SACRAMENTO – Assemblymember Ash Kalra commends the California Supreme Court’s ruling in De La Torre v. CashCall finding that high-interest rates on loans above $2,500 are “unconscionable.” Over the past two years Assemblymember Kalra has been leading the effort to place reasonable interest rate caps on high dollar consumer loans over $2,500.
“I applaud the California State Supreme Court for doing what the Legislature could not; finding that high-interest rate loans are unacceptable.” Assemblymember Kalra goes on to say, “This ruling is a significant step forward, however, it remains the responsibility of the Legislature to put in place sound and reasonable financial protections for consumers who need a loan when faced with stressful financial circumstances.”
The unanimous opinion released Monday morning ruled that interest rates on consumer loans of $2,500 or more can render the loans unconscionable and thereby void the loan. The opinion written by Associate Justice Mariano-Florentino Cuellar responded in the affirmative that “courts have a responsibility to guard against consumer loan provisions with unduly oppressive terms.”
This past year the Legislature failed to pass AB 2500, which would have closed the gap in California’s Consumer Finance Lender Law (CFLL) that is being exploited by predatory lenders, by extending the state’s interest rate cap for loans up to $5,000. It would have covered both unsecured and secured consumer loans. As a result, Californians continue to be targeted by predatory lenders, many of whom deliberately target Latino and African American borrowers by setting up stores in minority and low-income communities. According to a 2016 annual report by the California Department of Business Oversight (DBO), 58% of installment loans of $2,500 to $5,000 had APRs of 100% or higher.
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