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Report regarding a resolution in support of Assembly Bill 2500, the Safe Consumer Lending Act (Kalra), and authorizing the Mayor to sign a letter in support of Assembly Bill 2500. (Mike Futrell, City Manager)
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RECOMMENDATION
Recommendation
Staff recommends that City Council adopt a resolution in support of Assembly Bill 2500, the Safe Consumer Lending Act (Kalra), and authorizing the Mayor to sign a letter in support of Assembly Bill 2500.
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BACKGROUND/DISCUSSION
Many families throughout California are living paycheck to paycheck today. Stagnant wages, high-cost housing, childcare costs, and other financial strains are contributing to this problem. Unfortunately, some lenders see this despair as an opportunity to trap borrowers into high-cost loans with exorbitant interest rates that far too often lead them into financial ruin. This type of abuse leads to damaged credit, repossession of cars, closure of bank accounts, law suits, wage garnishment, and even bankruptcy.
The Trump Administration is rolling back important federal consumer protection regulations, including halting the Consumer Financial Protection Bureau's (CFPB) final rule on payday and car-title lending. Inaction at the federal level means that California families will depend on the state legislature to curb predatory payday lending and abusive high-cost installment loans.
Background
According to a 2016 annual report by the California Department of Business Oversight (DBO), 58 percent of installment loans of $2,500 to $5,000 had 100 percent annual percentage rates (APRs) or higher.
An example from a borrower in Anaheim, California, with a high-cost installment loan, is as follows:
* $5,125 loan
* 115 percent APR
* 7-year loan term
* $495 monthly payment
* $36,974 finance charge
* $42,099 total payment
In its July 2016 report "Misaligned incentives: Why High-Rate Installment Lenders Want Borrowers Who Will Default," the National Consumer Law Center, states that "data collected ...
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