California Cash Advance Laws & Regulations
The California Department of Corporations (DOC), which regulates the cash advance industry in the state, has established some important regulations to protect consumers. Unlike many states in which there are very few rules for payday lenders to follow, California has been aggressive in protecting borrowers from predatory lending. The DOC has set limits on the number of loans, the amount of loans, and finance charges and fees, while also establishing severe penalties for lenders who are not in compliance.
The California Deferred Deposit Transaction Law currently sets a $300 maximum amount on cash advance loans. However, as of June 1, 2011, the California Assembly passed AB 1158, which, if signed into law, will raise the maximum amount to $500. No further regulatory updates have been made as of January 2012.
Here are some specific California regulations, to protect consumers from predatory lending in the payday loan industry:
- Maximum Payday Loan Term
31 days - Maximum Finance Charges and Fees
15% of the loan value, up to $45 - Maximum Loan Amount
$300 - Number of Rollovers
None (cannot charge fee for extension) - Outstanding Loans Allowed at Once
One - Cool-Off Period
N/A
- Payment Plan
N/A - Collection Fees
$15 NSF fee - Presentment Limit
N/A - Private Right of Action
Not specified - Military Protection
Additional fee restrictions may apply to service members or their dependents - Penalties
Civil fines, suspension or revocations of license, cease and desist order, criminal
References:
California Department of Corporations “What You Need to Know About Payday Loans”
California Financial Code Pertaining to Cash Advances – Section 22300-22347
California Payday Loan Legislation:
California Assembly Bill 207 (2005):
- Prohibits the fee for some deferred deposit transactions from exceeding an effective annual rate greater than 10 percent
- Requires a check from a customer for these deferred deposit transactions to be made payable to the actual name of the licensee
- Prohibits a check that has been held by a licensee for more than 31 days from being presented to a bank for payment
California Assembly Bill 1158 (passed Assembly June 2011):
The California Deferred Deposit Transaction Law provides for the licensure and regulation by the commissioner of Corporations of persons engaged in the business of making or negotiating deferred deposit transactions, as defined. This law authorizes a licensee to defer the deposit of a customer’s personal check for up to 31 days, and requires each deferred deposit transaction to be made pursuant to a written agreement. Whereas this law prohibits the face amount of the check from exceeding $300, AB 1158 will instead authorize the face amount of a check for a deferred deposit transaction to be up to $500.
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Consumer Notice: A cash advance, also referred to as a payday loan or payday advance, is a small, short-term loan that is intended to cover a borrower's expenses until the following payday. Cash advances are intended for short-term financial relief and do not constitute long-term financial solutions. Consumers facing debt and credit difficulties should seek out debt and credit advisory help. Consumers are encouraged to consult our State Consumer Resource pages to learn more about the risks involved with cash advances, local laws and regulations that may be applicable to cash advances, possible loan alternatives and recent developments in their state.
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