California Payday Loans: Law, Stats and History
15% of the amount advanced (up to $45)
According to the state law of California payday lending is legal.
California imposes a $300 amount limit on payday loans offered in the state. Payday loans can be taken for a period of not longer than 31 days with the maximum finance charge of 15% for every $100 and 460%* APR. No additional charges are allowed for the extension of a loan. No rollovers are allowed, there are no cooling-off periods between 2 consecutive loans, and only one outstanding loan is allowed. There is an allowed $15 NSF fee; criminal actions in all cases are prohibited.
Payday loans in California are called “deferred deposit transactions“. Despite quite restrictive regulations, the industry still feels ok in the state with 2,119 payday lender storefronts and about 12.3 million payday loans taken out in 2015.
California Payday Lending Statutes
All the regulations concerning payday loans are written in the following two documents – the Civil Code 1789.30 et seq. and the Financial Code 23000 et seq.
Also, the state law requires that all lending companies should have a license from the Department of Business Oversight in order to operate in the state. Such a measure was taken especially with the aim of taking care of the customers’ rights and protecting them from fraudulent actions.
Moreover, it is also required that all the transactions between a lender and a borrower must be indicated in a legal contract in detail. This agreement should contain information about the loan amount, terms and conditions, such as interest rates and finance charges. Consumers, in their turn, are required to provide their ID card- or driving license number.
A payday loan contract must be provided in the language that was primarily used in the course of the negotiations with the lender.
Loan Amount in California
California state law allows payday lending in the amount not exceeding $300. (Financial Code 23000 et seq.)
Rates, Fees and Other Charges in California
- The fee is $17.64 per $100.00 borrowed.
- Finance charges and fees should not exceed 15% for every $100 of the amount advanced.
- According to the law, additional interest is not allowed, if a lender willingly agrees to prolong the payment.
Provisions of §,987 of Title 10 of the U.S. Code, as amended by 126 Stat. 1785 ensures that anyone who violates the provision or a provision of Part 232 violates division 10 of California Deferred Deposit Transaction Law. (Financial Code 23000 et seq.)
- APR equals 460% (*According to the Center for Responsible Lending 2019: “Typical APR based on
average rate for a $300 loan advertised by largest payday chains or as determined bystate regulator, where applicable.”).
How Much Would a $100 Payday Loan Cost? (Use Calculator)
With a 14 days term:
ARP: 460%
Loan cost: $17.64
To return: $117.64
ARP сalculation:
$17.64 / 14 days = 1.26 * 365 days = 460%
Payday Loan Terms in California
- Licensed lenders may defer any deposit of customer checks up to no more than 31 days. (Financial Code 23000 et seq)
- The lender has the right not to satisfy this request (by law)
Extended Payment Plan
A lender has 2 options:
- to approve a customer request for EPP but additional fees are not allowed;
- a lender has the right not to satisfy this request (by the law).
Consumer Information
Attention
From July 2020, lenders are not required to check a borrower’s ability to repay a loan.
Be careful, evaluate your financial situation, don’t get into a debt trap.
The rule was changed by the CFPB.
Warning
All payday loan lenders (online and storefront) in California must be licensed by the Department of Financial Protection and Innovation (DFPI – www.dfpi.ca.gov).
California Department strongly recommends checking the license of deferred deposit originators (payday lenders).
- No criminal action against a customer who enters into a deferred deposit transaction is allowed, any criminal penalty for the failure to repay is prohibited in California.
- In case a check is returned unpaid, an additional maximum fee of $15 for non-sufficient funds (NSF) transaction is established.
- In case of the check return due to insufficient funds, a lender is also not allowed to take any criminal action against the borrower.
- One person is allowed to take one payday loan at a time and should repay it in full before taking another one. Rollovers are not allowed and all the charges for extension are considered illegal.
- Borrowers are also prohibited to take one loan in order to repay another one. Every time the loan is applied the new procedure is initiated and a new agreement signed.
- Lenders in California are strictly prohibited to give extra loans to customers who haven’t repaid the previous ones. It is pretty difficult to monitor the actions of a borrower but it is not advised to take out a new loan before the old one is not yet resolved as long as it is fraught with never-ending indebtedness.
More information about payday loan laws and regulations in California can be found on the official California Department of Business Oversight (DBO) Division of Corporations page.
You can also file a complaint on their website with regard to illegal payday lender actions.
Regulator: Complaints & Information
California Department of Business Oversight
Address: Department of Business Oversight Citizen’s Complaint, 1515 K St #200, Sacramento, CA 95814
Phone: 916-327-7585 or 866-275-2677 (toll free)
Url: https://dbo.ca.gov/contact-us/
File a Complaint: https://dbo.ca.gov/file-a-complaint/
Number of California Consumers Complaints by Topics
According to CFPB Consumer Complaint Database
- Fraud and threat ( 1096 )
- Not exiting debt ( 578 )
- Charges from account ( 539 )
- Not requested loan ( 183 )
- Credit rating ( 178 )
- Lender is not available ( 139 )
- Loan to return ( 114 )
- Loan not received ( 103 )
The Quantity of Top California Stores by Cities
Statistics
| Year | No. of Stores | No. of Clients, million | No. of Loans, million | Value of Fees, million | Value of Loans, billion |
|---|---|---|---|---|---|
| 2010 | 2,144 | 1.6 | 12.1 | – | $3.1 |
| 2011 | 2,119 | 1.7 | 12.4 | – | $3.3 |
| 2012 | 2,100 | 1.8 | 12.3 | – | $3.2 |
| 2013 | 2,058 | 1.8 | 12.2 | – | $3.2 |
| 2014 | 2,014 | 1.8 | 12.4 | – | $3.4 |
| 2015 | 1,969 | 1.9 | 12.3 | – | $4.2 |
| 2016 | 1,854 | 1.8 | 11.5 | $467.2 | $3.1 |
| 2017 | 1,705 | 1.7 | 10.7 | $436.4 | $2.9 |
| 2018 | 1,645 | 1.6 | 10.2 | $420.5 | $2.8 |
| 2019 | 1,551 | 1.6 | 10.2 | $418.4 | $2.8 |
The History of Payday Loans in California
California’s payday lending regulatory structure is considered one of the most unfavorable when it comes to consumer protection. Pretty much the same laws govern payday loans in California for years.
- 1990’s – Payday lending started as an industry in California as an extension of the check cashing industry. At that time there wasn’t any special state law that explicitly authorized or prohibited check cashers from offering high-interest payday loans and they were not specifically regulated by the California Finance Lenders Law. Thus, they worked freely. (Report on the Status of Payday Lending in California)
- 1996 – “SB 1959 (C. Calderon, Statutes of 1996) sanctioned and accepted the requirements for a payday loan in California law. The bill exempted check cashers from the California Finance Lenders Law, which officially allowed payday lenders to charge excessive interest rates. (California Budget Project Chartbook 2008) The loan terms set by this law haven’t changed much for almost 20 years: 15% limit on fees, ~400% APR, $300 max loan amount. (Report on the Status of Payday Lending in California)
- 2002 – The California Deferred Deposit Transaction Law was introduced. It is now considered as one of the most ambiguous laws that do not take into account the consumers’ interests. It “established both licensure and regulation of persons making deferred deposit transactions” by imposing licensing obligations and disclosure all the lending terms among other things. Loan terms, however, didn’t become more restrictive.
- 2000s – nowadays – All the bills that came before the Legislature to regulate payday lending industry in the state, unfortunately, died. Among many failed attempts were:
- SB 365 (2011, died in committee) aimed at creating a payday loan database.
- SB 515 (2014, died in committee) aimed to extend the minimum payday loan term and require lenders to offer installments.
- AB 2953 (2018, died in the Senate) proposed a 36% interest rate cap on auto-title loans.
- AB 2500 (2018, died on the Assembly floor) proposed a 36% interest rate cap on installment loans.
- AB 3010 (2018, died) aimed to restrict payday loans to 1 at a time and proposed creating a database where lenders would record all loan transactions.
- Oct 5, 2017 – The Consumer Financial Protection Bureau (CFPB) issued the Final Payday Loan Rule that hasn’t yet fully come into effect.
- The only federal changes to California payday lending law include the Military Lending Act (2006), the law regarding advertising reporting: “March 15 or earlier of each year, every licensed lender must file their annual report with the Commissioner of Business Oversight” (AB 2156, 2003-2004 Leg. Sess. (Cal. 2004); Cal. Fin. Code § 23057.), and the law that exempts auto dealers from coverage (AB 634, 2007-2008 Leg. Sess. (Cal. 2008); Cal. Fin. Code § 23001.) (Report on the Status of Payday Lending in California).
[Updated As of March 2024]