Title and Payday Loans in


Payday Loans in California: Subprime Report

At a Glance
California, USA
  • Nickname: The Golden State
  • Population: 38,654,206
  • Capital: Sacramento
  • Website: www.ca.gov
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While California may be home to some America’s richest and most famous people, the cost of living in the Golden State is undeniably too high for many of its residents. The state has a poverty rate of 15.8%, and the suggested yearly income to live in the capital city of Sacramento is $125,400. In San Diego, that number is even higher: $135,648. Want to live comfortably in Los Angeles? You’ll need to make $141,408 a year. And then there’s San Francisco—at an average annual income of $153,552, it’s no wonder people in the Bay Area are often looking for loans to make ends meet.

Average Credit Card Debt and Median Household Income in California vs. the U.S.
Average Credit Card Debt
Median Household Income

California Payday Loans: An Analysis

But be careful! If you’re trying to keep up with the cost living in California, don’t fall into the payday loan trap. A bad credit loan, like a payday loan offering an APR of 459% for a 14-day, $100 loan, isn’t going to help you. In fact, it’s only going to make things worse.

A Payday loan is a type of  no credit check loan that come with short repayment terms and incredibly high APRs. They are aimed at customers who have poor credit or no credit. In California, the typical payday loan has a term of only two weeks, and an APR of 459%. Theoretically, they are meant to be paid off on the customer’s next pay day (hence the name), but the reality of payday loans is far more complicated.

In California, it may be easier to get a payday loan than a meal at McDonald’s! With 1,165 locations, California has more McDonald’s restaurants than any other state in the country. And yet, all of those restaurants are greatly outnumbered by the 2,119 payday lender storefronts that operate in the state. In fact, for every 100,000 residents in California there are seven payday lenders, compared to only three McDonald’s restaurants. And while California still lags behind Texas (8.03 payday lenders per 100,000 people), Ohio (12.1/100,000), and Utah (19.12/100,000), that’s a lot of debt traps.

California payday loans are legal under Civil Code 1789.30 and Section 23000 of the California Financial Code. California state law requires payday lenders to obtain a license to operate in the state to protect customers from fraudulent actors. All agreements between a payday lender and borrower must include the terms and conditions enumerated in a contract. In 2015, California residents took out approximately 12.3 million payday loans, with an average of 6.5 loans per customer and an average APR of 366% (a 5% increase from 2014).

The History of Payday Loans in California

Low-income families are desperate to get by in California, making them particularly susceptible to payday loan debt traps.

On average, a California payday loan of $100 borrowed for a period of 2 weeks carries an APR of 459%. The maximum interest fee that a payday lender can charge in California is 15% of the loan, and the maximum amount they can lend is $300. As an example, a customer who was charged a 15% fee on a $300 payday loan would only take home $255.

State law requires that all lending companies in California have a license to operate in the state. Consumers should be on the lookout for any payday lender operating in the state without a license. And even requiring that payday lenders in California be licensed doesn’t prevent them from leading you into a payday loan debt trap. According to the California Reinvestment Coalition, 76% of payday loans borrowed in California in 2015 were borrowed by consumers who had already borrowed one or more payday loans that same year.

As part of the Dodd-Frank Act, Congress gave the Consumer Financial Protection Bureau (CFPB) authority to address unfair, deceptive, and abusive payday loan practices in California. Moreover, the Dodd-Frank Act provides the CFPB with the authority to provide other rules and regulations to help protect consumers, such as:

  • Requiring lenders to take into account a borrower’s ability to repay the loan, considering both income and expenses.
  • Limiting the amount of time lenders can keep a borrower in payday loan debt to no more than 90 days in a 12-month period.
  • Restricting lenders from requiring a post-dated check or electronic access to a borrower’s checking account as a condition of extending credit.

The California Deferred Deposit Transaction Law, the statute that governs payday lending in California, imposes licensing obligations and disclosure requirements for interest rates and loan terms.

The law does not protect borrowers from extremely high annual percentage rates, nor are there any regulations that would help prevent a borrower from falling into the payday loan debt trap, such as a minimum repayment period of 30 to 60 days or a limit of four to six loans per year.


California Payday Loan Rules and Regulations

Under the California Deferred Deposit Transaction Law (CDDTL), a consumer must provide a California payday lender with a personal check (not to exceed $300) for the amount they are borrowing. The lender will then create a loan for the borrower, minus an agreed-upon fee (not to exceed 15% of the loan amount). The lender will then hold on to the check for the length of the loan term. When the loan term is complete, the lender will deposit the check to cover the loan amount.

Consumers are not allowed to take out more than one payday loan at a time in California—even if the multiple loans were to add up to the maximum loan amount of $300. California payday loans have a maximum term of 31 days and no minimum length. Under California law, additional interest cannot be charged if a lender willingly agrees to prolong the payment window beyond the maximum term.

This ban on additional interest at the maturity of the loan means that it is not possible to rollover a payday loan in California. Payday lenders are under no obligation to extend a borrower’s due date, but if they do, there is no added cost to the borrower.

However, there are no “cooling off periods” for payday loans under California law. This means that a borrower can pay off their payday loan and immediately take out a new one. This is how many California consumers get trapped in a cycle of payday loan debt, constantly taking out new loans to, in effect, pay off the payday loans they had previously borrowed.

While there are laws in effect to protect the borrower, there are still many ways for consumers to become trapped in a dangerous cycle of payday loan debt. Advertised as quick, one-time fixes for financial emergencies, the reality of payday loans in California involves a system built on repeat customers.

In 2015, there were more Californians who borrowed ten or more payday loans (462,334) than there were customers who only borrowed one (323,870). In that same year, 64% of payday loan fees were generated by customers who took out seven or more payday loans.

Quick Facts: Payday Lending in California
  • Maximum Loan Amount:$255 if maximum fee charged ($300 maximum check)
  • Loan Term:Max: 31 days
  • Maximum Finance Rate and Fees:15% of check
  • Finance Charge for 14-day $100 loan:$17.65
  • APR for 14-day $100 loan:459%
  • Maximum Number of Outstanding Loans at One Time:One
  • Rollovers Permitted:None (cannot charge fee for extension)

Title Loans in California

Payday loans are not the only type of predatory loan that is making lives harder in the Golden State. Car title loans in California pose an equal threat to consumers.

Like payday loans, title loans are typically short-term loans, with an average loan term of 1 month. Unlike payday loans, title loans are secured by collateral, namely the title to the borrower’s motor vehicle. If a borrower cannot repay the loan when it is due or is unable to extend the loan term (usually incurring additional fees and interest), the lender has the right to repossess the borrower’s car.

In California, most title loans range from $2,500 to $5,000—to avoid the state’s small loan interest rate cap—and about 45% of them carry annual percentage rates of at least 100%. The current state law in California does not limit the interest rates that lenders can charge on a consumer loan of $2,500 or more, nor does it cap the maximum length of the loan’s repayment term.

In 2013 alone, 91,505 title loans totaling $334.8 million were taken out in California. Those loans came with an incredible $239 million in fees, placing California alongside Alabama, Ohio, Illinois, Mississippi, and Texas in the top six states for short-term loan fee volume. In 2015, 16,989 car title loans in California resulted in borrowers’ cars being repossessed.

A History of Title Loans in California

The rate of title lending in California has more than doubled in recent years. There are currently 281 car title lenders in California, which amounts to 99,498 people per licensee Along with Kansas, Louisiana, and South Carolina, California has not explicitly authorized title loans. However, lenders have exploited loopholes in state laws to find ways to issue loans at triple-digit annual rates.

Even in the confines of the Small Loan Cap, title lenders have found ways to keep interest rates high and borrowers stuck in the loop of renewing their loans. Title lenders know how to play the game and have been doing so successfully for years.

California Title Loan Restrictions

Because California caps the interest rate for small loans ($2,500 or less), title lenders typically begin their loans at $2,501. This allows them to charge much higher interest rates. In fact, the industry standard interest rate for title loans in the state sits at approximately 300% APR.

At a 300% APR, California title loan customers who take an average of 8 months to pay back a $2,501 loan will end up paying $5,000 in interest alone! And remember: borrowers also have to pay back the principal loan amount of $2,501. That means that the total they end up paying to their lender on a $2,501 loan could be $7,500 or more!

A title loan under $2,500 in California has a term limit of 31 days. However, the state does not mandate a maximum term limit for any title loan above that amount. The lack of sensible title lending guidelines in California leaves consumers in a vulnerable place when dealing with the predatory actors in the title loan industry. From 2011 to 2013, California title loan totals jumped from 38,148 to 91,505, with more than 2 million people taking out a loan each year.

California Payday Loan Rules and Regulations

If you live in California and need emergency cash via a payday or title loan, use extreme caution and make sure to educate yourself on these lenders’ predatory business practices. Remember, payday lenders must post their California license and a fee schedule at every location, and must fully inform you about the interest you will pay.

A reputable company should send you free information without requiring you to provide any personal details. Look for a range of services, including budget counseling and savings and debt management classes. If they don’t provide helpful resources, how will they have your best interest in mind for a payday loan?

It is important for lenders to follow the payday and title loan laws of California, but they will also find ways around it. A keen awareness of the rules and regulations governing title loans and payday loans in California can help protect you from predatory lenders and the dangerous cycle of debt their products can trap you in.

If you have been victimized by a predatory payday or title lender in California, contact the California Department of Business Oversight (DBO) by calling 1-866-275-2677 to file a complaint. You can also complete the DBO’s complaint form online.

The California Department of Business Oversight (DBO) information:

  • Address: Financial Services Division 1515 K Street, Suite 200 Sacramento, CA 95814
  • Phone: (866) 275-2677
  • Website: www.dbo.ca.gov

Outside Help for Payday and Title Loans in California

Aside from the California Department of Business Oversight, you can find further help and guidance from the California Reinvestment Coalition (CRC). To meet the needs of communities of color and low-income communities, CRC works to build an inclusive and fair economy by ensuring banks and corporations invest in communities. In order to protect the residents of California from predatory lending, CRC is continually reaching out to local and state lawmakers. CRC has joined consumer advocates in opposing and defeating several industry-backed attempts to raise the maximum payday loan amount from $300 to $500.

Consumer Protection in California

The payday loan and title loan industry in California isn’t making it easy for lawmakers to protect residents. With every court case, lenders join forces to fight back, and oftentimes they end up winning. To help California continue their battle against predatory lending and to better protect its residents, it is important to reach out. Let your lawmakers know that you want stricter regulations and rules.

Reference this page when you need more information on title loans and payday loans in California—protect yourself from predatory lending.

Guides to Payday and Title Lending in California Cities

Payday and title loans are a big issue for California residents. And it gets even more complicated at the city level. Check out these payday and title loan guides to the following cities in California:

Anaheim | Bakersfield | Chico | Fresno | Los Angeles | Modesto | Oakland | Redding | Riverside | Sacramento | San Diego | San Francisco | San Jose | Santa Barbara | Stockton

Works Cited

  1. “Here’s how much you need to earn to live comfortably in 15 major U.S. cities while still saving money” Business Insider. Accessed February 22, 2017. http://www.businessinsider.com/salary-to-live-in-major-us-cities-2015-8/#14-sacramento-2
  2. “California State Information” Payday Loan Consumer Information. Accessed February 23, 2017. http://www.paydayloaninfo.org/state-information/12
  3. “State Debt” Balltopedia. Accessed February 22, 2017. https://ballotpedia.org/State_debt
  4. “McDonalds vs Payday Lenders” California State University Northridge. Accessed February 22, 2017. http://www.csun.edu/~sg4002/research/mcdonalds_by_state.htm
  5. “2015 Payday Loan Statistics for California” California Reinvestment Coalition. Accessed February 22, 2017. https://calreinvest.wordpress.com/2016/07/27/2015-payday-loan-statistics-for-california/7/27/2015-payday-loan-statistics-for-california/
  6. “California Payday Loan Law and Legislation” UStatesLoans.org. Accessed February 22, 2017. http://www.ustatesloans.org/state-ca.html
  7. “Payday Lenders in California: How Predatory Lenders Trap Consumers” California Reinvestment Coalition. Accessed February 23, 2017. http://www.calreinvest.org/crc-issues/payday-lenders-in-california-how-predatory-lenders-trap-consumers
  8. “Analysis: New State Data Show California Payday Lenders Continue to Rely on Trapping Borrowers in Debt” Center for Responsible Lending. Accessed February 23, 2017. http://www.responsiblelending.org/payday-lending/research-analysis/CRL-Analysis-CA-Payday-Lenders-Rely-on-Trapping-Borrowers-in-Debt.pdf
  9. “California Deferred Deposit Transaction (Payday Loan) Law” California Department of Business Oversight. Accessed February 15, 2017. http://www.dbo.ca.gov/Licensees/Payday_Lenders/
  10. “Automobile Title Loan Consumer Advisory” Department of Business Oversight. Accessed February 23, 2017. http://www.dbo.ca.gov/Consumers/Advisories/Auto_Title_Advisory.pdf
  11. “2015 Payday Loan Statistics for California” California Reinvestment Coalition. Accessed February 23, 2017. https://calreinvest.wordpress.com/2016/07/27/2015-payday-loan-statistics-for-california/
  12. “Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending. Accessed February 15, 2017. http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf
  13. “Driven to Disaster: Car-Title Lending and Its Impact on Consumers” CFA. Accessed February 23, 2017. http://www.responsiblelending.org/other-consumer-loans/car-title-loans/research-analysis/CRL-Car-Title-Report-FINAL.pdf
  14. “State Urges California Consumers to Be Wary of Auto-Title Loans” The Sacramento Bee. Accessed February 23, 2017. http://www.sacbee.com/news/business/article4457825.html
  15. “Why Car Title Loans are Illegal in Some States – Should They be Illegal in All of Them?” Dove-safely.net. Accessed February 23, 2017. http://www.drive-safely.net/why-car-title-loans-are-illegal-in-some-states/
  16. “Payday Lenders in California: How Predatory Lenders Trap Consumers” California Reinvestment Coalition. Accessed February 23, 2017. http://www.calreinvest.org/crc-issues/payday-lenders-in-california-how-predatory-lenders-trap-consumers