SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom has signed a law capping interest rates on consumer loans.
It’s a measure designed to stop predatory lending in which some lenders charge interest rates in the double digits.
The Democratic governor announced Thursday he signed the law, which takes effect next year.
The law will cap consumer loan interest rates at 36 percentage points above the main interest rate set by the Federal Reserve, which is currently around 2%. It would apply to loans between $2,500 and $9,999, and it would also require lenders to offer borrowers a credit education summary.
Newsom says people living paycheck-to-paycheck are being exploited by predatory lenders.
Critics of the bill said it could force lenders out of business and restrict access to loans for low-income people.