Senator Perata's Proposed Law (SB834)

Senator Perata's Proposed Law (SB834)

  1. Defines payday advance as a loan.
  2. Requires a payday advance applicant to have $25,000 in unencumbered assets per location.
  3. Prohibits civil lawsuits to collect for nonpayment will be prohibited. Before conducting a payday advance, a company must provide the customer with a notice, in 12-point type, stating this fact.
  4. Sets up a complaint process where anyone can file and have a hearing.
  5. Requires licensee to obtain a $50,000 per store surety bond.
  6. Requires each licensee to pay a prorated share of the costs to administer the law and will be billed yearly.
  7. Requires every company to provide a detailed report of all payday advance transactions.
  8. Establishes a minimum term of two weeks for each $50, meaning a $260 advance could extend over three months.
  9. Allows a customer to make a partial payment of $5 over a series of installments.
  10. Allows a licensee to receive no more than $5 for each payday advance and 3 percent per month.

How do these proposals translate? 

  1. This makes the transaction applicable to APRs - an irrelevant method of measuring a short-term advance.
  2. An operation of 20 check cashing stores offering deferred deposits would have to maintain $500,000 in liquid assets to stay in business. Few, if any, check cashers can meet that requirement.
  3. This limits a company's ability to collect payments, in a civil court, from consumers that default. This equates to giving money away with no means to collect.
  4. This would cause a tremendous backlog of hearings among consumers who do not want to repay the advance.
  5. This cost is prohibitive to the industry.
  6. Other industries do not pay for administration of laws that regulate them.
  7. The earnings of a private company should remain private.
  8. A repayment in three months makes the product financially unfeasible. It is important to remember that payday advance services carry high risks and administrative costs, at both the store and corporate level.
  9. This would extend a $260 advance over 52 payments, which is untenable for those offering the service.
  10. These fees reduce the current fees by an amount that clearly make deferred deposit impossible in California.