Senate Bill 515 is set to save borrowers from being stuck in payday loans. However, the payday loans industry sees the bill as destructive rather than helpful.
Another senate bill is being proposed before the California legislature that would limit payday loans applications to six in a year per borrower. According to the proponents of Bill 515,its main purpose is to control, if not totally eradicate, the debt cycle that hits the state’s financially-struggling residents.
Payday loans bill restrictions
Bill515 will be submitted to the Senate Banking and Financial Services Committee. If approved, it would prohibit short-term finance lenders from providing payday loans to any borrower more than six times every year. In addition, lenders can no longer demand for a payback in 15 days. The bill proposes that the terms for payday loans be extended to 30 days.
State Senator Hanna-Beth Jackson is one of the authors of the bill. She believes that low-income residents are the most vulnerable to bad credit loans as of finance options. That being said, the need to save them from this possible debt trap becomes more crucial.
What payday loans lenders have to say
On the other hand, proponents of the payday loans industry do not see what supporters of Bill 515 see. Lenders are not supporting the bill as they believe it would only harm the already-regulated industry that has saved a lot of financially-struggling state residents.
California Financial Service Providers’ spokesman Greg Larsen said that the best people to decide are the consumers themselves. This is mainly because the bill may lead to underground lending and/or legitimate lenders raising the interest rates and costs.Worse, it may even cause the crash of the industry.
Additionally, the bill would allow borrowers to opt for repayment plans if they fail to pay their loans after six loans. But lenders also argue that the bill will further push the residents to online lenders where unlicensed finance agencies lurk.
What supporters of the payday loans bill have to say
Despite the objections from the payday loans sector, there are still strong supporters backing the bill. These would include the National Council of La Raza, California Reinvestment Coalition and The Center for Responsible Lending.
These advocates reiterate that borrowers generally can’t pay off their loans on time. With this, they are forced to take out new loans, even with bad credit, to cover up their overdue payments. As a result, they become subject to more fees and higher interest rates.