California consumer loan law, explained in 1 minute


Okay, Pop Quiz:
If I lend you $2,510 and you pay me back $244 dollars every month for the next 3 years…what
is the interest rate on that loan? The answer is 112%. Each year. If that seems outrageously high—like, there
ought to be a law against it—well, now there is. Hi, I’m Ben Christopher, elections reporter
for CALMatters. I’m going to explain a new law reining in
high interest consumer loans in under a minute. Starting January 1, lenders who make small
to medium sized loans have to keep interest rates under 36%. Over the last decade, there’s been a kind
of a financial gold rush into the high-cost “small dollar” loan market. Companies lend to borrowers who tend to be
ignored by traditional banks. And they’ve profited by charging high interest
rates and fees. But, that’s changing in California. A new law by Assemblywoman Monique Limon,
is cracking down on high cost loans. Limon and consumer advocates say loans like
these exploit people’s desperation and set them up to fail, often wrecking their credit
and trapping them in poverty. Lenders say that when interest rates are capped
at 36%, they won’t be able to afford to lend to many low income Calfornians. It will be too risky. And if the lenders go away, they argue, borrowers
will just find other ways to get money. Which might be worse. Who’s right? California is at the center of an economic
experiment to find out…and it starts on January 1st. Check out our coverage on this issue and others
at calmatters.org. Subscribe to our YouTube channe

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2 thoughts on “California consumer loan law, explained in 1 minute

  1. Hearing what is being said in this video is remarkably difficult without turning the volume up. It would be appreciated if you could check your levels and bump them up by 7-10 dB in future videos.

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