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