Loading...
HomeMy WebLinkAboutReso 57-2018 (18-229)City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA City Council Resolution: RES 57 -2018 File Number: 18 -229 Enactment Number: RES 57 -2018 RESOLUTION IN SUPPORT OF ASSEMBLY BILL 2500, THE SAFE CONSUMER LENDING ACT (KALRA), AND AUTHORIZING THE MAYOR TO SIGN A LETTER IN SUPPORT OF ASSEMBLY BILL 2500. WHEREAS, currently there is no limit on annual percentage rates (APRs) for loans ranging from $2,500 to $10,000, which gives lenders the opportunity to lure borrowers into this unregulated loan range and charge higher -cost loans; and WHEREAS, the Trump Administration is rolling back important federal consumer protection regulations, including halting the Consumer Financial Protection Bureau's (CFPB) final rule on payday and car -title lending; and WHEREAS, according to a 2016 annual report by the California Department of Business Oversight (DBO), 58 percent of installment loans of $2,500 to $5,000 had 100 percent annual percentage rates (APRs) or higher; and WHEREAS, high -cost loans with exorbitant interest rates can lead to damaged credit, repossession of cars, closure of bank accounts, law suits, wage garnishment, and even bankruptcy. WHEREAS, AB 2500 would close a gap in California's Consumer Finance Lender Law (CFLL) that is being exploited by predatory lenders, by extending the state's interest rate cap for loans up to $10,000; and WHEREAS, putting a limit on APRs would level the playing field for lenders that are providing access to safe and affordable loans. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco hereby supports Assembly Bill (AB) 2500, The Safe Consumer Lending Act (Kalra). BE IT FURTHER RESOLVED that the City Council authorizes the Mayor to sign a letter in support of AB 2500 on behalf of the City Council. City of South San Francisco Page 1 File Number: 18 -229 Enactment Number: RES 57 -2018 At a meeting of the City Council on 4/11/2018, a motion was made by Mark Addiego, seconded by Pradeep Gupta, that this Resolution be adopted. The motion passed. Yes: 3 Mayor Normandy, Councilmember Gupta, and Councilmember Addiego Absent: 2 Mayor Pro Tem Matsumoto, and Councilmember Garbarino City of South San Francisco Page 2 March 28, 2018 The Honorable Monique Limón Chair, Assembly Banking and Finance Committee State Capitol, Room 6031 Sacramento, CA 94249-0045 RE: Support AB 2500 (Kalra) – Dear Chairperson Limón: The City of South San Francisco supports Assembly Bill 2500 (Kalra) which provides strong protections for consumer loans. The City of South San Francisco's mission is to provide a safe, attractive and well-maintained City through excellent customer service and superior programs and to have a work ethic that will enhance the Community's quality of life. Many families across California are living paycheck to paycheck. Stagnant wages, high cost housing, childcare costs, and other financial strains are contributing to this problem. Unfortunately, some lenders see this despair as an opportunity to trap borrowers into high cost loans, with exorbitant interest rates that far too often lead them into financial ruin. This type of abuse leads to damaged credit, repossession of car, closure of bank accounts, law suits, wage garnishment, and even bankruptcy. These lenders deliberately target Latino and African American borrowers by setting up stores in minority and low -income neighborhoods around California. Currently, California law does not have a limit on the APR (annual percentage rate) that lenders can charge on loans $2,500 to $10,000. According to a 2016 annual report by the California Department of Business Oversight, 58% of loans from $2,500 to $5,000 had an APR of 100% or higher. In 2014, according to the National Consumer Law Center, these loans had a default rate of 20% to 40%. It’s a win-win situation for lenders, as they are able to recoup the loan amount and profit within 6-12 months of repayment, and obtain a tax write-off for any unpaid principal. CITY COUNCIL 2018 LIZA NORMANDY, MAYOR KARYL MATSUMOTO, MAYOR PRO TEMPORE MARK ADDIEGO, COUNCILMEMBER RICHARD A. GARBARINO, COUNCILMEMBER PRADEEP C. GUPTA, PH.D. COUNCILMEMBER MIKE FUTRELL, CITY MANAGER AB 2500 will extend California’s current interest rate cap for consumer loans from $2,500 to $10,000. Under this law, a $10,000 loan with a 12 month repayment plan would carry a maximum interest rate of 20%. Putting a limit on APRs would level the playing field for lenders that are providing access to safe and affordable loans. The Trump Administration is rolling back important federal consumer protection regulations, including halting the Consumer Financial Protection Bureau’s final rule on payday and car-title lending. Inaction at the federal level means that California families will highly depend on the state legislature to curb predatory payday lending and abusive high-cost installment loans. For these reasons, the City of South San Francisco supports AB 2500 and respectfully requests your “Aye” vote. Thank you for your consideration. Sincerely, Liza Normandy Mayor