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Payday loan bill gutted
By Jim Sanders - jsanders@sacbee.com
Last Updated 6:05 pm PDT Monday, April 14, 2008
Legislation to cap payday loan interest rates at 36 percent was gutted Monday in the Assembly's Banking and Finance Committee.
The committee stripped Assembly Bill 2845 after the industry complained that it could not survive a 36 percent rate cap.
To keep hopes alive for a compromise, Assemblyman Dave Jones accepted the committee's offer to convert AB 2845 into a spot bill expressing intent to alter state law regarding payday loans.
Payday loans, up to $300, provide immediate money to cash-strapped consumers who agree to pay the debt within 31 days.
Annual interest rates of more than 400 percent are being charged on 14-day payday loans, according to a committee analysis of AB 2845.
Jones, D-Sacramento, claims that interest rates are excessive and that consumers are being shortchanged by the lack of a cap.
The industry counters that existing rates are necessary due to high loan delinquency rates, labor costs and other expenses.
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