BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1357
                                                                  Page  1

          Date of Hearing:   April 29, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                 AB 1357 (Coto) - As Introduced:  February 27, 2009 

          Policy Committee:                              Banking and  
          Finance      Vote:                            11-0

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable: No           

           SUMMARY  

          This bill allows pawnbroker to charge an interest rate of 2.5%  
          per month on all unpaid balances of a loan. Currently, the 2.5%  
          rate applies only to the first $225 in unpaid loan balances,  
          with declining rates applying to larger balances. 

           FISCAL EFFECT  

          Negligible local law enforcement costs, not reimbursable.

           COMMENTS  

           1)Background.  A pawnbroker is an individual or business entity  
            that offers monetary loans in exchange for an item of value.  
            The pawnbroker transaction can involve either the outright  
            purchase of an item in return for cash or an exchange of the  
            item for a loan. In the latter case, the customer may  
            repurchase the item within a contracted time period for the  
            amount of the loan plus an interest rate. The maximum interest  
            rate is currently capped in state law at 2.5% per month for  
            unpaid loan balances of up to $225, 2% for balances between  
            $225 and $900, 1.5% for balances of between $900 and $1,650,  
            and 1.0% for balances in excess of $1,650. This bill  
            establishes an across the board rate of 2.5% on  all  unpaid  
            loan balances. 

            The increased cap would translate into a monthly increase of  
            $1.37 for a $500 unpaid loan balance, $4.37 for a $1,000  
            unpaid loan balance, and $16.12 for a $2,000 unpaid loan  
            balance. 









                                                                  AB 1357
                                                                  Page  2

           1)Purpose  . This bill seeks to impose fee increases in order to  
            offset rising costs that have occurred over the past six  
            years. The proponents assert that the increases are needed to  
            keep pawnbroker industry a viable source of credit to  
            low-income Californians who have relatively few options for  
            borrowing.

           2)Previous legislation . The version of AB 274 (Mendoza) from  
            last year's session that was passed by the Assembly included  
            the 2.5% interest rate provision in this bill, as well  
            increases in set up fees and minimum payment requirements. All  
            of the financial provisions in the Assembly version were  
            deleted in the Senate. The set-up fee and minimum payment  
            provisions were amended into SB 580 (Calderon), Chapter 580,  
            Statutes of 2008.   
           
          Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081