Sign on to Increased Regulation of Predatory Payday Lenders

TO BE ADDED TO THE LETTER BELOW, PLEASE EMAIL rserna@calreinvest.org with your name and the name or your organization.

Predatory payday lenders target members of the United States military. Active-duty military personnel are three times more likely than civilians to take out payday loans that entrap and seriously undermine their financial stability. And the Navy now estimates that more Sailors lose their security clearance due to financial issues than any other reason.

Last month, the California State Assembly passed bill AB 1965 with virtually no opposition on a vote of 71 to 1. This bill would provide some relief to military service members from payday lenders. However, as it is currently written, AB 1965 does not cap the interest rate on payday loans and continues to allow payday lenders to charge 459% APR. In the Senate, the Navy opposed the bill and requested a few limited reforms, which have been added. But what is really needed is a strong bill that provides real protections for military borrowers, including a cap on interest rates at 36% APR. Providing these increased protections to military borrowers today can help us get the same reforms enacted for all other borrowers in the future.


The California Senate Judiciary Committee has scheduled a hearing on AB 1965 for August 8, where Senators will have the opportunity to strengthen the bill by including a 36% rate cap. Please join us by signing on to the letter below urging California’s Senators to include a 36% rate cap in AB 1965. Just send an email to reserna@calreinvest.org with your organization's name to confirm that you’d like to be added. If you have any questions, please contact Rhea Serna at 415-864-3980. Thanks!

***SIGN-ON Letter***

Dear Assembly Member Lieu:

The undersigned organizations are writing today to oppose AB 1965 unless it is amended to include a 36 percent rate cap on payday loans (called “deferred deposit transactions” in CA statute) to active duty military personnel. Your efforts to bring attention to the serious harm that the payday lending industry is doing to our military men and women is greatly appreciated, but a rate cap is absolutely fundamental to ensuring that our military personnel get access to fairly priced short-term credit.

Payday lenders target the military with their 400 percent interest rate product, trapping many military personnel in abusive loans. Military personnel are three or four times more likely to be payday borrowers than civilians and payday borrowers concentrate their shops around California’s military bases.

As it stands, AB 1965 provides limited protections to military personnel. The most significant provision amendment is an optional, no-additional-cost repayment plan over 120 days at a military borrower’s request. While potentially promising, these plans have not proven effective in other states, and would still leave military personnel saddled with interest rates of 45 percent APR.

Since work began on this bill, U.S. Senator James Talent (R-MO) successfully amended the Defense Authorization bill with a provision to cap the annual percentage rate (APR) for all forms of credit, including payday lending, to active duty military personnel at 36 percent, including all fees and service charges.

California should not have weaker protections for its military personnel than those offered by a bi-partisan consensus of U.S. Senators. We will oppose AB 1965 unless it is amended to include a 36 percent APR cap to your bill in the Senate Judiciary Committee.

Thank you for your consideration.

Sincerely,
“Your Name”
“Your Organization”