SACRAMENTO (AP) – The California Senate advanced legislation Friday to cap interest rates for consumer loans, a measure that supporters say is designed to blunt predatory lending practices.
The bill would cap consumer loan interest rates at 36 percentage points above the main interest rate set by the Federal Reserve, which is currently around 2%. Consumer advocacy groups say some loan companies charge interest rates as high as 225%.READ MORE: Colfax Residents Return Home After Debris Flow Concerns Subside
It would apply to loans between $2,500 and $9,999 and it would also require lenders to offer borrowers a credit education summary.
The bill is expected to get a final vote in the state Assembly later Friday before going to Democratic Gov. Gavin Newsom.
Critics of the bill, including black and Hispanic chambers of commerce, argued a rate cap could put some lenders out of business and cut off loan options for vulnerable Californians. Other critics suggested it could harm people’s ability to build credit.READ MORE: Some Sierra Spots Report More Than 2 Feet Of Snow Over Past 24 Hours
“I would suggest that we not feign naivete about credit,” Democratic Sen. Holly Mitchell said in response to critics. “To assert or assume that you can earn credit by being taken advantage of someone who is going to charge you 200% on a $2,500 loan is just not the case.”
It passed by a vote of 30-5.
The Online Lenders Alliance, which opposes the bill, spent $66,000 lobbying in the first half of 2019. Lenders including Advance America, Check Into Cash and Axcess Financial spent more than $100,000 combined on lobbying in the same time frame.MORE NEWS: Best Places For Halloween: Sacramento Ranks 22nd Among US Cities
Copyright 2019 The Associated Press.