On December 14, 2021, the California Department of Financial Protection and Innovation (DPFI) announced that it entered what it described as a “novel” consent order with a Los Angeles-based automobile title loan lender prohibiting the company from marketing or servicing title loans under $10,000 with interest rates above 36 percent within the state of California for the next 21 months. The agreement also prevents the lender from making new loans available through a state-chartered bank partner until September 2023 absent a change in controlling law.
The agreement stems from a 2020 investigation by the DPFI into whether the lender was unlawfully evading California’s Fair Access to Credit Act (Act) through a partnership with an out-of-state bank. The Act, enacted in 2019 and effective January 2020, capped interest rates on most loans made by California-licensed lenders at 36 percent. DPFI Commissioner Clothilde V. Hewlett expressed DPFI’s intent to prevent lenders from circumventing such caps through partnerships, stating: “The DFPI is committed to ensuring that out-of-state banks do not exploit Californians[.] The DFPI will continue to combat any effort to evade California’s Fair Access to Credit Act and will work closely with state and federal regulators to monitor and respond to practices that hurt consumers.”
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