their small businesses or medical and family emergencies – like immigration legal services or a funeral – without resorting to costly, predatory options that perpetuate the cycle of poverty.
“Underbanked communities like those I represent have a tough time accessing loans in times of emergencies. When they do, it often means they are stuck in a dangerous cycle of debt because the interest rates and fees are so high and they don’t earn a credit score even if they pay it back on time,” said Assemblywoman Lorena Gonzalez Fletcher. “With this new law, we will help Californians escape the traps of crushing debt that are afflicting so many low-income communities.”
In 2014, the California Legislature enacted a pilot program under the California Finance Law that allowed individuals with little or no credit history to borrow small dollar loans between $300 and $2,499. Under this pilot program, the Legislature enacted strong consumer protections including a cap on interest rates and fees, credit reporting, and education on borrowing practices. The new law signed by the Governor today will raise the upper limit of the loans available under this pilot program from $2,499 to $7,500.
Since the program’s inception, the need for affordable loans above $2,500 has been crystal clear. Nearly half of all consumer loans issued under the California Finance Law are between $2,500 and $10,000. Because of the demand, consumers are turning to predatory lenders whose interest rates are 100% or more.
Raising the upper limit of the Pilot Program to $7,500 ensures that underserved communities are able to pay for emergency expenses while also building their credit score and getting educated about borrowing responsibly. AB 237 passed the Assembly by a 53-0 vote and the Senate by a 33-0 vote.
For more information on this issue or to schedule an interview with Assemblywoman Gonzalez Fletcher, contact Mary Latibashvili at (415) 902-3421.
Assemblywoman Lorena Gonzalez Fletcher represents California’s 80th Assembly District, located in southern San Diego County, including the cities of San Diego, Chula Vista, and National City. She serves as Chair of the Assembly Committee on Appropriations, Chair of the Assembly Select Committee on Women in the Workplace, and Vice Chair of the California Latino Legislative Caucus. For more information on Assemblywoman Lorena Gonzalez Fletcher visit https://a80.asmdc.org/