California's Law Regulating Payday Advances

Current deferred deposit customers are satisfied with California's current law regulating the payday advance industry. According to the Attorney General's office, few individuals have made any request to change the state's requirements.

PROVISIONS OF CURRENT CALIFORNIA, LAW

1. Requires companies offering deferred deposits to comply with all  permit and fee requirements subject to check cashers.
2. Each payday advance facility must post a complete, unambiguous fee schedule. This prevents individual stores from offering the service at rates higher than allowed by law.
3. In a deferred deposit transaction, a check may be held up to 30 days, and the face value cannot exceed $300.
4. Preceding every transaction, a customer must sign a written agreement that clearly states all fees.
5. A customer may transact only one deferred deposit at a time.
6. A fee no larger than $15 can be charged for a returned check.
7. A company that violates the law can be penalized $2,000 per offense and is subject to civil lawsuits by customers.
8. Every owner must obtain a permit and file with the Department of Justice (DOJ), be fingerprinted, and pay a fee. Permits must be renewed annually. The DOJ must deny anyone who was convicted of fraud or dishonesty.
9. Anyone who does not obtain a permit will be fined up to $1,000 for the first offense and up to $5,000 for the second offense.

THE STAND AGAINST ROLLOVERS

Consumers say their biggest fear about the payday advance industry is rollovers - initiating a second payday advance when the first advance has not been paid. We agree!   Califomia's payday advance industry has asked the Attorney General to confirm that rollovers are illegal in California.

Current law states that only if the customer has completely paid off the principle and fee, can he/she initiate a second advance. This law is in the best interest of both consumers and businesses. The industry continues to support laws requiring customers to pay off a current payday advance before transacting a new one.

SENATE BILL 834 HARMS CONSUMERS AND BUSINESSES

Lacking concern for Californians' needs, critics drafted the proposed legislation in an attempt to remove the option of obtaining a payday advance. The legislation has been written, moreover, based on the stories of those who abuse the service, not on facts.

One clear fact is that the proposed legislation by Senator Don Perata (Senate Bill 834) is extremely restrictive. In fact, the bill makes payday advance services economically unfeasible in California. The chart on the following page outlines just how SB 834 harms the payday advance industry.

If California loses the payday advance industry, thousands of jobs will be lost and tens of thousands of consumers will be left with no alternative service. Consumers may be forced to write checks that bounce, thereby paying outrageous bank charges for returned checks (up to approximately $50 per check).

CALIFORNIA FINANCIAL SERVICE PROVIDERS

The California Financial Service Providers (CFSP) is the only statewide organization representing Califomia's payday advance industry. Working with national, state and local officials, the association actively promotes regulations that protect the rights of both consumers and businesses.

For more information, please contact Blake Miraglia, chairman of the association's committee on legislation, at (925)676-1418 x104.