AB 55

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 Division of

Banking in the Department of Financial Institutions (division) to assess a finance

charge greater than 18 percent per year. This type of lender is generally referred to

as a "licensed lender." With certain limited exceptions, current law provides no

maximum finance charge for a loan entered into by a licensed lender. A lender who

makes motor vehicle title or payday loans is typically required to be a licensed lender.

This bill creates a maximum finance charge for certain motor vehicle title and

payday loans.

The bill defines "motor vehicle title loan" as a loan that is secured by

an interest, other than a purchase money security interest, in the borrower's motor

vehicle, and that has an original term of three months or less. The bill defines

"payday loan" as a transaction between a person and an issuer of a check in which

all of the following are satisfied: 1) the person agrees to hold the check for a period

of time before negotiating or presenting the check for payment; and 2) the person

pays the issuer, upon accepting the check, the amount of the check less any finance

charge.

Under the bill, a lender, other than a bank, savings bank, savings and loan

association, or credit union, who makes motor vehicle title or payday loans in the

regular course of business, may not assess a finance charge that exceeds 2 percent

per month. In addition, such a lender who makes such loans must obtain the license

described above. Also, the bill requires the division to enforce the bill's prohibition.

The bill also allows a borrower to bring an action against a person who violates

the bill's requirements to recover damages in an amount equal to the greater of the

following: 1) twice the amount of the finance charge in connection with the loan made

to the borrower; or 2) the actual damages, including incidental and consequential

damages, sustained by the borrower by reason of the violation. In addition, the bill

allows the borrower to recover the costs of the action, including reasonable attorney

fees.