The implementation of AB 2561 would expand the boundaries of existing laws regarding money transmission and deferred deposit transactions, reinforcing consumer protections by broadening the scope of actions that can lead to penalties for licensees. Importantly, this includes the prohibition of loan arrangements and marketing activities related to loans that exceed specified charge limits. This legislation aims to enhance financial stability for consumers and ensure fair lending practices among financial institutions.
Assembly Bill 2561, introduced by Assembly Member Limn, aims to amend California's Financial Code by adding Sections 2177 and 23028. The bill's primary focus is on consumer loans, specifically targeting the practices of finance lenders and brokers. Currently, California Financing Law prohibits engaging in such businesses without proper licensing and sets guidelines on interest rate charges for loans under $10,000. Under this bill, additional restrictions would be placed on licensees, preventing them from arranging loans or referring customers to lenders if the proposed loans contain charges exceeding established limits.
While supporters argue that AB 2561 strengthens consumer rights and protects against predatory lending practices, critics may view it as a potential overreach that could impose undue burdens on financial service providers. Notably, the bill also stipulates that no reimbursement is necessary for local agencies or school districts as the costs associated with the bill are tied to the creation of new infractions rather than direct financial mandates. This aspect is designed to mitigate concerns regarding the economic impact of regulatory changes on local governments, which has been a point of contention in past legislative discussions.