California Deferred Deposit Transaction (Payday Loan) Law

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A deferred deposit transaction is commonly known as a payday loan. Here's how they work under the California Deferred Deposit Transaction Law (CDDTL):

The consumer provides the lender (called an originator under the CDDTL) a personal check for the amount of money desired. The lender provides the consumer the money, minus an agreed-upon fee. The lender then defers depositing the consumer's check for a specific period of time.

Under the CDDTL, the amount of the consumer's personal check cannot exceed $300. The lender cannot charge a fee that is higher than 15 percent of the check amount. So, for example, a borrower who gives the lender a check for $300 will take home only $255 if the lender charges the maximum fee of 15 percent. The term of a payday loan cannot last longer than 31 days.

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