Financial institutions: loans: interest rates., the official text

An act to amend Sections 22303 and 23036 of the Financial Code, relating to financial institutions.

LEGISLATIVE COUNSEL'S DIGEST

The California Financing Law (CFL) generally regulates loans made by finance lenders, brokers, and program administrators. The CFL authorizes licensees who make a consumer loan to contract for and receive charges with blended rates based on the amount of the money loaned, up to loans of a bona fide principal amount of less than $2,500. The CFL provides that a willful violation of any of its provisions a crime.
This bill would instead prohibit a licensee who lends any sum of money less than $2,500 from contracting for or receiving charges at a rate exceeding an annual percentage rate set forth in, and calculated by, specified federal laws and regulations as in effect on January 1, 2026. By expanding a crime, this bill would impose a state-mandated local program.
The California Deferred Deposit Transaction Law (CDDTL) generally regulates deferred deposit transactions. The CDDTL prohibits the fee for a deferred deposit transaction from exceeding 15% of the face amount of the check. The CDDTL provides that a willful violation of any of its provisions is crime.
This bill would instead prohibit the total amount charged to a customer for a deferred deposit transaction from exceeding the annual percentage rate set forth in, and calculated by, specified federal laws and regulations as in effect on January 1, 2026. By expanding a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

The people of the State of California do enact as follows:

SECTION 1.
Section 22303 of the Financial Code is amended to read:
22303.
(a) A licensee who lends any sum of money less than two thousand five hundred dollars ($2,500) shall not contract for or receive charges at a rate exceeding an annual percentage rate set forth in, and calculated pursuant to, the Military Lending Act (10 U.S.C. Sec. 987) and its implementing regulations (32 C.F.R. Part 232) as in effect on January 1, 2026.
(b) This section does not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,500) or more as determined in accordance with Section 22251.

SEC. 2.
Section 23036 of the Financial Code is amended to read:
23036.
(a) The total amount charged to a customer for a deferred deposit transaction shall not exceed an annual percentage rate set forth in, and calculated pursuant to, the Military Lending Act (10 U.S.C. Sec. 987) and its implementing regulations (32 C.F.R. Part 232) as in effect on January 1, 2026.
(b) A licensee may allow an extension of time, or a payment plan, for repayment of an existing deferred deposit transaction but may not charge any additional fee or charge of any kind in conjunction with the extension or payment plan. A licensee that complies with the provisions of this subdivision shall not be deemed to be in violation of subdivision (g) of Section 23037.
(c) A licensee shall not enter into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect.
(d) A licensee who enters into a deferred deposit transaction agreement, or any assignee of that licensee, shall not be entitled to recover damages for that transaction in any action brought pursuant to, or governed by, Section 1719 of the Civil Code.
(e) A fee not to exceed fifteen dollars ($15) may be charged for the return of a dishonored check by a depositary institution in a deferred deposit transaction. A single fee charged pursuant to this subdivision is the exclusive charge for a dishonored check. No fee may be added for late payment.
(f) No amount in excess of the amounts authorized by this section shall be directly or indirectly charged by a licensee pursuant to a deferred deposit transaction.
(g) A licensee shall be subject to the provisions of Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code.

SEC. 3.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.