Business

New State Law Restricts Payday, Other “Debt Trap” Loans

Published

6 years ago

October 24, 2019

Gov. Gavin Newsom recently signed Assembly Bill 539, putting restrictions on predatory lending practices in California that he says “create debt traps for families already struggling financially.”

Critics say lenders who offer these high-interest loans target disadvantaged people, large numbers of them Black and Brown consumers living in some of the most underserved census tracts in the state. These are Californians who are typically denied traditional bank loans because of poor credit or lack of collateral. However, the high interest rates on these loans can be crippling.

According to documents provided to California Black Media, a LoanMe Inc. loan for around $5,000 would require a payback of $42,000 over seven years at a 115 percent annual percentage rate

Tacking interest rates on loans as high as 200 percent sometimes — in addition to hidden fees, critics say that predatory lenders typically structure their loans in ways that force people who sign up for them to constantly re-borrow money to pay off the mounting debts they already owe.

“Many Californians living paycheck to paycheck are exploited by predatory lending practices each year,” said Newsom. “Defaulting on high-cost, high-interest rate installment loans push families further into poverty instead of pulling them out. These families deserve better, and this industry must be held to account.” The new legislation restricts the amount of interest that can be levied on loans ranging from $2,500-$10,000 to 36 percent, plus the federal funds rate.

“Gov. Newsom’s signature on AB 539 sends a strong message that California will not allow lenders to thrive on high-cost loans that often leave consumers worse off than when they started,” said Assemblymember Monique Limόn (D-Santa Barbara,) co-author of the bill.

“I am grateful to the broad coalition of community groups, faith leaders, local governments, and responsible lenders who supported this historic achievement and helped us achieve strong bipartisan support of this legislation.”

Limon has been campaigning for the passage of AB 539 for more than two years now. She is also a champion for financial education that informs consumers about the dangers of high-interest loans.

Assemblymember Timothy Grayson (D-Concord), a co-author of the bill, says the governor signing the bill signals the end of the worst kinds of abusive loans in the state.

“Californians deserve real access to capital, not exploitative loans that trap them in perpetual payments and compounding debt,” said Grayson. “We must do more to protect financially vulnerable, hardworking families from predatory lenders who profit off their devastation.”

Figures from the California Department of Business Oversight (CBO) reveal that in 2016 the total dollar amount for payday loans in the state was $3.14 billion. The CBO also stated that seniors now represent the largest group taking out payday loans and more than 400,000 consumers in the state took out 10 payday loans in 2016. A third of those high-cost loans ended up in default.

Not everyone is cheering the passage of AB 539. Those opponents say the bill is restrictive and undermines the values of free-market capitalism.

The California-Hawaii chapter of the NAACP opposed the bill, arguing that it limits options for poor African Americans who need to borrow money in emergencies.

“We are deeply concerned about the impact AB 539 will have on small businesses and consumers. As proposed, AB 539 will limit lenders’ ability to provide a variety of short-term credit options to borrowers in need.” said the California Hispanic Chamber of Commerce in an interview with California Globe.

Manny Otiko, California Black Media

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Oakland Post: Week of March 18 – 24, 2026

The printed Weekly Edition of the Oakland Post: Week of March 18 – 24, 2026

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1 week ago

March 22, 2026

Oakland Post

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Advice

Financial Wellness and Mental Health: Managing Money Stress in College 

While everyone’s financial situation is unique, several common sources of stress have the potential to strain your financial health. These include financial and economic uncertainty, existing debts, unexpected expenses, and mental or physical health changes. Financial stress may differ from situation to situation, but understanding the factors contributing to yours may help you begin to craft a plan for your unique circumstances.

Published

2 weeks ago

March 17, 2026

Oakland Post

Sponsored by JPMorganChase

As a college student, managing financial responsibilities can be stressful.

If you’ve found yourself staying up late thinking about your finances or just feeling anxious overall about your financial future, you’re not alone. In one survey, 78% of college students who reported financial stress had negative impacts on their mental health, and 59% considered dropping out. While finances can impact overall stress, taking steps to manage your finances can support your mental, emotional and physical well-being.

When it comes to money, the sources of stress may look different for each student, but identifying the underlying causes and setting goals accordingly may help you feel more confident about your financial future.

Consider these strategies to help improve your financial wellness and reduce stress.

Understand what causes financial stress

2. Determine your financial priorities

Start by reflecting on your financial priorities. For students this often includes paying for school or paying off student loans, studying abroad, saving for spring break, building an emergency fund, paying down credit card debt or buying a car. Name the milestones that are most important to you, and plan accordingly.

3. Create a plan and stick to it

While setting actionable goals starts you on the journey to better financial health, it’s essential to craft a plan to follow through. Identifying and committing to a savings plan may give you a greater sense of control over your finances, which may help reduce your stress. Creating and sticking to a budget allows you to better track where your money is going so you may spend less and save more.

4. Pay down debt

Many students have some form of debt and want to make progress toward reducing their debt obligations. One option is the debt avalanche method, which focuses on paying off your debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate. Another is the debt snowball method, which builds momentum by paying off your smallest debt balance, and then working your way up to the largest amounts.

5. Build your financial resilience

Some financial stress may be inevitable, but building financial resilience may allow you to overcome obstacles more easily. The more you learn about managing your money, for instance, the more prepared you’ll feel if the unexpected happens. Growing your emergency savings also may increase resilience since you’ll be more financially prepared to cover unexpected expenses or pay your living expenses.

6. Seek help and support

Many colleges have resources to help students experiencing financial stress, like financial literacy courses or funds that provide some assistance for students in need. Talk to your admissions counselor or advisor about your concerns, and they can direct you to sources of support. Your school’s counseling center can also be a great resource for mental health assistance if you’re struggling with financial stress.

The bottom line

Financial stress can affect college students’ health and wellbeing, but it doesn’t have to derail your dreams. Setting smart financial goals and developing simple plans to achieve them may help ease your stress. Revisit and adjust your plan as needed to ensure it continues to work for you, and seek additional support on campus as needed to help keep you on track.

 JPMorgan Chase Bank, N.A. Member FDIC