CA Cuts Interest Rates on Certain Loans From Approved Lenders | Weiner Brodsky Kider PC
The California legislature recently passed a bill, called the Fair Access to Credit Act, which amends the California Financing Law (CFL) by imposing, in part, a maximum interest rate on loans made by approved financial lenders. between $ 2,500 and $ 10,000. The bill comes into force on January 1, 2020.
More specifically, with respect to a loan of a good faith principal amount of $ 2,500 or more but less than $ 10,000, the bill authorizes approved lenders to contract or receive fees at a rate not exceeding not a simple annual interest rate of 36% plus the Federal Funds Rate. Approved lenders making such loans must, among other things, report the payment performance of each borrower to at least one consumer information agency that compiles and maintains consumer records nationwide. In addition, they must offer, at no cost to the borrower, a credit education program or seminar that has been previously reviewed and approved by the Commissioner of the Department of Business Supervision.
In addition, the bill prohibits an approved lender from entering into a contract for a consumer loan of at least $ 2,500 but less than $ 10,000 that provides for a scheduled principal repayment of less than 12 months. With regard to the current CFL provision limiting the maximum term of certain loans to 60 months and 15 days, the bill adds an exemption for loans secured by real estate with a good faith capital of at least $ 5,000. In addition, with the exception of a loan secured by real estate, the bill prohibits a CFL licensee from charging, imposing or receiving a penalty for the prepayment of a loan under the CFL. In addition, the CFL, as amended by the bill, will now cover indefinite consumer loans with good faith capital not exceeding $ 10,000 (which is an increase from the current threshold. of $ 5,000).