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: Man Was Attacked By Bear Inside Meyers Cabin Before He Shot It
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: Fans Flock To Golden 1 Arena For California Classic Summer League Games
“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: Citrus Heights Woman Captured on Surveillance Video Before Arson Arrest
Copyright 2019 The Associated Press.