Proposition 111 placed a 36 percent cap on total APR for payday loans. This was a substantial change, as prior to this, the average APR for these products was 186 percent. Notably, this 2018 measure was tremendously popular, and passed with 77 percent of the vote.
Despite their similarities, alternative charge loans were not subject to Proposition 111’s rate cap. This created a loophole for lenders, many of whom, according to the Attorney General’s office, simply switched from providing payday to alternative charge loans after the proposition went into effect. This trend is evidenced in the number of small-dollar, high-cost loans originated in 2018 and 2019. As seen in the chart below, the number of alternative charge loans in 2019 (post-Proposition 111) and payday loans in 2018 (pre-Proposition 111) are not tremendously different.