16 Nov
2011

Payday Loan Laws in California

Posted by : Dougie Morris

Payday loans are small, short-term cash loans. Generally, consumers write a post-dated check for the desired amount, in addition to an interest fee. The lender will hold onto the check until the next payday (usually 14 days) and then deposits it. Consumers also have the option to return with cash to reclaim the check. Or, in some cases, consumers can repay the loan with a signed agreement which allows the lender to electronically withdraw the funds from their bank account on a pre-determined date. Payday loans are regulated by state; therefore, it’s important to understand your state laws.

Payday loan laws in California include the following:

The maximum amount of money you’re allowed to borrow may not exceed $300.

The maximum interest rate is 15% of the total amount of the check (up to $45).

Example:

The borrower writes a check for $300 – $45 fee = receives $255 cash (The lender does not cash the check until the borrower’s next payday).

Payday lenders must visibly post their CA license and a fee schedule at every location.

A payday lender cannot make you a new loan to repay an existing loan.

A payday lender cannot make you a new loan while an existing loan with the same lender is outstanding, even if the sum of the existing loan and new loan do not exceed $300.

If your check bounces, the lender may only charge a one-time fee of $15 or less. However, this does not apply to the fees your bank may charge.

Additional fees cannot be applied to a loan extension or installment plan. But, be aware that the lender is not required to offer an extension or installment plan.

The law also mandates that the contract for a payday loan be provided in the same language used to negotiate the loan terms.

Currently, there is no limit on the number of payday loans that you’re allowed to withdraw annually.

The California Department of Corporations licenses and regulates payday lenders and the payday loan industry for California. Online payday lenders that lend to California residents must be licensed and comply with their loan limits and terms. You can verify the license of a payday lender in California by calling 1-866-275-2677 or online.

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