Assembly member Gonzalez attacks predatory loans – San Diego Downtown News
By KENDRA SITTON | Downtown News
Lorena Gonzalez, assembly member from San Diego, continues her efforts in Sacramento to end high-cost loans. The bill banning predatory lending by capping interest rates, AB 539, was passed in the assembly on May 23 with bipartisan support. Now it is being amended by Senate committees because advocates fear it will never be heard.
“He still has a long way to go. We haven’t had the outside support we were hoping for, ”Gonzalez said after a panel at the Westin Hotel on the effects of high-cost loans in San Diego on June 7.
While dozens of states, as well as the District of Columbia, cap interest rates on small loans, similar proposals in California have repeatedly died in the legislature. Gonzalez saw this as a big victory when AB 539, which would in effect restore the old limits on interest rates that have not been used since 1985, was passed in the assembly. Gonzalez urged people at the June event to pressure their state’s senators so that these protections can finally be put in place after years of advocacy.
There are limits on interest rates for loans under $ 2,500 and over $ 10,000 in California. The Consumer Financial Protections Bureau (CFPB) and California Department of Business Oversight (DBO) have uncovered numerous predatory practices on the part of lenders, including forcing borrowers to take out loans just above the $ 2,500 threshold in order to that lenders can legally charge triple-digit interest rates. A loan of $ 2,500 at 200% interest would require a borrower to repay nearly $ 10,000 in two years.
“We know it can set families back and we want people to keep moving forward,” Gonzalez said.
Opponents of the bill fear that it will prevent people in low-income neighborhoods who are turned away from banks or other traditional financial institutions from accessing credit when needed. It is true that many storefronts offering high cost loans are concentrated in low income or minority neighborhoods like National City, where residents could face discrimination when trying to get a loan from a major bank. .
“Many of them [lawmakers opposed to AB 539] are afraid that there are people who will not have access to any kind of money when they are in the most difficult times. What we have seen and why we think they are wrong is because there are lenders in this space and we know we can develop this space. [access to credit] at 36%. We will continue to work on this access, but allowing people to take out 100%, 200%, 600% loans is something that should be impossible for all of us. “
Geneve Villacres, from OneMain Financial, attended the panel to demonstrate that other credit options are available. She explained how OneMain Financial issued nearly 10,000 loans in 2017 between $ 2,500 and $ 5,000, and all of them had interest rates below 39%. She said many other similar lenders exist, but predatory lenders make them better known to the most vulnerable.
Of the top 20 lenders with loans between $ 2,500 and $ 5,000 in 2017, the vast majority were offering some or all of their loans at triple-digit interest rates. Three lenders offered all of their loans at interest rates above 100%, showing that they did not take into account the borrowers’ ability to repay the loan when working out an interest rate.
Alyson Snow, of San Diego Legal Aid, was also on the panel moderated by Gonzalez. She pointed out that in order to help clients who come to her office, she has to prove that predatory lenders have somehow broken the rules – for example, by targeting a veteran’s spouse for a loan because veterans are already protected against high interest rates or by lying about the terms of the loan. She said triple-digit interest rates should be illegal, but instead can only find loopholes to help San Diego residents drowning in payday loan debt. .
As the bill makes its way through the Senate, Gonzalez urges voters to contact their senators to pressure them so that AB 539 does not die like so many previous similar measures introduced in the Legislature.
– Kendra Sitton can be contacted at [email protected]