Assembly Committee to Shine a Light on Payday Lending

Next week, the Assembly Banking and Finance Committee will hold an informational hearing on California’s “deferred deposit transaction” law, more commonly known as payday lending. The hearing is scheduled for Monday, March 4, at 2 p.m. in Room 444 of the State Capitol.

A robust discussion of payday lending is certainly needed. Payday loans, which are obtained using a personal check, have extremely short repayment periods and excessive fees. Payday loans encourage chronic, repeat borrowing because borrowers often lack sufficient income to both repay the loan and meet their basic living expenses. Research shows that most payday loan borrowers in California are women and have household incomes under $50,000. For a comprehensive analysis of California’s payday lending industry, see the CBP’s 2008 report, Payday Loans: Taking the Pay Out of Payday. According to the Silicon Valley Community Foundation — which also has been critical of payday loans — this CBP report “provides a compendium of alternatives to payday lending that should be considered as potential content for a financial education course designed to help consumers avoid payday borrowing.”

Although evidence against payday lending keeps piling up, meaningful payday-lending reform remains elusive in California. Perhaps 2013 will bring a different result.

— Scott Graves

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