AB 28339 (Villapudua) Proposes New Requirements for Department of Financial Protection and Innovation Regarding Responsible Small Dollar Loans Program

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By Summer M. Bosse

AB 2839 (Villapudua), as amended March 17, 2022, would amend section 22370 of the Financial Code as it relates to the California Financing Law’s Pilot Program for Increased Access to Responsible Small Dollar Loans.

The Pilot Program for Increased Access to Responsible Small Dollar Loans (RSDL), created under SB 318 (Hill) (Chapter. 467, Statutes of 2013), aims to increase the availability of installment loans of at least $300, but less than $2,500. Financial lenders licensed under the California Financial Law (CFL) and approved by the Commissioner of the Department of Financial Protection and Innovation (DFPI) to participate in the program are permitted to charge specified alternative rates and charges, including an administrative fee and delinquency fees, on loans between $300 and $2,500. The program is currently scheduled to run until January 1, 2028, and requires licensees and other entities that wish to participate in the program to file an application and pay a fee to the Commissioner of DFPI. Before dispersing loans through RSDL, licensees must offer a credit education program to borrowers, or invite the borrower to a credit education program offered through an independent third party. The requisite credit education program must be previously reviewed and approved by the Commissioner of DFPI.

AB 2839 would require DFPI to provide a list of approved credit education programs and providers on its website. The bill would also allow licensees approved to participate in RSDL to charge a monthly maintenance fee but would prohibit the monthly maintenance fee from being added to the loan balance upon which interest is charged. Licensees would also be required to disclose the amount of the monthly maintenance fee when a consumer applies for a loan under RSDL.

At this writing, AB 2839 is pending before the Assembly Committee on Banking and Finance. A hearing on the bill has not yet been set.

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