Bill That Limits Payday Lenders’ Profits Might Actually Hurt The Poor

A sign outside a 'Speedy Cash' cash loans shop in London, England on Nov. 1, 2012. Dan Kitwood/Getty Images

A California bill that was already passed by the Assembly and is now in the Senate would put a cap on how much payday lenders may charge Californians for loans between $2,500 and $10,000. It would also bar California Financing Law (CFL) licensees from imposing penalties for prepayments.

According to AB 539’s co-author, Assemblywoman Monique Limón (D-Santa Barbara), the bill fixes a loophole that allows payday lenders to charge higher interest rates on loans that are higher than $2,500. This, she wrote in an op-ed, prompted lenders to “push consumers toward much larger loans.”