AB 311

Under current law, a lender other than a bank, savings bank, savings and loan

association, or credit union generally must obtain a license from the Department of

Financial Institutions (DFI) to assess a finance charge greater than 18 percent per

year. This type of lender is generally referred to as a "licensed lender." A licensed

lender must have a separate license for each place of business it maintains.

This bill creates certain requirements applicable to payday loan transactions.

Under the bill, a "payday loan provider" is a licensed lender that makes payday loans.

A "payday loan" is a transaction between an individual with an account at a financial

establishment and the payday loan provider in which the provider agrees to either:

1) accept from the individual a check, hold the check for at least three days before

negotiating it, and before negotiating the check pay the individual an agreed

amount; or 2) accept the individual's authorization to initiate an electronic fund

transfer (EFT) from the individual's account, wait for at least three days before

initiating the EFT, and before initiating the EFT pay the individual an agreed

amount. A payday loan provider may not make a payday loan in a principal amount

that exceeds $800 or 50 percent of the applicant's next paycheck, whichever is

greater. The bill also limits a consumer's ability to "rollover" a payday loan. The bill

defines "rollover" as the refinancing, renewal, amendment, or extension of a payday

loan. Under the bill, a payday loan provider may enter into no more than one rollover

of a consumer's payday loan and, before entering into such a rollover, the consumer

must make payment, applied to the existing payday loan, that reduces the

outstanding balance on the existing payday loan by at least 50 percent.

The bill also prohibits DFI, or any other state agency, from establishing or

maintaining a database of individuals who enter into payday loans.