Loan paperwork is full of words that sound alike and mean very different things. This loan terms glossary for Fresno borrowers starts with the phrase “deferred deposit transaction,” which is California’s legal name for a payday loan, and then covers the other terms you are likely to meet. Knowing the words does not make a high-cost loan cheap, but it helps you spot the real price before you sign.
Quick answer: A deferred deposit transaction is California's legal name for a payday loan: you write a check for up to $300, the lender holds it until a due date up to 31 days away, and the fee is up to 15% of the check, so the most cash you can receive is $255. This glossary explains that term and the other words you will see on loan paperwork in Fresno.
Deferred deposit transaction
This is the formal name for a payday loan under the California Deferred Deposit Transaction Law. You write the lender a personal check. The lender gives you cash and agrees to “defer,” or delay, depositing the check until a set date, usually close to your next payday. On that date the lender deposits the check, or collects by another method you authorized.
If your Fresno paperwork uses this phrase, you are looking at a payday loan with its own California rules. If it says “installment loan,” “personal loan” or “line of credit,” a different law applies. For a wider look at the product, see how payday loans actually work.
Face amount, fee and cash you receive
Three numbers on a payday agreement are easy to mix up.
- Face amount: the dollar amount written on your check. In California it can be up to $300.
- Fee: the lender’s charge, up to 15% of the face amount. On a $300 check that is $45.
- Cash you receive: the face amount minus the fee. On a $300 check, the most you can receive is $255.
You write the check for the full face amount, fee included. You owe $300 even though you only walked out with $255.
Term and due date
The term is how long the loan lasts. A California payday loan can run up to 31 days. The due date is the day the lender may deposit your check. Make sure the money is in your account the day before, because a bounced check adds costs and stress.
APR versus fee
A payday lender usually talks about a flat fee. The annual percentage rate, or APR, turns that fee into a yearly rate so you can compare it with other credit. Federal Truth in Lending rules require the cost to be disclosed in writing. Our guide on APR versus interest rate goes deeper.
Here is a worked example. You write a $300 check and receive $255 in cash. The fee is $45, and the loan lasts 14 days.
- You receive: $255
- You repay: $300
- Cost to borrow for 14 days: $45
- Approximate APR: about 460%
The fee looks small, but the loan is short and the cost is large compared with the cash you get. That is why the APR matters when you compare a payday loan with a credit union loan.
Paper check versus ACH authorization
The classic version uses a paper check that the lender holds. Many loans today are handled online. An ACH authorization is your permission for the lender to pull money from your bank account on the due date. Read it carefully: check the date, the exact amount and whether it allows repeat withdrawals.
Returned-check fee
If your check bounces, California allows one $15 returned-check fee. That is the only charge the lender may add for the bounced check. Your own bank may also charge an overdraft or insufficient-funds fee, which is a separate cost.
Extension and payment plan
You can ask the lender for more time, though it does not have to agree. If it agrees to an extension or a payment plan, California does not let it charge any additional fee for doing so. If someone wants a new fee for an “extension,” ask which rule allows it, and consider contacting the DFPI.
Rollover and renewal
A rollover, or renewal, means pushing the due date back by paying a new fee. In California, a payday lender may not make you a new loan to pay off an existing one, and it can have only one open payday loan with you at a time. These rules aim to stop the cycle where fees pile up while the original $255 never gets paid down. Read more in California’s rule against extending payday loans.
Collateral and criminal threats
Collateral is something you pledge, such as a car title, that the lender can take if you do not pay. A California payday loan cannot be secured by collateral. The law also does not allow criminal charges or criminal process against a payday borrower. A lender who threatens arrest is breaking the rules, so write down the date and what was said, and report it.
Principal, interest and administrative fee
Larger loans use different words. Principal is the amount you borrow, interest is the charge for using it over time, and an administrative fee is a one-time charge some licensed lenders add. For a licensed loan under $2,500, California caps monthly interest and allows an administrative fee of up to 5% of the principal or $50, whichever is less.
Example: the most interest allowed on a $1,000 loan repaid over 12 equal monthly payments.
- Monthly payment: about $95.56
- Number of payments: 12
- Total interest: about $147
- Administrative fee: up to $50
- Total repaid: about $1,197 at most
A lender can charge less than the maximum, and a credit union may be lower still, so compare offers.
License, DFPI and debt collectors
A licensed lender is one that the California Department of Financial Protection and Innovation (DFPI) has approved. Check the license before you hand over a check or bank details. You can search licenses and file complaints at dfpi.ca.gov, or call the DFPI consumer line at 1-866-275-2677. See how to verify a licensed lender for the steps.
If a debt goes to collections, the Rosenthal Act covers original creditors and collection agencies, and debt collectors must be licensed by the DFPI. Wages can be garnished only after a court judgment, within state limits.
Language of the agreement
A payday agreement must be written in the language mainly used when you and the lender negotiated it. For consumer loans negotiated mainly in Spanish, Chinese, Tagalog, Vietnamese or Korean, California also requires a translation. Do not sign a document you cannot read.
Cheaper options to try first in Fresno
- Utility payment plans. PG&E (1-800-743-5000) can set up a payment arrangement, and CARE or FERA may lower your bill. For water, sewer and trash, call City of Fresno Utilities Billing and Collection at (559) 621-6888.
- Credit unions. EECU is the largest credit union based in the central San Joaquin Valley; confirm eligibility with it. Federal credit unions can also offer payday alternative loans at no more than 28% interest plus an application fee of at most $20. See credit unions versus payday lenders in Fresno.
- 211 Fresno County. Dial 211, call 1-866-559-4211 or text 211-211 for rent, food and utility help, any hour.
Frequently asked questions
Yes. It is the legal term California uses for a payday loan, and the Deferred Deposit Transaction Law applies to it.
The check can be up to $300. Because the fee can be up to 15%, which is $45 on $300, the most cash you can receive is $255.
The term can be up to 31 days. Check the due date on your agreement and plan for full repayment that day.
If the lender agrees to an extension or payment plan, it cannot charge an additional fee for it. The lender is not required to agree, so ask early.
No. A lender may have only one open payday loan with you at a time, and it may not make a new loan to pay off the old one.
Use the license search at dfpi.ca.gov or call the DFPI consumer line at 1-866-275-2677 before you sign anything.
This article is educational and is not financial or legal advice. Before you borrow, confirm the lender is licensed with the California Department of Financial Protection and Innovation (DFPI), and read the fee disclosure in full.