(2)The California Deferred Deposit Transaction Law provides for the licensure and regulation by the Commissioner of Business Oversight of persons engaged in the business of making or arranging deferred deposit transactions. Existing law, among other things, prohibits a licensee from entering into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. A knowing and willful violation of the provisions of this law is a crime.

This bill would require the commissioner, by July 1, 2019, to develop operate, and maintain an Internet Web site and common database in which a licensee would be required to, by the time period described below, record each deferred deposit transaction for the purpose of preventing violations of the California Deferred Deposit Transaction Law. The bill would require the database to meet certain requirements, including that it allow real-time access to information entered into the database via an Internet connection. The bill would, alternatively, authorize the commissioner to contract with a provider to develop, operate, or maintain the database. The bill would require, on or after July 1, 2019, a licensee to conduct a search on the database before entering into any deferred deposit transaction, and would prohibit the licensee from entering into that transaction if the database reveals the customer has any outstanding deferred deposit transactions. The bill would require the licensee to adhere to generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database. By expanding the scope of an existing crime, this bill would impose a state-mandated local program. The bill would provide that the information contained in the database is confidential and not subject to public inspection, and the database and its contents are not subject to requests under the California Public Records Act, except as specified.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The California Deferred Deposit Transaction Law provides for the licensure and regulation by the Commissioner of Business Oversight of persons engaged in the business of making or arranging deferred deposit transactions. Existing law, among other things, prohibits a licensee from entering into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. A knowing and willful violation of the provisions of this law is a crime.

This bill would require the commissioner, by July 1, 2019, to develop operate, and maintain an Internet Web site and common database in which a licensee would be required to, by the time period described below, record each deferred deposit transaction for the purpose of preventing violations of the California Deferred Deposit Transaction Law. The bill would require the database to meet certain requirements, including that it allow real-time access to information entered into the database via an Internet connection. The bill would, alternatively, authorize the commissioner to contract with a provider to develop, operate, or maintain the database. The bill would require, on or after July 1, 2019, a licensee to conduct a search on the database before entering into any deferred deposit transaction, and would prohibit the licensee from entering into that transaction if the database reveals the customer has any outstanding deferred deposit transactions. The bill would require, on or after July 1, 2019, a licensee to enter specified information related to deferred deposit transactions into the database, and would require the licensee to adhere to generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database. By expanding the scope of an existing crime, this bill would impose a state-mandated local program. The bill would provide that the information contained in the database is confidential and not subject to public inspection, and the database and its contents are not subject to requests under the California Public Records Act, except as specified.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The California Deferred Deposit Transaction Law provides for the licensure and regulation of persons engaged in the business of making or arranging deferred deposit transactions. Existing law makes a willful violation of these provisions a crime.

This bill would state the intent of the Legislature to enact subsequent legislation relating to the California Deferred Deposit Transaction Law.

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Steven Bradford, Chair

2017 - 2018 Regular

Bill No: AB 3010 Hearing Date: June 27, 2018

Subject: California Deferred Deposit Transaction Law

SUMMARY

This bill imposes a limit of one deferred deposit transaction at a time per borrower, across all deferred deposit transaction law licensees, enforced by a database, and proposes a new, alternative set of rules for installment loans made under the California Financing Law (CFL) in amounts of up to $2,500, as specified.

EXISTING LAW

1. Provides for the CFL (Financial Code Sections 22000 et seq.), administered by the Department of Business Oversight (DBO). The CFL regulates secured and unsecured, consumer-purpose and commercial-purpose loans made by nondepository institutions and Property Assessed Clean Energy financing arranged by program administrators, as specified. Key rules applicable to consumer loans in amounts up to $2,500 are summarized in the table below.

1. Provides for the CDDTL (Financial Code Section 23000 et seq.), administered by DBO. The CDDTL:
   
   1. Allows lenders licensed under its provisions to defer the deposit of a customer’s personal check for up to 31 days; limits the maximum value of the check to $300; limits the maximum fee to 15% of the face amount of the check; and requires CDDTL lenders to distribute a notice to customers prior to entering into any deferred deposit transaction that includes information about the loan and loan charges and a listing of the borrower’s rights (Financial Code Section 23036).
   2. Allows CDDTL licensees to grant borrowers an extension of time or a payment plan to repay an existing deferred deposit transaction, and prohibits the lender from charging any additional fee in connection with the extension or payment plan (Financial Code Section 23036).
      
   3. Prohibits CDDTL licensees from entering into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect and from doing any of the following (Financial Code Section 23036):
      
      1. Accepting or using the same check for a subsequent transaction.
         
      2. Permitting a customer to pay off all or a portion of one deferred deposit transaction with the proceeds of another.
         
      3. Entering into a deferred deposit transaction with a person lacking the capacity to contract.
         
      4. Accepting any collateral or making any deferred deposit transaction contingent on the purchase of insurance or any other goods or services.
         
      5. Altering the date or any other information on a check, accepting more than one check for a single deferred deposit transaction, or taking any check on which blanks are left to be filled in after execution.
         

THIS BILL

INSTALLMENT LOAN PROVISIONS

1. Proposes a new type of installment loan under the CFL, applicable to loan amounts up to $2,500, which differs from the two existing installment loan rules, as shown below.

1. In addition to the rules summarized in the table above, the following rules are applicable to DBO, the loans authorized by this bill, and the lenders offering those loans:
   
   1. DBO is required to promulgate regulations prescribing the manner in which licensees are required to determine a prospective borrower’s income for purposes of the underwriting requirements.
      
   2. Each loan must be precomputed and payable in substantially equal installments, which must include principal, fees, interest, and other charges.
      
   3. The minimum loan duration must be the greater of 60 days or the number of months derived from adding the loan principal and all applicable charges, and dividing that sum by the maximum allowable monthly payment (either 5% of gross income or 6% of net income).
      
   4. A finance lender may not originate more than two loans to any single borrower during any 12-month period, nor originate a loan to a borrower if that borrower already has an outstanding loan with that licensee.
      
   5. A finance lender may collect one returned-check or late fee per loan, in a maximum amount of 5% of the original loan amount or $25, whichever is less.
      
   6. A finance lender may not charge active duty military personnel of the United States Armed Forces or their dependents a monthly maintenance fee.
      
   7. At the time a prospective borrower submits an application for a loan, the finance lender must disclose information required pursuant to federal Regulation Z, including the periodic payment amount, total repayment, total loan costs, APR inclusive of monthly fee, and loan duration; must notify the consumer of his or her right to revoke an automated clearinghouse (ACH) payment authorization; and must notify the consumer of his or her right to rescind his or her loan by notifying the licensee of his or her intent to do so and returning the principal advanced by the end of the business day following the date the loan is consummated.
      
   8. A finance lender may not attempt to collect from a borrower’s account after two consecutive attempts have failed, unless that lender has obtained a new payment authorization from the consumer in writing.
      
   9. Upon a ten-day delinquency and notice to the borrower, a finance lender may accelerate the loan balance (i.e., require payment in full), but may collect only prorated interest and fees earned to date.
      
   10. A finance lender must allow a borrower to prepay his or her loan at any time and may not charge a prepayment penalty. Upon prepayment, all finance charges, inclusive of interest, and all fees are pro rata refundable, as specified.
       

DEFERRED DEPOSIT TRANSACTION LAW PROVISIONS

1. Directs the Commissioner of Business Oversight (commissioner) to develop operate, and maintain an Internet Web site and common database by July 1, 2019, in which a licensee must record each deferred deposit transaction into which it enters. The database must allow licensees real-time access to information on deferred deposit transactions entered into the database through an Internet connection and may retain data only as necessary to ensure compliance with the CDDTL.
   
2. Authorizes the commissioner to contract with a database provider to develop, operate, or maintain the database. If the commissioner does contract with a third party, the contract must include provisions requiring the database provider to ensure that data in the database is kept confidential, except as otherwise authorized, and requiring data to be archived 365 calendar days after it is first entered, as specified.
   
3. Beginning on July 1, 2019, requires a licensee to conduct a search of the database before entering into a deferred deposit transaction, to ensure that a customer does not have any outstanding deferred deposit transactions. Prohibits a licensee from entering into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect with any licensee, as reflected by the database.
   
4. Provides that, if a licensee’s search of the database does not reflect any outstanding deferred deposit transactions, the licensee may enter into an agreement for a deferred deposit transaction with that licensee. Requires the licensee to enter the following into the database related to that transaction:
   
   • 1. The applicant’s social security number (SSN) or individual taxpayer identification number, if the applicant cannot provide an SSN.
        
     2. When the deferred deposit transaction was initiated.
        
     3. When the deferred deposit transaction is paid in full.
        
5. Requires a licensee to immediately correct any incorrect data previously entered into the database, as specified.
   
6. Provides rules intended to ensure that CDDTL licensees are not in violation of the law, if the database cannot be accessed due to technical difficulties, and to ensure that the data is entered timely, once the technical difficulties are resolved.
   
7. Requires licensees to maintain generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database.
   
8. Provides that data in the database is confidential and may not be requested pursuant to the Public Records Act, but clarifies that the commissioner may publicly release aggregate data in the database if he or she finds that the release is in the public interest, provided, however, that the commissioner’s release does not include the personally identifying information of any customer or licensee.
   

COMMENTS

1. Reconsideration: On June 20^th, the author of this bill presented the measure in the Senate Banking and Financial Institutions Committee after proposing amendments to delete the installment loan provisions and accept the technical amendments to the payday loan provisions that were suggested in the Committee analysis. The bill, as proposed to be amended by the author, failed to receive a motion. The bill, as it appears in print, is now back before this Committee.
   
2. Purpose: This bill is sponsored by the author to maintain access to capital for California consumers, while restraining practices that lead consumers into a cycle of debt.
   
3. Background: This bill has two provisions: 1) one payday loan at a time, enforced by a database, and 2) a new installment loan product that may be offered under the CFL in amounts of up to $2.500. The first provision was heard and passed by the Assembly. The second provision was amended into this bill on June 11^th and is being heard in a policy committee for the first time on June 20^th.
   
   Although they will be discussed separately below in the interest of clarity, this bill’s two provisions are not truly separate. The payday loan provision is intended to prevent borrowers from “stacking” multiple payday loans at the same time (i.e., from taking out a payday loan from one payday lender while that borrower has another payday loan or payday loans outstanding from another payday lender or lenders). The installment loan provision is intended to address concerns that borrowers who currently stack payday loans will have nowhere to go to borrow money, when they are limited to a single payday loan at a time.
   
4. Payday Loan Provisions: Debates over the merits and dangers of payday loans have been waged in the California Legislature since the state first authorized payday lending in 1996. Consumer advocates believe that payday loans drive borrowers into a cycle of repeat borrowing, which harms them more than they are helped by the infusion of borrowed cash. Industry advocates assert that their product offers needed credit to borrowers who have few other options, and cite high rates of customer satisfaction and low rates of complaints from borrowers who understand the risks and rewards of their product.
   
   Doesn’t Existing Law Already Limit Payday Borrowers to One Payday Loan at a Time? Existing law prohibits a licensee from entering into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. According to those involved in negotiating the bill that established the CDDTL (SB 898, Perata, Chapter 777, Statutes of 2002), it was understood that this language was intended to prohibit payday borrowers from obtaining more than one payday loan at a time from the same licensee; it was not intended to prohibit stacking. Although the background around original intent provides useful context, the original intent of existing law has thus far been moot, because DBO and its predecessor department (the Department of Corporations) have lacked any mechanism with which to enforce a “one payday loan at a time, across all licensees” requirement. This bill would allow DBO to enforce such a requirement. This bill also takes the additional step of changing the wording of existing law to provide that a licensee may not enter into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect with any licensee.
   
   How Much Will the Database Cost? The cost of the database envisioned by this bill will be borne entirely by licensed lenders. These lenders will be unable to pass the cost of the database on to their customers, because the allowable fees that may be charged under the CDDTL are capped at 15% per $100 borrowed, and virtually all licensees are already charging this maximum rate. Because no other charges or fees other than a returned check fee may be charged to borrowers under the CDDTL, licensees will not be allowed to add a line item cost per loan attributable to the lender’s database cost onto the top of their existing loan charges.
   
   The cost to operate the database envisioned by this bill is currently unknown. However, experiences in other states can provide a rough guide. At the present time, fourteen states use a database to enforce their payday loan laws: Alabama, Delaware, Florida, Illinois, Indiana, Kentucky, Michigan, New Mexico, North Dakota, Oklahoma, South Carolina, Virginia, Washington, and Wisconsin. Typically, the state regulator contracts with the database provider to run the database, and the database provider charges licensees directly on a per loan basis. According to a representative of Veritec, the database provider used by the other states to manage their databases, the lowest fee charged is $0.35 per loan (Florida), and the highest is $1.50 per loan (Delaware). Veritec estimates that the per loan cost to payday lenders in California would be between $0.20 and $0.25 per loan, assuming that DBO uses a competitive bidding process to select the provider it chooses.
   
   What About Data Breaches? This bill represents the third time legislation has been introduced to establish a payday loan database in California.  As part of research conducted for one of the earlier bills, Committee staff reached out to representatives of Veritec to ask how that company handled privacy and data breach issues in the other states where it operates databases.  Those representatives responded that if the company’s database is breached, Veritec’s responsibilities are covered by existing state and federal data breach laws.  Those laws require that the company housing the data notify consumers of the breach and pay for credit monitoring.  Veritec’s contracts require it to adhere to applicable state and federal laws regarding customer notification following a data breach, and to carry insurance to cover its costs to comply with those requirements, should the company lack the funds with which to do so. 
   
   In other states, the state payday loan regulator and the database provider are the only entities that have access to all of the data in the database.  Typically, these states and the database provider indemnify each other against unlawful use of the database by each of their employees and contractors.  In contrast to regulators and the database provider, individual payday lenders only have access to data they enter into the database. 

Isn’t the Consumer Financial Protection Bureau (CFPB) Already Planning to Require a National Database of Payday Loans? On October 5, 2017, the federal CFPB issued final regulations for “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (12 CFR Part 1041; Federal Register, Vol. 82, November 17, 2017, pp. 54472 – 54921). Although acting CFPB Director Mick Mulvaney has expressed his dislike of the rules and his desire to change and/or delay them, the rules are still scheduled to take effect on August 19, 2019. One of the key components of the federal payday rule is a federal database.

As described in 12 CFR 1041.10 and 1041.11, the regulations envision that one or more companies will apply to and obtain approval from CFPB for databases called registered information systems (RISs). These RISs are intended to serve as repositories of information for lenders regarding consumers’ current and prior usage of covered loans (which include payday loans). Lenders are required to furnish information to RISs for all covered loans at origination, update that information over the life of the loan, and provide additional information to RISs when the loan ceases to be outstanding. The CFPB intends that each lender making a covered loan will notify all existing RISs about the status of that loan throughout the loan’s life and that each lender seeking to vet an applicant for a covered loan will obtain a consumer report from an RIS to determine whether that consumer has an outstanding covered loan and/or when he or she last paid off a covered loan. Before making most covered loans, a lender will be required to obtain and review a consumer report from a RIS.

If the federal payday rules do go into effect (either as planned, or on a delayed schedule), the database envisioned by this bill will likely be superfluous. This bill’s author may wish to consider an amendment that would sunset her bill’s requirement for a state-specific payday database, if a national database renders a state-specific database unnecessary.

Could Banks Provide Alternatives for Payday Customers? Recent guidance Issued by the Office of the Comptroller of the Currency (OCC) may allow banks to compete for consumers who currently utilize payday loans. On May 23, 2018, OCC head Joseph Otting issued a bulletin clarifying the OCC’s guidance on short-term, small-dollar installment loans (https://www.occ.treas.gov/news-issuances/bulletins/2018/bulletin-2018-14.html). In an announcement accompanying release of the bulletin, Otting said that he wanted banks to originate loans of between $300 and $5,000 to borrowers with FICO scores of 680 or below. In news reports following the announcement (“OCC Gives Banks Green Light to Compete With Payday Lenders,” Kate Berry, American Banker, May 23, 2018), Otting was quoted as saying, “This product is a vehicle to help people get back into mainstream banking and get them off of high-cost financial services products of check-cashing and payday lending, with a view toward getting them into the mainstream of financial activities where they can qualify for a credit card.” The bulletin did not create a new rule or change existing guidance, but the clarification could provide banks with greater assurance that they can offer short-term installment loans without running afoul of their federal regulator. The long-term effect of the OCC’s recent change is currently unknown.

1. Installment Loan Provisions: As described in the Amendments section below, many aspects of the installment loan product envisioned by this bill are unclear. However, if one makes basic assumptions, it is possible to generate a table such as the one below. In reviewing the table, readers are encouraged to view the scenarios below as examples of what loans authorized by this bill might look like, rather than a prediction of what they will look like.
   

Will Borrowers Who Qualify for Pilot Program Loans Receive the Higher-Cost Loans Authorized By This Bill? This bill will allow lenders to charge higher interest rates and fees than those allowed under the pilot program, without requiring them to adhere to many of the consumer protections required under the pilot program (such as rigorous debt-to-income underwriting, reporting borrower payment performance to a major credit bureau, and offering credit education prior to loan consummation). It is unclear to what extent borrowers who could qualify for lower-cost, credit-building pilot program loans will obtain the higher-cost, non-credit building loans authorized by this bill.

1. Support: None received.
2. Opposition:
   
   1. A coalition of consumer advocacy groups was supportive of this bill when it proposed to limit payday customers to one payday loan at a time, enforced by a database, but is opposed to the current version of the bill. These groups observe that the bill does not address existing, harmful predatory practices, and instead, it creates new ones; it authorizes the creation of another loan product with triple-digit interest rates; and it includes insufficient safeguards to stop the debt trap. The consumer groups are particularly concerned about the underwriting criteria in the bill, observing that it does not require lenders to ensure that monthly payments are affordable. “High-cost installment loans have very high default rates even when payments are limited to 5% of income or less. Research by the CFPB found extraordinarily high default levels on online installment loans, even at payment to income ratios of 5% or less.” Furthermore, although the bill limits lenders making installment loans to one at a time to an individual borrower, the bill does not limit loans across other lenders or between other products. “Unlike AB 3010 as originally proposed, the new language does not create any limitations on the total number of loans outstanding across all lenders offering the new product or across multiple products, which would be enforced by a statewide database. Even through the database remains in the bill as amended, it is written in such a way that it will not protect consumers.”
      
   2. Enova, an online lender that lends nationwide, opposes both provisions of the bill. With respect to the database, the company observes, “A single-purpose database does not allow consumers to benefit from their positive repayment history.” Further, “consumers should have the opportunity to access the credit they need and lenders should have the ability to evaluate an applicant’s ability to repay the loan. State managed, single purpose databases simply do not support this.”
      
      On the installment loan provisions, “this language...is often described as being modeled on successful reforms adopted in Colorado in 2011. Those claims are not accurate. The rates described in the new alternative are not the ones used in Colorado.” Enova also observes that the limitations on monthly payment size would, for customers with incomes of $40,000 or less, stretch repayment periods for loans above $500 to over a year – a product structure that is not commercially viable. “We would also point out that this payment size limitation is not part of the Colorado law, and unfairly discriminates against borrowers with seasonal income variations. Studies of income-based limitations on payment size have shown that payment to income ratios do not substantially impact default rates but do restrict access to credit for lower income consumers. The cap on total costs (50% of the principal lent) would make intermediate-term loans (6 months) and longer-term loans (over 1 year) not commercially viable for lending to non-prime rated consumers.”
      
      Many of the industry representatives writing in opposition to the bill make similar arguments about the likelihood that the bill will significantly restrict access to credit among borrowers with damaged credit histories and about the failure of this bill’s installment loan structure to pencil out economically given their customer base.
      
   3. The National Federation of Independent Business/California opposes the bill on grounds that it “may push responsible, licensed companies out of the market while doing nothing to address consumers’ underlying need for credit...We know the important role small-dollar credit fills in the financial services marketplace. Taking away an individual or family’s ability to access small dollar credit when they need it the most doesn’t erase their obligation or the stress they experience. Instead, placing unwarranted additional limitations on consumers’ capacity to secure credit will drive them to more expensive and less regulated alternatives.”
      
   4. The California State Conference of the National Association for the Advancement of Colored People raises concerns about this bill’s restriction of credit and about the database this bill would require. “This is a huge risk to Californians’ data and privacy. At a time of unprecedented data and privacy security, compiling and storing data related to personal financial transactions compounds security risks, offering potential opportunities for identity theft and related scams. This risk would be created only for Californians with near- and sub-prime credit who want short-term loans.”
      
3. Amendments: Amendments are suggested to address the technical and implementation concerns noted below. Suggested amendments are not expected to remove opposition to the bill, but are intended to ensure that the bill can be implemented, if it is enacted.
   
   INSTALLMENT LOAN PROVISIONS
   
   1. Broadly speaking, the installment loan provisions of this bill require amendment to clarify how they mesh with other provisions of the CFL. For example, as drafted, Section 22304.5 states that, “as an alternative to the charges authorized by Sections 22303 and 22304,” a licensee may contract for a note rate of 36%. However, the bill fails to clarify that its monthly servicing fee is in lieu of the administrative fee in Section 22305, its returned check fee is in lieu of the returned item fee in Section 22320, and its late fee is in lieu of the late fee in Section 22320.5.
      
      This bill’s relationship to the Pilot Program for Increased Access to Responsible Small Dollar Loans (pilot program) should also be clarified.
      
      It would also be helpful to clarify the extent to which this bill’s provisions are intended to apply to both secured and unsecured loans or only to unsecured loans. If the author wishes to apply the measure to unsecured loans only, an amendment will be necessary to limit it in that way.
      
   2. The underwriting requirements of Section 22304.5(a)(4) would benefit from clarification. As drafted, this section could be read to require a borrower to pass both income tests (5% of gross income and 6% of net monthly income). Consistent with her understanding of the author’s intent, staff suggests revising the section to provide that “(4) The total required monthly payment shall meet at least one of the following criteria: (A) No greater than 5% of the borrower’s verified gross monthly income. (B) No greater than 6% of the borrower’s verified net monthly income.”
      
   3. Section 22304.5(a)(4) requires DBO to establish rules for use by licensees to verify borrower’s income. However, the bill lacks a delayed operative date that would allow DBO to promulgate those rules, before authorizing licensees to use the alternative installment loan structure contemplated by the bill.
      
   4. Section 22304.5(c) states that a licensee shall not charge any fee not expressly permitted by “this section,” but a different section (Section 22304.6) authorizes other fees that may be charged.
      
      Section 22304.5(c) also states that a licensee shall not charge any fee not expressly permitted by “other law.” The reference to “other law” should either be clarified or deleted.
      
   5. Section 22304.5(e) prohibits licensees from charging a maintenance fee to active duty military personnel of the United States Armed Forces “or their dependents.” Staff recommends an amendment to clarify the term dependent.
      
   6. Section 22304.6 uses the term consumer to refer to the same individual referred to in Section 22304.5 as a borrower. Staff suggests using the word borrower in Section 22304.6, to track other, similar references in the CFL.
      
   7. Section 22304.6 is drafted in a manner that contemplates lenders’ use of automated clearinghouse (ACH) payments to debit customers’ accounts. However, this section fails to contemplate the possibility that a borrower might choose to write a check or pay cash to make their monthly payment. Staff suggests a series of amendments to this section intended to communicate the concept that ACH authorization is only one means by which borrowers may pay their loans back. This might be accomplished by moving subdivision (g) to the front of the section and adding clarifying language to other subdivisions along the lines of, “if a borrower opts to allow the lender to collect from the consumer’s account....” and “right to revoke ACH authorization, if applicable.”
      
   8. Section 22304.6(i) refers to “prepayment, renewal, or refinancing” but the bill contains no rules for either renewal or refinancing. Are these allowed? If so, under what conditions?
      
   9. More generally, the Legislature has previously imposed a sunset date and required a study by DBO, when it has created new consumer-purpose installment loan products. Keeping with that history, staff suggests a sunset date of January 1, 2023 and annual reporting by DBO regarding the performance of loans made using this new authority, beginning in July, 2020.
      

DEFERRED DEPOSIT PROVISIONS

• 1. Although the bill has language requiring CDDTL licensees to search the payday loan database beginning on July 1, 2019, the bill’s cap of one payday loan at a time across all licensees (Section 23036(c)) is operative on January 1, 2019.
     
  2. Section 23036.5(b) requires the contract with the third party database provider to ensure that data is archived 365 days after it is first entered. Unless there is a compelling reason for data to be archived exactly on the 365^th day, staff suggests providing more flexibility by applying this requirement to data that have been in the database for at least one year. It would also be helpful to clarify for how long the database provider is required to archive the data.
     
  3. Section 23036.5(c) and (d) use the term “customer” when “applicant” should be used and the term “applicant” when customer should be used. References to “customer” on page 9, lines 23, 24, 26, 28, and 31 should refer to “applicant.” References to “applicant” on page 9, line 33 should refer to “customer.”
     
  4. Section 23036.5(d) requires CDDTL licensees to enter “when” a deferred deposit transaction is initiated and paid in full. It is unclear if “when” refers only to a date or to both a date and time. It is also unclear how the term “is paid in full” should be interpreted, if a customer does not repay their payday loan with cash. Does “paid in full” refer to the date on which a CDDTL licensee submits the customer’s check for payment or to the date on which that customer’s check clears?
     
  5. An amendment is suggested to ensure that the requirement for a licensee to immediately correct any incorrect data previously entered into the database is triggered once a licensee discovers or is made aware of the inaccuracy. The existing language of 22306.5(e) is not clear in this regard.
     

1. Prior and Related Legislation:
   
   1. SB 515 (Jackson), 2014-14 Legislative Session, would have increased the minimum length of a deferred deposit transaction; required deferred deposit licensees to underwrite deferred deposit transactions and offer installment plans, as specified; capped the maximum number of deferred deposit transactions per customer at four per year; and required the Commissioner of Corporations to develop and implement a database to help enforce the CDDTL. Failed passage in the Senate Banking and Financial Institutions Committee.
      
   2. AB 365 (Lowenthal), 2011-12 Legislative Session, would have directed the Commissioner of Corporations to establish a payday loan database. Never taken up by the author.
      
   3. SB 898 (Perata), Chapter 777, Statutes of 2002, enacted the CDDTL and shifted the responsibility for administering the law from the California Department of Justice (DOJ) to DOC.
      
   4. SB 1959 (Calderon), Chapter 682, Statutes of 1996 enacted the earliest version of a payday lending law in California, administered by DOJ.
      

LIST OF REGISTERED SUPPORT/OPPOSITION

Support

None received

Opposition

Asian Law Alliance

Beach Financial

California Asian Pacific Chamber of Commerce

California Black Chamber of Commerce

California Financial Services Providers

California Low-Income Consumers Coalition

California State Conference of the National Association for the Advancement of Colored
People

Cashback Loans

Center for Responsible Lending

Check Into Cash

California Reinvestment Coalition

Clergy and Laity United for Economic Justice

Community Legal Services in East Palo Alto

Consumers for Auto Reliability and Safety

Consumers Union

CURO

CYCO Financial Services Center

Enova

ER Financial

Housing and Economic Rights Advocates

Jubilee East Bay

JustFaith East Bay

League of California Cities—Latino Caucus

Los Angeles County Business Federation

Mission Asset Fund

Mission Economic Development Agency

National Federation of Independent Business/California

New Economics for Women

Online Lenders Alliance

Payday Loan

UnidosUS

Valley Industry and Commerce Association

-- END --

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Steven Bradford, Chair

2017 - 2018 Regular

Bill No: AB 3010 Hearing Date: June 20, 2018

Subject: California Deferred Deposit Transaction Law

SUMMARY

This bill imposes a limit of one deferred deposit transaction at a time per borrower, across all deferred deposit transaction law licensees, enforced by a database, and proposes a new, alternative set of rules for installment loans made under the California Financing Law (CFL) in amounts of up to $2,500, as specified.

EXISTING LAW

1. Provides for the CFL (Financial Code Sections 22000 et seq.), administered by the Department of Business Oversight (DBO). The CFL regulates secured and unsecured, consumer-purpose and commercial-purpose loans made by nondepository institutions and Property Assessed Clean Energy financing arranged by program administrators, as specified. Key rules applicable to consumer loans in amounts up to $2,500 are summarized in the table below.

1. Provides for the CDDTL (Financial Code Section 23000 et seq.), administered by DBO. The CDDTL:
   
   1. Allows lenders licensed under its provisions to defer the deposit of a customer’s personal check for up to 31 days; limits the maximum value of the check to $300; limits the maximum fee to 15% of the face amount of the check; and requires CDDTL lenders to distribute a notice to customers prior to entering into any deferred deposit transaction that includes information about the loan and loan charges and a listing of the borrower’s rights (Financial Code Section 23036).
   2. Allows CDDTL licensees to grant borrowers an extension of time or a payment plan to repay an existing deferred deposit transaction, and prohibits the lender from charging any additional fee in connection with the extension or payment plan (Financial Code Section 23036).
      
   3. Prohibits CDDTL licensees from entering into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect and from doing any of the following (Financial Code Section 23036):
      
      1. Accepting or using the same check for a subsequent transaction.
         
      2. Permitting a customer to pay off all or a portion of one deferred deposit transaction with the proceeds of another.
         
      3. Entering into a deferred deposit transaction with a person lacking the capacity to contract.
         
      4. Accepting any collateral or making any deferred deposit transaction contingent on the purchase of insurance or any other goods or services.
         
      5. Altering the date or any other information on a check, accepting more than one check for a single deferred deposit transaction, or taking any check on which blanks are left to be filled in after execution.
         

THIS BILL

INSTALLMENT LOAN PROVISIONS

1. Proposes a new type of installment loan under the CFL, applicable to loan amounts up to $2,500, which differs from the two existing installment loan rules, as shown below.

1. In addition to the rules summarized in the table above, the following rules are applicable to DBO, the loans authorized by this bill, and the lenders offering those loans:
   
   1. DBO is required to promulgate regulations prescribing the manner in which licensees are required to determine a prospective borrower’s income for purposes of the underwriting requirements.
      
   2. Each loan must be precomputed and payable in substantially equal installments, which must include principal, fees, interest, and other charges.
      
   3. The minimum loan duration must be the greater of 60 days or the number of months derived from adding the loan principal and all applicable charges, and dividing that sum by the maximum allowable monthly payment (either 5% of gross income or 6% of net income).
      
   4. A finance lender may not originate more than two loans to any single borrower during any 12-month period, nor originate a loan to a borrower if that borrower already has an outstanding loan with that licensee.
      
   5. A finance lender may collect one returned-check or late fee per loan, in a maximum amount of 5% of the original loan amount or $25, whichever is less.
      
   6. A finance lender may not charge active duty military personnel of the United States Armed Forces or their dependents a monthly maintenance fee.
      
   7. At the time a prospective borrower submits an application for a loan, the finance lender must disclose information required pursuant to federal Regulation Z, including the periodic payment amount, total repayment, total loan costs, APR inclusive of monthly fee, and loan duration; must notify the consumer of his or her right to revoke an automated clearinghouse (ACH) payment authorization; and must notify the consumer of his or her right to rescind his or her loan by notifying the licensee of his or her intent to do so and returning the principal advanced by the end of the business day following the date the loan is consummated.
      
   8. A finance lender may not attempt to collect from a borrower’s account after two consecutive attempts have failed, unless that lender has obtained a new payment authorization from the consumer in writing.
      
   9. Upon a ten-day delinquency and notice to the borrower, a finance lender may accelerate the loan balance (i.e., require payment in full), but may collect only prorated interest and fees earned to date.
      
   10. A finance lender must allow a borrower to prepay his or her loan at any time and may not charge a prepayment penalty. Upon prepayment, all finance charges, inclusive of interest, and all fees are pro rata refundable, as specified.
       

DEFERRED DEPOSIT TRANSACTION LAW PROVISIONS

1. Directs the Commissioner of Business Oversight (commissioner) to develop operate, and maintain an Internet Web site and common database by July 1, 2019, in which a licensee must record each deferred deposit transaction into which it enters. The database must allow licensees real-time access to information on deferred deposit transactions entered into the database through an Internet connection and may retain data only as necessary to ensure compliance with the CDDTL.
   
2. Authorizes the commissioner to contract with a database provider to develop, operate, or maintain the database. If the commissioner does contract with a third party, the contract must include provisions requiring the database provider to ensure that data in the database is kept confidential, except as otherwise authorized, and requiring data to be archived 365 calendar days after it is first entered, as specified.
   
3. Beginning on July 1, 2019, requires a licensee to conduct a search of the database before entering into a deferred deposit transaction, to ensure that a customer does not have any outstanding deferred deposit transactions. Prohibits a licensee from entering into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect with any licensee, as reflected by the database.
   
4. Provides that, if a licensee’s search of the database does not reflect any outstanding deferred deposit transactions, the licensee may enter into an agreement for a deferred deposit transaction with that licensee. Requires the licensee to enter the following into the database related to that transaction:
   
   • 1. The applicant’s social security number (SSN) or individual taxpayer identification number, if the applicant cannot provide an SSN.
        
     2. When the deferred deposit transaction was initiated.
        
     3. When the deferred deposit transaction is paid in full.
        
5. Requires a licensee to immediately correct any incorrect data previously entered into the database, as specified.
   
6. Provides rules intended to ensure that CDDTL licensees are not in violation of the law, if the database cannot be accessed due to technical difficulties, and to ensure that the data is entered timely, once the technical difficulties are resolved.
   
7. Requires licensees to maintain generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database.
   
8. Provides that data in the database is confidential and may not be requested pursuant to the Public Records Act, but clarifies that the commissioner may publicly release aggregate data in the database if he or she finds that the release is in the public interest, provided, however, that the commissioner’s release does not include the personally identifying information of any customer or licensee.
   

COMMENTS

1. Purpose: This bill is sponsored by the author to maintain access to capital for California consumers, while restraining practices that lead consumers into a cycle of debt.
   
2. Background: This bill has two provisions: 1) one payday loan at a time, enforced by a database, and 2) a new installment loan product that may be offered under the CFL in amounts of up to $2.500. The first provision was heard and passed by the Assembly. The second provision was amended into this bill on June 11^th and is being heard in a policy committee for the first time on June 20^th.
   
   Although they will be discussed separately below in the interest of clarity, this bill’s two provisions are not truly separate. The payday loan provision is intended to prevent borrowers from “stacking” multiple payday loans at the same time (i.e., from taking out a payday loan from one payday lender while that borrower has another payday loan or payday loans outstanding from another payday lender or lenders). The installment loan provision is intended to address concerns that borrowers who currently stack payday loans will have nowhere to go to borrow money, when they are limited to a single payday loan at a time.
   
3. Payday Loan Provisions: Debates over the merits and dangers of payday loans have been waged in the California Legislature since the state first authorized payday lending in 1996. Consumer advocates believe that payday loans drive borrowers into a cycle of repeat borrowing, which harms them more than they are helped by the infusion of borrowed cash. Industry advocates assert that their product offers needed credit to borrowers who have few other options, and cite high rates of customer satisfaction and low rates of complaints from borrowers who understand the risks and rewards of their product.
   
   Doesn’t Existing Law Already Limit Payday Borrowers to One Payday Loan at a Time? Existing law prohibits a licensee from entering into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. According to those involved in negotiating the bill that established the CDDTL (SB 898, Perata, Chapter 777, Statutes of 2002), it was understood that this language was intended to prohibit payday borrowers from obtaining more than one payday loan at a time from the same licensee; it was not intended to prohibit stacking. Although the background around original intent provides useful context, the original intent of existing law has thus far been moot, because DBO and its predecessor department (the Department of Corporations) have lacked any mechanism with which to enforce a “one payday loan at a time, across all licensees” requirement. This bill would allow DBO to enforce such a requirement. This bill also takes the additional step of changing the wording of existing law to provide that a licensee may not enter into an agreement for a deferred deposit transaction for a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect with any licensee.
   
   How Much Will the Database Cost? The cost of the database envisioned by this bill will be borne entirely by licensed lenders. These lenders will be unable to pass the cost of the database on to their customers, because the allowable fees that may be charged under the CDDTL are capped at 15% per $100 borrowed, and virtually all licensees are already charging this maximum rate. Because no other charges or fees other than a returned check fee may be charged to borrowers under the CDDTL, licensees will not be allowed to add a line item cost per loan attributable to the lender’s database cost onto the top of their existing loan charges.
   
   The cost to operate the database envisioned by this bill is currently unknown. However, experiences in other states can provide a rough guide. At the present time, fourteen states use a database to enforce their payday loan laws: Alabama, Delaware, Florida, Illinois, Indiana, Kentucky, Michigan, New Mexico, North Dakota, Oklahoma, South Carolina, Virginia, Washington, and Wisconsin. Typically, the state regulator contracts with the database provider to run the database, and the database provider charges licensees directly on a per loan basis. According to a representative of Veritec, the database provider used by the other states to manage their databases, the lowest fee charged is $0.35 per loan (Florida), and the highest is $1.50 per loan (Delaware). Veritec estimates that the per loan cost to payday lenders in California would be between $0.20 and $0.25 per loan, assuming that DBO uses a competitive bidding process to select the provider it chooses.
   
   What About Data Breaches? This bill represents the third time legislation has been introduced to establish a payday loan database in California.  As part of research conducted for one of the earlier bills, Committee staff reached out to representatives of Veritec to ask how that company handled privacy and data breach issues in the other states where it operates databases.  Those representatives responded that if the company’s database is breached, Veritec’s responsibilities are covered by existing state and federal data breach laws.  Those laws require that the company housing the data notify consumers of the breach and pay for credit monitoring.  Veritec’s contracts require it to adhere to applicable state and federal laws regarding customer notification following a data breach, and to carry insurance to cover its costs to comply with those requirements, should the company lack the funds with which to do so. 
   
   In other states, the state payday loan regulator and the database provider are the only entities that have access to all of the data in the database.  Typically, these states and the database provider indemnify each other against unlawful use of the database by each of their employees and contractors.  In contrast to regulators and the database provider, individual payday lenders only have access to data they enter into the database. 

Isn’t the Consumer Financial Protection Bureau (CFPB) Already Planning to Require a National Database of Payday Loans? On October 5, 2017, the federal CFPB issued final regulations for “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (12 CFR Part 1041; Federal Register, Vol. 82, November 17, 2017, pp. 54472 – 54921). Although acting CFPB Director Mick Mulvaney has expressed his dislike of the rules and his desire to change and/or delay them, the rules are still scheduled to take effect on August 19, 2019. One of the key components of the federal payday rule is a federal database.

As described in 12 CFR 1041.10 and 1041.11, the regulations envision that one or more companies will apply to and obtain approval from CFPB for databases called registered information systems (RISs). These RISs are intended to serve as repositories of information for lenders regarding consumers’ current and prior usage of covered loans (which include payday loans). Lenders are required to furnish information to RISs for all covered loans at origination, update that information over the life of the loan, and provide additional information to RISs when the loan ceases to be outstanding. The CFPB intends that each lender making a covered loan will notify all existing RISs about the status of that loan throughout the loan’s life and that each lender seeking to vet an applicant for a covered loan will obtain a consumer report from an RIS to determine whether that consumer has an outstanding covered loan and/or when he or she last paid off a covered loan. Before making most covered loans, a lender will be required to obtain and review a consumer report from a RIS.

If the federal payday rules do go into effect (either as planned, or on a delayed schedule), the database envisioned by this bill will likely be superfluous. This bill’s author may wish to consider an amendment that would sunset her bill’s requirement for a state-specific payday database, if a national database renders a state-specific database unnecessary.

Could Banks Provide Alternatives for Payday Customers? Recent guidance Issued by the Office of the Comptroller of the Currency (OCC) may allow banks to compete for consumers who currently utilize payday loans. On May 23, 2018, OCC head Joseph Otting issued a bulletin clarifying the OCC’s guidance on short-term, small-dollar installment loans (https://www.occ.treas.gov/news-issuances/bulletins/2018/bulletin-2018-14.html). In an announcement accompanying release of the bulletin, Otting said that he wanted banks to originate loans of between $300 and $5,000 to borrowers with FICO scores of 680 or below. In news reports following the announcement (“OCC Gives Banks Green Light to Compete With Payday Lenders,” Kate Berry, American Banker, May 23, 2018), Otting was quoted as saying, “This product is a vehicle to help people get back into mainstream banking and get them off of high-cost financial services products of check-cashing and payday lending, with a view toward getting them into the mainstream of financial activities where they can qualify for a credit card.” The bulletin did not create a new rule or change existing guidance, but the clarification could provide banks with greater assurance that they can offer short-term installment loans without running afoul of their federal regulator. The long-term effect of the OCC’s recent change is currently unknown.

1. Installment Loan Provisions: As described in the Amendments section below, many aspects of the installment loan product envisioned by this bill are unclear. However, if one makes basic assumptions, it is possible to generate a table such as the one below. In reviewing the table, readers are encouraged to view the scenarios below as examples of what loans authorized by this bill might look like, rather than a prediction of what they will look like.
   

Will Borrowers Who Qualify for Pilot Program Loans Receive the Higher-Cost Loans Authorized By This Bill? This bill will allow lenders to charge higher interest rates and fees than those allowed under the pilot program, without requiring them to adhere to many of the consumer protections required under the pilot program (such as rigorous debt-to-income underwriting, reporting borrower payment performance to a major credit bureau, and offering credit education prior to loan consummation). It is unclear to what extent borrowers who could qualify for lower-cost, credit-building pilot program loans will obtain the higher-cost, non-credit building loans authorized by this bill.

1. Support: None received.
2. Opposition:
   
   1. A coalition of consumer advocacy groups was supportive of this bill when it proposed to limit payday customers to one payday loan at a time, enforced by a database, but is opposed to the current version of the bill. These groups observe that the bill does not address existing, harmful predatory practices, and instead, it creates new ones; it authorizes the creation of another loan product with triple-digit interest rates; and it includes insufficient safeguards to stop the debt trap. The consumer groups are particularly concerned about the underwriting criteria in the bill, observing that it does not require lenders to ensure that monthly payments are affordable. “High-cost installment loans have very high default rates even when payments are limited to 5% of income or less. Research by the CFPB found extraordinarily high default levels on online installment loans, even at payment to income ratios of 5% or less.” Furthermore, although the bill limits lenders making installment loans to one at a time to an individual borrower, the bill does not limit loans across other lenders or between other products. “Unlike AB 3010 as originally proposed, the new language does not create any limitations on the total number of loans outstanding across all lenders offering the new product or across multiple products, which would be enforced by a statewide database. Even through the database remains in the bill as amended, it is written in such a way that it will not protect consumers.”
      
   2. Enova, an online lender that lends nationwide, opposes both provisions of the bill. With respect to the database, the company observes, “A single-purpose database does not allow consumers to benefit from their positive repayment history.” Further, “consumers should have the opportunity to access the credit they need and lenders should have the ability to evaluate an applicant’s ability to repay the loan. State managed, single purpose databases simply do not support this.”
      
      On the installment loan provisions, “this language...is often described as being modeled on successful reforms adopted in Colorado in 2011. Those claims are not accurate. The rates described in the new alternative are not the ones used in Colorado.” Enova also observes that the limitations on monthly payment size would, for customers with incomes of $40,000 or less, stretch repayment periods for loans above $500 to over a year – a product structure that is not commercially viable. “We would also point out that this payment size limitation is not part of the Colorado law, and unfairly discriminates against borrowers with seasonal income variations. Studies of income-based limitations on payment size have shown that payment to income ratios do not substantially impact default rates but do restrict access to credit for lower income consumers. The cap on total costs (50% of the principal lent) would make intermediate-term loans (6 months) and longer-term loans (over 1 year) not commercially viable for lending to non-prime rated consumers.”
      
      Many of the industry representatives writing in opposition to the bill make similar arguments about the likelihood that the bill will significantly restrict access to credit among borrowers with damaged credit histories and about the failure of this bill’s installment loan structure to pencil out economically given their customer base.
      
   3. The National Federation of Independent Business/California opposes the bill on grounds that it “may push responsible, licensed companies out of the market while doing nothing to address consumers’ underlying need for credit...We know the important role small-dollar credit fills in the financial services marketplace. Taking away an individual or family’s ability to access small dollar credit when they need it the most doesn’t erase their obligation or the stress they experience. Instead, placing unwarranted additional limitations on consumers’ capacity to secure credit will drive them to more expensive and less regulated alternatives.”
      
   4. The California State Conference of the National Association for the Advancement of Colored People raises concerns about this bill’s restriction of credit and about the database this bill would require. “This is a huge risk to Californians’ data and privacy. At a time of unprecedented data and privacy security, compiling and storing data related to personal financial transactions compounds security risks, offering potential opportunities for identity theft and related scams. This risk would be created only for Californians with near- and sub-prime credit who want short-term loans.”
      
3. Amendments: Amendments are suggested to address the technical and implementation concerns noted below. Suggested amendments are not expected to remove opposition to the bill, but are intended to ensure that the bill can be implemented, if it is enacted.
   
   INSTALLMENT LOAN PROVISIONS
   
   1. Broadly speaking, the installment loan provisions of this bill require amendment to clarify how they mesh with other provisions of the CFL. For example, as drafted, Section 22304.5 states that, “as an alternative to the charges authorized by Sections 22303 and 22304,” a licensee may contract for a note rate of 36%. However, the bill fails to clarify that its monthly servicing fee is in lieu of the administrative fee in Section 22305, its returned check fee is in lieu of the returned item fee in Section 22320, and its late fee is in lieu of the late fee in Section 22320.5.
      
      This bill’s relationship to the Pilot Program for Increased Access to Responsible Small Dollar Loans (pilot program) should also be clarified.
      
      It would also be helpful to clarify the extent to which this bill’s provisions are intended to apply to both secured and unsecured loans or only to unsecured loans. If the author wishes to apply the measure to unsecured loans only, an amendment will be necessary to limit it in that way.
      
   2. The underwriting requirements of Section 22304.5(a)(4) would benefit from clarification. As drafted, this section could be read to require a borrower to pass both income tests (5% of gross income and 6% of net monthly income). Consistent with her understanding of the author’s intent, staff suggests revising the section to provide that “(4) The total required monthly payment shall meet at least one of the following criteria: (A) No greater than 5% of the borrower’s verified gross monthly income. (B) No greater than 6% of the borrower’s verified net monthly income.”
      
   3. Section 22304.5(a)(4) requires DBO to establish rules for use by licensees to verify borrower’s income. However, the bill lacks a delayed operative date that would allow DBO to promulgate those rules, before authorizing licensees to use the alternative installment loan structure contemplated by the bill.
      
   4. Section 22304.5(c) states that a licensee shall not charge any fee not expressly permitted by “this section,” but a different section (Section 22304.6) authorizes other fees that may be charged.
      
      Section 22304.5(c) also states that a licensee shall not charge any fee not expressly permitted by “other law.” The reference to “other law” should either be clarified or deleted.
      
   5. Section 22304.5(e) prohibits licensees from charging a maintenance fee to active duty military personnel of the United States Armed Forces “or their dependents.” Staff recommends an amendment to clarify the term dependent.
      
   6. Section 22304.6 uses the term consumer to refer to the same individual referred to in Section 22304.5 as a borrower. Staff suggests using the word borrower in Section 22304.6, to track other, similar references in the CFL.
      
   7. Section 22304.6 is drafted in a manner that contemplates lenders’ use of automated clearinghouse (ACH) payments to debit customers’ accounts. However, this section fails to contemplate the possibility that a borrower might choose to write a check or pay cash to make their monthly payment. Staff suggests a series of amendments to this section intended to communicate the concept that ACH authorization is only one means by which borrowers may pay their loans back. This might be accomplished by moving subdivision (g) to the front of the section and adding clarifying language to other subdivisions along the lines of, “if a borrower opts to allow the lender to collect from the consumer’s account....” and “right to revoke ACH authorization, if applicable.”
      
   8. Section 22304.6(i) refers to “prepayment, renewal, or refinancing” but the bill contains no rules for either renewal or refinancing. Are these allowed? If so, under what conditions?
      
   9. More generally, the Legislature has previously imposed a sunset date and required a study by DBO, when it has created new consumer-purpose installment loan products. Keeping with that history, staff suggests a sunset date of January 1, 2023 and annual reporting by DBO regarding the performance of loans made using this new authority, beginning in July, 2020.
      

DEFERRED DEPOSIT PROVISIONS

• 1. Although the bill has language requiring CDDTL licensees to search the payday loan database beginning on July 1, 2019, the bill’s cap of one payday loan at a time across all licensees (Section 23036(c)) is operative on January 1, 2019.
     
  2. Section 23036.5(b) requires the contract with the third party database provider to ensure that data is archived 365 days after it is first entered. Unless there is a compelling reason for data to be archived exactly on the 365^th day, staff suggests providing more flexibility by applying this requirement to data that have been in the database for at least one year. It would also be helpful to clarify for how long the database provider is required to archive the data.
     
  3. Section 23036.5(c) and (d) use the term “customer” when “applicant” should be used and the term “applicant” when customer should be used. References to “customer” on page 9, lines 23, 24, 26, 28, and 31 should refer to “applicant.” References to “applicant” on page 9, line 33 should refer to “customer.”
     
  4. Section 23036.5(d) requires CDDTL licensees to enter “when” a deferred deposit transaction is initiated and paid in full. It is unclear if “when” refers only to a date or to both a date and time. It is also unclear how the term “is paid in full” should be interpreted, if a customer does not repay their payday loan with cash. Does “paid in full” refer to the date on which a CDDTL licensee submits the customer’s check for payment or to the date on which that customer’s check clears?
     
  5. An amendment is suggested to ensure that the requirement for a licensee to immediately correct any incorrect data previously entered into the database is triggered once a licensee discovers or is made aware of the inaccuracy. The existing language of 22306.5(e) is not clear in this regard.
     

1. Prior and Related Legislation:
   
   1. SB 515 (Jackson), 2014-14 Legislative Session, would have increased the minimum length of a deferred deposit transaction; required deferred deposit licensees to underwrite deferred deposit transactions and offer installment plans, as specified; capped the maximum number of deferred deposit transactions per customer at four per year; and required the Commissioner of Corporations to develop and implement a database to help enforce the CDDTL. Failed passage in the Senate Banking and Financial Institutions Committee.
      
   2. AB 365 (Lowenthal), 2011-12 Legislative Session, would have directed the Commissioner of Corporations to establish a payday loan database. Never taken up by the author.
      
   3. SB 898 (Perata), Chapter 777, Statutes of 2002, enacted the CDDTL and shifted the responsibility for administering the law from the California Department of Justice (DOJ) to DOC.
      
   4. SB 1959 (Calderon), Chapter 682, Statutes of 1996 enacted the earliest version of a payday lending law in California, administered by DOJ.
      

LIST OF REGISTERED SUPPORT/OPPOSITION

Support

None received

Opposition

Asian Law Alliance

Beach Financial

California Asian Pacific Chamber of Commerce

California Black Chamber of Commerce

California Financial Services Providers

California Low-Income Consumers Coalition

California State Conference of the National Association for the Advancement of Colored
People

Cashback Loans

Center for Responsible Lending

Check Into Cash

California Reinvestment Coalition

Clergy and Laity United for Economic Justice

Community Legal Services in East Palo Alto

Consumers for Auto Reliability and Safety

Consumers Union

CURO

CYCO Financial Services Center

Enova

ER Financial

Housing and Economic Rights Advocates

Jubilee East Bay

JustFaith East Bay

League of California Cities—Latino Caucus

Los Angeles County Business Federation

Mission Asset Fund

Mission Economic Development Agency

National Federation of Independent Business/California

New Economics for Women

Online Lenders Alliance

Payday Loan

UnidosUS

Valley Industry and Commerce Association

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 3010

Author:(Limón)

As Amended Ver:April 19, 2018

Majority vote

SUMMARY: Makes changes to the California Deferred Deposit Transaction Law (CDDTL) limiting borrowers to one deferred deposit transaction (payday loan) at a time and authorizes the Department of Business Oversight (DBO) to track and enforce this provision. Specifically, this bill:

1. Prohibits a licensed lender from entering into a payday loan with a customer that has a current payday loan with any other lender.
2. Authorizes the Commissioner of DBO to develop, operate and maintain an Internet Web site and common database to record each payday loan for the purpose of preventing violations of the provision in (1) above. The database shall:
   1. Allow licensed lenders real-time access to information on payday loans entered into the database by all licensed lenders.
   2. Require the retention of data in the database only as necessary to ensure statutory compliance.
3. Allows the Commissioner to enter into a contract with a database provider to develop, operate or maintain the database, as specified. The contract shall contain provisions that:
   1. Require the data be archived for one year after it has been entered and allows the Commissioner access to archived information.
   2. Require the database provider to ensure the data and all information remains confidential, as specified.
4. Requires that on or after July 1, 2019, a licensed lender, before entering into any payday loan contract, shall conduct a search on the database to ensure that the customer does not have any outstanding payday loans. If the customer does have an outstanding payday loan, the lender shall not enter into an additional payday loan contract.
5. Requires lenders, after determining a customer has no outstanding payday loans and a new payday loan agreement has subsequently been entered into, to submit all information regarding the customer and the transaction that the Commissioner determines is necessary to record the transaction. That information shall include, but is not limited to the following:
6. Lenders shall record when a payday loan is paid in full, as specified, and shall correct any incorrect data previously entered into the database. If technical problems prevent access to the database, a lender shall enter all required information on the next business day when access is restored. Lenders shall maintain generally accepted security safeguards to protect confidential information. The information contained within the database is confidential and not available for public inspection.
7. The Commissioner may release aggregate data maintained in the database (excluding personal data) if the commissioner finds that the release is in the public interest.

EXISTING LAW: Establishes the CDDTL (Financial Code Section 23000 et seq.), administered by DBO. The CDDTL requires the licensing of payday lenders, sets a maximum of $300 for any payday loan, establishes a one-loan-at-a-time per lender policy and provides for the administration and oversight of the program by DBO.

California Finance Law (CFL) provides rate caps for loans between $300 and $2,500 that generally range between 12% and 20% depending on the amount and terms of the loan.

Additionally, a pilot program was established within the CFL (Financial Code Sections 22365 et seq.). Generally speaking, the pilot program authorizes lenders who have been vetted by DBO to charge somewhat higher interest rates and fees on loans of principal amounts up to $2,500 than are allowed under the CFL.

COMMENTS: This bill seeks to accomplish two basic goals: 1) extend the current policy of one-loan-at-a-time per lender to one-loan-at-a-time from all lenders, and 2) establish a real-time database for both lenders and DBO to use as a tool to prevent violations of the one-loan-at-a-time policy.

History

In 1996, the emergence of the check cashing industry presented the Legislature with a choice. Either focus on the nature of the check and treat check cashing services as simply that, a service, or treat the delayed deposit of the check as a loan and bring the industry in under the CFL. Ultimately, the Legislature recognized the unique nature of the industry and the service it provided to California consumers and created a new regulatory framework for payday lending. Clear statutory authority for offering payday loans was established through the creation of the CDDTL via SB 1959, (Calderon, Chapter 682, Statutes of 1996).

SB 1959 permitted check cashers to defer deposit on payday loans made by the check casher. These transactions were originally regulated by the State Department of Justice (DOJ). SB 898 (Perata, Chapter 777, Statutes of 2002), shifted the responsibility for administering payday lending from the DOJ to the Department of Corporations, now known as DBO.

By creating the CDDTL, the Legislature chose not to bring payday lending under the CFL and instead set a limit of $300 as the maximum size of a payday loan and prohibited any lender from making more than one loan to a borrower at a time. As noted in the existing law section above, lending above $300 remains governed by the CFL.

It seems relevant to note that at the time the Legislature adopted a one-loan-at-a-time per lender policy the physical availability of payday lending stores was considerably less than what it is today. Additionally, online payday lending which is easily accessible today simply did not exist then.

It seems reasonable to assume that at the time the Legislature adopted this policy they believed that one-loan-at-a-time per lender meant that no borrower would end up with more than one payday loan at any given time.

The Legislature over two decades ago could not have foreseen the explosion in payday loan access points that we have today. The problem of borrowers taking out multiple payday loans at the same time (loan stacking) was a concern of the Legislature then and is a significant issue before the Legislature today. The central purpose of this bill is to prevent loan stacking.

Payday loan stacking undermines consumer protections contained within the CFL

As discussed above, loan stacking is the practice of a borrower taking out multiple payday loans at the same time. When the Legislature established a separate section for payday lending in the Financial Code it seems clear that they were establishing a boundary of $300, below which a payday loan can be made, and above which loan activity is governed by the CFL. Today a borrower can incur payday loan debt at a level that far exceeds the $300 limit established by the Legislature. Accessing online payday lending and visiting multiple payday loan stores, which have become ever-present in many neighborhoods throughout the state, has given borrowers the ability to create payday loan debt at an unprecedented level. A borrower can take out 4 payday loans (or more) at a time incurring $1200 in payday loan debt in a single day. A loan of this size in 1996 was covered by provisions contained within the CFL, as it still is today. Those CFL provisions include consumer protections such as interest rate caps, fee caps and underwriting (determining the ability of a consumer to repay) and are present in lending between $300 and $2,500 in the pilot program under the CFL. These protections are not required within the limited scope of payday lending. To fully understand the impacts of loan stacking it is important to understand another statutory work-around that borrowers engage in, “loan sequencing”.

Loan sequencing undermines the value of a payday loan

Current statute prohibits a lender from entering into a second payday loan with a borrower until such time as the first payday loan is paid off. This prohibition prevents borrowers who cannot pay off a payday loan from simply paying a loan fee and rolling over a loan for an additional pay period. The idea here is to prevent a borrower from paying a succession of payday loan fees without ever reducing the principal of the loan. Those who oppose payday lending refer to this as a “debt trap”. Studies have shown that borrowers engage in a sequencing practice where a payday loan is incurred, paid off when the borrower gets paid and then a new payday loan is incurred within a short time thereafter. Data collected by DBO reveals that of the 11.5 million payday loans reported for 2016, 83% were subsequent transactions made by the same borrower. Of these subsequent borrowers, nearly 2/3 of the loans were made on the same day as the previous loan pay off. This sequence of taking out a payday loan, paying off the loan and then taking out a new payday loan is a proxy for loan rollovers which are prohibited by law for individual lenders. Although technically legal, sequencing has the same effect of eroding the value of a loan through a series of loan fee payments that do not reduce the loan principal.

For a borrower that finds they are unable to pay back the payday loan upon receiving their next paycheck, the results can be serious. Multiple loans sequenced over several pay periods can lead to a significant drain on a borrowers finances without reducing the principal amount of the loan (or loans).

Interested parties on all sides are concerned where borrowers will go if loan stacking is prohibited. It seems prudent to note that providing access to capital through payday loans to borrowers that do not have the ability to pay them back in a timely manner does not really provide access to capital. The rapid erosion of the benefits of a loan through sequencing and made more serious by stacking multiple loans across multiple lenders seems to support the Legislature’s decision to include greater consumer protections for loans larger than those offered through payday loans.

Unlike the CDDTL, the CFL, which governs loans above $300, requires lenders to evaluate a borrower’s ability to repay along with additional consumer protections that seek to protect borrowers from incurring debt that they are not able to pay back.

Data

Each year DBO is required to conduct a survey of payday lenders to collect up-to-date information on licensed lenders activities in order to assess the financial health and compliance practices of California’s payday loan industry. The most recent data available is the 2016 annual report titled, "The California Deferred Deposit Transaction Law Annual Report and Industry Survey (report)."

It is important to remember that the data provided to DBO comes directly from the lenders and does not include any borrower identification that would allow for tracking borrower activity across multiple lenders. The following chart shows borrower activity as seen from a single lender perspective aggregated for all lenders.

The clear implication of what this chart shows us is that the original intention of the payday loan program, namely using the payday loan for a one-time short-term emergency, is no longer the case. As can be seen, more people take out greater than 10 payday loans per year than those that take out a single loan.

What this chart does not show us is how often and to what extent a single borrower accesses payday loans across multiple lenders. A single borrower can borrow 6 payday loans from lender A, three loans from lender B and one loan from a third lender C, only to be counted as three separate borrowers at three separate payday loan lenders.

This lack of lending transparency is what allows individuals to take out multiple loans across multiple lenders and far exceed the $300 limit established by the Legislature for the payday loan program. The creation of a real-time database as provided in this bill will allow both lenders and the DBO to track borrower activity and prevent loan stacking.

Consumer Financial Protection Bureau (CFPB)

The CFPB is a federal consumer protection agency. In November of 2017, the CFPB issued a final rule for, "Payday, Vehicle Title, and Certain High-Cost Installment Loans."

This final rule contained a provision dealing with payday lending that once implemented would prohibit any payday lender in any state from entering into a loan agreement with a borrower if that borrower has an outstanding payday loan. The rule also contained provisions that would create a national real-time data base to ensure compliance with the one-loan-at-a-time policy. Once in effect, this rule becomes the law of the land.

This rule was developed and finalized under the Obama administration. It is unclear if the current administration will seek to repeal the rule or simply choose not to enforce its provisions.

There is currently legislation in Congress to repeal the rule, but again, it is unclear whether or not Congress will act upon it.

According to the author, it is the uncertainty over the commitment of the current administration to enforce these rules that has led the author to introduce this legislation to protect California consumers.

Opposition to one-loan-at-a-time

To the extent that borrowers are engaging in borrowing behavior where they take out multiple payday loans at the same time, restricting borrowers to one-loan-at-a-time will reduce the total volume of payday loans made each year. As noted above, it is difficult to determine the full extent to which this practice is used and therefore the impact on the industry. Additionally, it is difficult to determine if the reduction in loan volume will be felt uniformly across all lenders favoring brick and mortar stores over online lenders or vice versa.

Opposition to the database

The primary concern of lenders with the database is cost. Data collection and oversight activities by DBO are paid for through fees assessed on licensed lenders. Establishing and maintaining the database and the additional activities required by DBO to enforce the one-loan-at-a-time policy will increase cost to the department which will be passed on to the lenders through license fees. Additionally, lenders will be required to gather and report more date than is currently required. It seems reasonable to assume that loan processing costs will increase.

The author took amendments in the Assembly Privacy and Consumer Protection Committee that significantly narrowed the data collection required by lenders.

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0003447

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 3010

Author:(Limón) – As Amended Ver:April 19, 2018

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

SUMMARY:

This bill requires the Department of Business Oversight (DBO) to develop a database related to tracking deferred deposit transactions (payday loans) and imposes additional requirements on licensees related to customers with more than one payday loan. Specifically, this bill:

1. Requires DBO to develop, operate, and maintain an internet website and database, which provide licensees real-time access to information on payday loans, in which licensees record each payday loan.
2. Authorizes DBO to contract with a database provider to develop, operate, or maintain the database.
3. Prohibits a licensee from entering into a payday loan with a customer who has a current payday loan with another lender and requires licensees to enter specified information on customers and eligible transactions.

FISCAL EFFECT:

Significant one-time costs to DBO, likely in excess of $1 million, to develop the database, and unknown costs for ongoing maintenance of the database. DBO may contract with a third party to operate the database, and funding for the database would come from fees charged on licensees.

COMMENTS:

1. Background. California Deferred Deposit Transaction Law (CDDTL) requires DBO to regulate payday loans. These loans are short-term loans in which a person borrows up to $300 and pays an upfront fee up to 15% of the loan amount. Each lender may provide onlyone loan at a time, and the lender is required to provide certain information to customers, including the full fee amount, payment obligations, and that the consumer cannot be threatened with prosecution in order to collect payment on a loan. Lenders may accept collateral on a loan and require borrowers to purchase other products, such as credit insurance, as a condition of the loan. Moreover, a lender may provide a loan to a borrower who already has an outstanding payday loan.
2. Purpose. AB 3010 seeks to expand the current one-loan-per-lender policy to allow just one loan per borrower from all lenders. It does this through establishing a real-time database for both lenders and DBO to use to prevent violations of this new policy. The Assembly Committee on Banking and Finance’s analysis of AB 3010 notes that payday loan stacking – where a borrower takes out multiple loans from multiple lenders – has led to unprecedented payday loan debt. In 2016, 83% of the 11.5 million payday loans reported were subsequent transactions made by the same borrower.
3. Consumer Financial Protection Bureau (CFPB). In November 2017, CFPB issued a final rule related to payday lending, which included a provision prohibiting any payday lender in any state from entering into a loan agreement with a borrower if that borrower has an outstanding payday loan. The rule also contained provisions creating a national real-time database to track this policy. However, there is significant uncertainty around whether this rule will take effect in the new administration. According to the author, AB 3010 will help protect consumers amidst this federal uncertainty.
4. DBO technology infrastructure. DBO submitted a budget change proposal (BCP) for 2018-19 requesting $577,000 ongoing for positions and resources to address ongoing technology infrastructure problems. The BCP notes that DBO has an ever-growing list of information projects designed to enhance services provided to licensees and employees.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 17, 2018

ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION

Ed Chau, Chair

ABPCA Bill Id:AB 3010 (

Author:Limón) – As Amended Ver:March 19, 2018

SUBJECT: California Deferred Deposit Transaction Law

SUMMARY: This bill would require the Commissioner of Business Oversight (commissioner) to develop operate, and maintain an internet website and common database in which a licensee would be required to record each deferred deposit transaction for the purpose of preventing violations of the California Deferred Deposit Transaction Law (CDDTL). Specifically, this bill would:

1. Require the commissioner, by July 1, 2019, to develop, operate, and maintain an internet website and common database in which a licensee shall record each deferred deposit transaction. The database must allow licensees real-time access to information on deferred deposit transactions, and retain data in the database only as necessary to ensure compliance with the CDDTL.
2. Permit the commissioner to contract with a database provider to develop, operate, or maintain the database. Any resulting contract must include the following:
   • A provision requiring data be archived 365 calendar days after it was first entered, and allow the commissioner access to that archived data as necessary.
   • A provision requiring the database provider to ensure that the data is confidential, except as otherwise authorized by this section.
   • A provision requiring the database provider to comply with all requirements of this section relating to the database.
3. Prohibit, on or after July 1, 2019, a licensee from entering into an agreement for a deferred deposit transaction without first checking the database to ensure that the customer is not subject to a current deferred deposit transaction.
4. Require, after entering into that agreement, the licensee to submit all information regarding the customer and the transaction that the commissioner determines is necessary to record that transaction including, at a minimum:
   • The applicant’s date of birth and one of the following: applicant’s Social Security number, alien registration number, individual tax identification number.
   • The amount of the check, the amount of money received by the customer, the date of the transaction, the date the customer’s check will be withdrawn from the customer’s account, and fees associated with the deferred deposit transaction.
5. Require, on or after July 1, 2019, a licensee to immediately record in the database any event related to a deferred deposit transaction, including, but not limited to, the following:
   • Imposition of a returned check fee.
   • A payment default.
   • A due date extension.
   • Entering into a repayment plan.
   • The charge off of a debt.
   • Entering into a settlement.
   • The referral or sale of a deferred deposit transaction to a third party for collection.
   • Any action brought in court, including, but not limited to, small claims court, and the terms of any judgment obtained, including costs and attorneys’ fees.
6. Require, when a deferred deposit transaction paid is in full, the licensee to immediately record in the database that the funds were received from the customer, the method by which the transaction was repaid, and every unsuccessful attempt by the licensee to recover funds from a customer’s account, if applicable.
7. Require a licensee to immediately correct any incorrect data that was previously entered into the database, including any information that the licensee becomes aware needs to be updated.
8. Provide that if a licensee is unable to access the database due to technical difficulties, the licensee shall not be in violation of any obligation to immediately record data pursuant to the provisions above, so long as the licensee records that data on the next business day following the day that the database becomes accessible, or complies with any alternate process to record that data established by the commissioner.
9. Require a licensee shall maintain generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database, as determined by the commissioner.
10. Provide that the information contained in the database is confidential and not subject to public inspection, and the database and its contents are not subject to requests under the California Public Records Act (CPRA). The commissioner, however, may publicly release aggregate data maintained in the database if the commissioner finds that the release is in the public interest.
11. Define “database provider” to mean a third-party vendor that has entered into an agreement with the commissioner to administer a database.
12. Define “outstanding deferred deposit transaction” to mean a deferred deposit transaction listed in the database that has not been paid in full.

EXISTING LAW:

1. Establishes the CDDTL administered by Department of Business Oversight (DBO). The CDDTL requires the licensing of payday lenders, sets a maximum of $300 for any payday loan, establishes a one-loan-at-a-time per lender policy, and provides for the administration and oversight of the program by the DBO. (Fin. Code Sec. 23000 et seq.)
2. Establishes the California Department of Technology (CDT) within the Government Operations Agency, supervised by the Director, who also serves as the state’s Chief Information Officer. (Gov. Code Sec. 11545 and 12803.2.)
3. Requires CDT to approve, monitor and oversee state agency IT projects from start to finish. (Pub. Contract Code Sec. 12100 et seq. and Gov. Code Sec. 11546 et seq.)
4. The California Public Records Act (CPRA) provides that all records held by government are accessible to the public unless expressly made exempt from disclosure. (Gov. Code Sec. 6250 et seq.)

FISCAL EFFECT: Unknown

COMMENTS:

1. Purpose of the bill: This bill seeks to create a database, under the DBO, in which payday lenders must input transactions and against which payday lenders must verify whether borrowers have any outstanding payday loans, prior to issuing a new loan. This bill is an author-sponsored bill.
2. Author’s statement: According to the author, “highlights from DBO’s 2016 California Deferred Deposit Transaction Law – Annual Report and Industry Survey, indicate that “nearly a half-million Californians are taking out more than 10 payday loans over the course of a year, paying an average percentage rate of 372 percent with a substantial number of these loans going to the elderly. This activity represents a significant burden to these individuals, their families, their communities and the state.

As a result of these and other concerns, the federal Consumer Financial Protection Bureau (CFPB) issued a final rule governing several lending practices including payday lending. The CFPB established an ability to repay principle that included a one-loan-at-a-time practice and the use of a national real-time database for lenders to access loan history data for consumers.

Uncertainty over the commitment of the current administration to enforce these rules has led the author to introduce this legislation to protect California consumers.”

1. Deferred deposit transaction law: A payday loan, known more formally in California as a deferred deposit transaction, is a short-term loan in which a borrower writes a post-dated, personal check to a lender for a specified amount that is capped by state law. The payday lender advances the borrower the amount on the check, less the fee, which is also capped by law. The payday lender does not cash the check at the time the loan is made. Both parties are aware that the borrower lacks sufficient funds to cover the check when the check is written. The assumption underlying the loan is that the borrower will repay the loan by the agreed-upon date, either by depositing sufficient funds in his or her checking account to cover the check, or by paying the payday lender in cash on the loan’s due date, and having the lender return the original check to the borrower, without cashing it.

Debates over the merits and dangers of payday loans have been waged in the California Legislature since the state first authorized payday lending in 1996. Consumer advocates assert that payday loans drive borrowers into a cycle of repeat borrowing, which harms them more than they are helped by the infusion of borrowed cash. Industry advocates contend that their product offers needed credit to borrowers who have few other options, and cite high rates of customer satisfaction from borrowers who understand the risks and rewards of their product.

Recognizing that this bill has been double-referred to the Assembly Committee on Banking and Finance and the primary jurisdiction of that committee over issues of related to lending, this Committee analysis will focus on consumer privacy with regard to the database this bill would create.

1. Database to be funded by payday lenders: To ensure that payday lenders verify that borrowers do not have any outstanding payday loans prior to entering into a new transaction, this bill would require that the commissioner develop a database in which all payday loans would be entered. This bill would also require payday lenders, as part of their annual assessment, to pay for the development and administration of the database.

The idea of a payday loan database is not new to the Legislature. SB 515 (Jackson, 2013), which failed passage in the Senate Banking and Financial Institutions Committee, similarly included a database for payday loans. With respect to SB 515’s proposed database, the two policy concerns noted by that committee’s analysis were related to funding and privacy. Regarding funding, that committee noted, “SB 515 is silent on a funding mechanism for the database contemplated by the bill. The author and sponsors indicate that they expect [Department of Corporations] DOC^[1] to fund the database through surcharges on licensees – a funding mechanism which requires no additional statutory changes. Financial Code Section 23016 requires each licensee to annually pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of the CDDTL. According to DOC, the most recent pro rata assessment imposed on CDDTL licensees equaled $941 per licensed lending location.”

Similar to SB 515, this bill would add to Financial Code Section 23016 a requirement that the “assessment shall include an amount that is sufficient to cover the reasonable regulatory costs of the commissioner to develop and administer the database.” In other words, payday lenders will pay for the development and maintenance of the database. Because the fees lenders may charge are capped under law, lenders will not be able to pass on the cost of this database to the borrowers. As a matter of public policy, this provision seems to strike the right balance in that it recognizes that borrowers, who have limited borrowing options and already pay high fees (expressed in the form of annual percentage rates), should not be required to bear the cost of a database which is intended to protect them.

1. Database development: Existing law requires that all contracts for the acquisition of reportable IT projects shall be made by or under the supervision of CDT, and that all contracts for the acquisition of IT goods or services, whether by lease or purchase, are made under the supervision of the Department of General Services (DGS). (See Pub. Contract Code Sec. 12100 et seq.) CDT and DGS are charged with ensuring the expeditious and value-effective acquisition of information technology goods and services that satisfy state requirements, and of ensuring that methods of acquisition are compatible with the state’s short- and long-term fiscal needs. This bill, which would provide that the “commissioner may, consistent with existing contracting requirements, contract with a database provider to develop, operate, or maintain the database on behalf of the department,” would require supervision by the CDT or DGS, or both, unless the database falls within the DBO’s delegated authority to conduct the acquisition on its own. (Pub. Contract Code Sec. 12102.2(e).) These public contract laws and policies, as overseen by these departments, and by CDT in its IT oversight role, should serve to ensure that any database created with an outside vender will be developed and/or maintained in a way that meets the state’s business and policy objectives.
2. Database privacy: This bill would require payday lenders, at the time of a loan, to enter information about the borrower and transaction into the database, including, among other things: the applicant’s date of birth; an identification number (specifically, an SSN, alien registration number, or individual tax identification number); the amount of the transaction; the date of the transaction; fees associated with the transaction; the date the customer’s check will be withdrawn; any payment default; any due date extension; and the referral or sale of the transaction for third party collection.

The vast majority of the information that payday lenders would be required to enter into the database is in excess of the information needed to determine whether an applicant has an outstanding loan. While the bill provides reasonable confidentiality provisions (discussed below), the risk of data breach has become nearly ubiquitous and databases need to be designed with this reality in mind. Collecting such personal and sensitive information without adequate justification is arguably putting California residents’ privacy at unnecessary risk. Accordingly, the author agrees to the following amendments which would limit the data collection for the database to an applicant’s SSN (or individual taxpayer identification number, if the applicant cannot provide an SSN), when a deferred deposit transaction was initiated, and when it was paid in full. These changes should allow payday lenders to verify that applicants do not have outstanding loans, but would arguably better protect the privacy of borrowers because very limited amounts of data would be collected.

Author’s amendment:

Amend Section 4, in relevant part, of the bill to read:

(c) On or after July 1, 2019, a licensee, before entering into any deferred deposit transaction, shall conduct a search on the database to ensure that the customer does not have any outstanding deferred deposit transactions. If that customer does have an outstanding deferred deposit transaction, the licensee shall not enter into a deferred deposit transaction with that customer.

(d) If the search conducted by the licensee under subdivision (c) reveals that the customer does not have any outstanding deferred deposit transaction, and that transaction otherwise meets all other requirements of this division, the licensee may enter into an agreement for that transaction with the customer. After entering into that agreement, the licensee shall submit all information regarding the customer and the transaction that the commissioner determines is necessary to record that transaction. That information shall include, at a minimum, the following:

(1) Identifying information regarding the applicant, including the applicant’s date of birth and one of the following:

1. The applicant’s social security number. If the applicant cannot provide a social security number, the licensee shall submit an individual taxpayer identification number.
2. When a deferred deposit transaction was initiated.

(C) When a deferred deposit transaction that was recorded in the database is paid in full.

(B) The applicant’s alien registration number.

(C) The applicant’s individual tax identification number.

(2) Identifying information regarding the terms of the deferred deposit transaction, including the amount of the check, the amount of money received by the customer, the date of the transaction, the date the customer’s check will be withdrawn from the customer’s account, and fees associated with the deferred deposit transaction.

(e) On or after, July 1, 2019, a licensee shall immediately record in the database any event related to a deferred deposit transaction that was recorded in the database, including, but not limited to, the following:

(1) Imposition of a returned check fee.

(2) A payment default.

(3) A due date extension.

(4) Entering into a repayment plan.

(5) The charge off of a debt.

(6) Entering into a settlement.

(7) The referral or sale of a deferred deposit transaction to a third party for collection.

(8) Any action brought in court, including, but not limited to, small claims court, and the terms of any judgment obtained, including costs and attorneys’ fees.

(f) If a deferred deposit transaction that was recorded in the database is paid in full, then the licensee shall immediately record in the database that the funds were received from the customer, the method by which the transaction was repaid, and every unsuccessful attempt by the licensee to recover funds from a customer’s account, if applicable.

As an additional privacy measure, this bill would provide that the information contained in the database is confidential and not subject to public inspection, including inspection pursuant to the CPRA. Indeed, in addition to enforcement by the DBO, the only permissible use of the information in the database (subject to a narrow exception discussed below) would be for a payday lender to verify that a borrower does not have an existing payday loan in effect. Such a database will arguably help DBO enforce existing law, which provides that “a licensee shall not enter into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect.” (Fin. Code Sec. 23036(c).) That being said, this bill would require payday lenders to collect sensitive and personal borrower information, and record borrower activity, that is arguably wholly unrelated to whether a borrower has an outstanding loan. Specifically, this bill would require, at a minimum, the payday lender to

As a limited exception to the confidentiality requirement above, this bill would allow the

commissioner to “publicly release aggregate data maintained in the database if the commissioner finds that the release is in the public interest. However, that release shall, in no instance, include personal information of any customer.”  Insomuch that this provision is intended to allow the commissioner to release data that is truly in the aggregate, the provision should be amended to also then prohibit the release of data that could identify a payday lender.  The author agrees to the following amendment to allow the public to have access to data related to the payday loan industry, while ensuring that the DBO is armed with the information necessary to effectively regulate the industry.  This will arguably strike an appropriate balance in that it protects the personal information of both borrowers and lenders.

Author’s amendment:

Page 8, line 9, after “include” insert “personally identifying language”

Page 8, line 10, after “customer” insert “or licensee, including a licensee that is a business or corporation.”

1. Database security: Regarding the security of the database that this bill would require, like the bill at hand, SB 515 (see Comment 4, above) also required the DOC to develop and implement a payday loan database with real-time access, via an internet connection, for use by payday loan licensees to comply with the provisions of the bill, and for use by the DOC for enforcement purposes. Notably, as discussed above, both bills allow the commissioner to contract with a third party to develop the database. In looking at potential vendors and on the issue of privacy, the Senate Banking and Financial Institutions analysis of SB 515 noted:

To date, fourteen other states have established payday loan databases similar to the one envisioned by this bill (Florida, Virginia, South Carolina, Kentucky, Delaware, New Mexico, Illinois, Michigan, Wisconsin, North Dakota, Washington, Alabama, Indiana, and Oklahoma).

A single company, Veritec, administers the databases in all of those states. Committee staff reached out to representatives of Veritec to ask how they have handled privacy and data breach issues in those other states. They responded that if a Veritec database is breached, the company’s responsibilities are covered by existing state and federal data breach laws. Those laws require that the company housing the data notify consumers of the breach and pay for credit monitoring. Veritec’s contracts require it to adhere to applicable state and federal laws regarding customer notification following a data breach, and to carry insurance to cover Veritec’s costs to comply with those requirements, should Veritec lack the funds with which to do so.

In the states in which Veritec operates, the state payday loan regulator and Veritec are the only entities that have access to all of the data in the database. Typically, these states and Veritec indemnify each other against unlawful use of the database by each of their employees and contractors. Individual payday lenders only have access to data they enter into the database. According to Veritec, lenders are liable for unauthorized access to the database via their portals.

Similarly, with this bill, at the time of this writing there only appears to be one vendor, Veritec, administering payday loan databases. California requires a competitive bidding process for any state contracts, and also requires that specific provisions be included in all state contracts, including those for IT and IT goods and services. (See Pub. Contract Code Secs. 12102 and 12102.1.) The competitive bidding requirement may be waived, under existing law, when CDT or DGS determine that (1) the goods and services proposed for acquisition are the only goods and services that can meet the state’s need, or (2) the goods and services are needed for an emergency and immediate acquisition and are necessary for the protection of the public health, welfare, or safety. Accordingly, despite the fact that there may not be multiple vendors competing for the contract to develop or maintain the database as required by this bill, the state provides a framework to designed to ensure that any resulting contract may still be value-effective and meet the state’s needs.

1. Arguments in opposition: Speedy Cash and Galt Ventures, LLC (collectively, Speedy Cash), both licensed and regulated lenders, oppose this bill and argue that consumers are best served when there exists a variety of loan produces offered by reputable, state-licensed lenders to meet a variety of credit needs. Speedy Cash writes:

As proposed, AB 3010 will severely restrict access to credit. Specifically, the onerous proposal to report deferred deposit transactions into a common database will make […] deferred deposit loans untenable. If AB 3010 passes in its current form […] California’s lending paradigm will further exacerbate consumers’ already precarious financial situation by limiting the availability of desperately needed credit products and drive consumers to risker lending options, e.g., unlicensed, tribal and offshore lenders offering illegal loans through the internet[.]

1. Prior legislation: SB 515 (Jackson, 2013) would have made several changes to Payday Loan Law, such as increasing the minimum length of deferred deposit transactions; requiring deferred deposit licensees to underwrite deferred deposit transactions and offer installment plans, as specified; capping the maximum number of deferred deposit transactions per customer at four per year; requiring the Commissioner of Corporations to develop and implement a database to help enforce the CDDTL. This bill failed passage in the Senate Banking and Financial Institutions Committee.

AB 365 (Lowenthal, 2011) would have directed the Commissioner of Corporations to establish a payday loan database. This bill was never taken up by the author.

SB 898 (Perata, Ch. 777, Stats. 2002) shifted the responsibility for administering payday lending from the Department of Justice to the Department of Corporations, now known as DBO.

SB 1959 (Calderon, Ch. 682, Stats. 1996) enacted the earliest version of a payday lending law in California, and gave regulatory authority to the California Department of Justice.

1. Double-referral: This bill is double-referred to the Assembly Banking and Finance Committee where it is scheduled to be heard on April 16, 2018. Due to the timing of this Committee’s hearing and the need to provide adequate public notice of this analysis, this analysis does not reflect the outcome of the Assembly Banking Committee’s hearing, including any amendments approved by that committee.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

California Financial Service Providers

Check Into Cash

Galt Ventures, LLC

Speedy Cash

Analysis Prepared by: Nichole Rapier / P. & C.P. / (916) 319-2200

1. The California Department of Corporations was a department within the former California Business, Transportation and Housing Agency in California. The chief officer of the Department was the Commissioner of Corporations. Effective July 1, 2013, the Department of Corporations and the Department of Financial Institutions became divisions of the California Department of Business Oversight (DBO) pursuant to the Governor's Reorganization Plan No. 2 of 2012. ↑

Date of Hearing: April 16, 2018

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Monique Limón, Chair

ABPCA Bill Id:AB 3010 (

Author:Limón) – As Amended Ver:March 19, 2018

SUBJECT: California Deferred Deposit Transaction Law

SUMMARY: Makes changes to the California Deferred Deposit Transaction Law (CDDTL) limiting borrowers to one deferred deposit transaction (payday loan) at a time and authorizes the Department of Business Oversight (DBO) to track and enforce this provision. Specifically, this bill:

1. Prohibits a licensed lender from entering into a payday loan with a customer that has a current payday loan with any other lender.
2. Authorizes the Commissioner of DBO to develop, operate and maintain an Internet Web site and common database to record each payday loan for the purpose of preventing violations of the provision in (1) above. The database shall:
   1. Allow licensed lenders real-time access to information on payday loans entered into the database by all licensed lenders.
   2. Require the retention of data in the database only as necessary to ensure statutory compliance.
3. Allows the Commissioner to enter into a contract with a database provider to develop, operate or maintain the database, as specified. The contract shall contain provisions that:
   1. Require the data be archived for one year after it has been entered and allows the Commissioner access to archived information.
   2. Require the database provider to ensure the data and all information remains confidential, as specified.
4. Requires that on or after July 1, 2019, a licensed lender, before entering into any payday loan contract, shall conduct a search on the database to ensure that the customer does not have any outstanding payday loans. If the customer does have an outstanding payday loan, the lender shall not enter into an additional payday loan contract.
5. Requires lenders, after determining a customer has no outstanding payday loans and a new payday loan agreement has subsequently been entered into, to submit all information regarding the customer and the transaction that the Commissioner determines is necessary to record the transaction. That information shall include, but is not limited to the following:
   1. Identifying information regarding the applicant, including the applicant’s date of birth and one of the following:
      1. The applicants social security number
      2. The applicant’s alien registration number
      3. The applicant’s individual tax identification number.
   2. Identifying information regarding the terms of the payday loan, including the amount of the check, the amount of money received by the customer, the date of the transaction, the date the customer’s check will be cashed and the fees associated with the payday loan.
6. Requires that on or after July 1, 2019 a licensed lender shall immediately update the database with any action relevant to the payday loan transaction including, but not limited to, the following:
   1. Imposition of a returned check fee.
   2. A payment default.
   3. A due date extension.
   4. Entering into a repayment plan.
   5. The charge off of a debt.
   6. Entering into a settlement.
   7. The referral or sale of a payday loan to a third party for collection.
   8. Any action brought in court, as specified.
7. Lenders shall record when a payday loan is paid in full, as specified, and shall correct any incorrect data previously entered into the database. If technical problems prevent access to the database, a lender shall enter all required information on the next business day when access is restored. Lenders shall maintain generally accepted security safeguards to protect confidential information. The information contained within the database is confidential and not available for public inspection.
8. The Commissioner may release aggregate data maintained in the database (excluding personal data) if the commissioner finds that the release is in the public interest.

EXISTING LAW: Establishes the CDDTL (Financial Code Section 23000 et seq.), administered by DBO. The CDDTL requires the licensing of payday lenders, sets a maximum of $300 for any payday loan, establishes a one-loan-at-a-time per lender policy and provides for the administration and oversight of the program by DBO.

California Finance Law (CFL) provides rate caps for loans between $300 and $2,500 that generally range between 12% and 20% depending on the amount and terms of the loan.

Additionally, a pilot program was established within the California Finance Law (CFL) (Financial Code Sections 22365 et seq.). Generally speaking, the pilot program authorizes lenders who have been vetted by DBO to charge somewhat higher interest rates and fees on loans of principal amounts up to $2,500 than are allowed under the CFL.

FISCAL EFFECT: Unknown

COMMENTS: This bill seeks to accomplish two basic goals: 1) extending the current policy of one-loan-at-a-time per lender to one-loan-at-a-time from all lenders, and 2) establishing a real-time database for both lenders and DBO to use as a tool to prevent violations of the one-loan-at-a-time policy.

History

In 1996, the emergence of the check cashing industry presented the Legislature with a choice. Either focus on the nature of the check and treat check cashing services as simply that, a service, or treat the delayed deposit of the check as a loan and bring the industry in under the California Finance Law. Ultimately, the Legislature recognized the unique nature of the industry and the service it provided to California consumers and created a new regulatory framework for payday lending. Clear statutory authority for offering payday loans was established through the creation of the CDDTL via SB 1959, (Calderon, Chapter 682, Statutes of 1996).

SB 1959 permitted check cashers to defer deposit on payday loans made by the check casher. These transactions were originally regulated by the State Department of Justice (DOJ). SB 898 (Perata, Chapter 777, Statutes of 2002), shifted the responsibility for administering payday lending from the DOJ to the Department of Corporations, now known as DBO.

By creating the CDDTL, the Legislature chose not to bring payday lending under the CFL and instead set a limit of $300 as the maximum size of a payday loan and prohibited any lender from making more than one loan to a borrower at a time. As noted in the existing law section above, lending above $300 remains governed by the CFL.

It seems relevant to note that at the time the Legislature adopted a one-loan-at-a-time per lender policy the physical availability of payday lending stores was considerably less than what it is today. Additionally, online payday lending which is easily accessible today simply did not exist then.

It seems reasonable to assume that at the time the Legislature adopted this policy they believed that one-loan-at-a-time per lender meant that no borrower would end up with more than one payday loan at any given time.

The Legislature over two decades ago could not have foreseen the explosion in payday loan access points that we have today. The problem of borrowers taking out multiple payday loans at the same time (loan stacking) was a concern of the Legislature then and is a significant issue before the Legislature today. The central purpose of this bill is to prevent loan stacking.

Payday loan stacking undermines consumer protections contained within the CFL

As discussed above, loan stacking is the practice of a borrower taking out multiple payday loans at the same time. When the Legislature established a separate section for payday lending in the Financial Code it seems clear that they were establishing a boundary of $300, below which a payday loan can be made, and above which loan activity is governed by the CFL. Today a borrower can incur payday loan debt at a level that far exceeds the $300 limit established by the Legislature. Accessing online payday lending and visiting multiple payday loan stores, which have become ever-present in many neighborhoods throughout the state, has given borrowers the ability to create payday loan debt at an unprecedented level. A borrower can take out 4 payday loans (or more) at a time incurring $1200 in payday loan debt in a single day. A loan of this size in 1996 was covered by provisions contained within the CFL, as it still is today. Those CFL provisions include consumer protections such as interest rate caps, fee caps and underwriting (determining the ability of a consumer to repay) and are present in lending between $300 and $2,500 in the pilot program under the CFL. These protections are not required within the limited scope of payday lending. To fully understand the impacts of loan stacking it is important to understand another statutory work-around that borrowers engage in, “loan sequencing”.

Loan sequencing undermines the value of a payday loan

Current statute prohibits a lender from entering in to a second payday loan with a borrower until such time as the first payday loan is paid off. This prohibition prevents borrowers who cannot pay off a payday loan from simply paying a loan fee and rolling over a loan for an additional pay period. The idea here is to prevent a borrower from paying a succession of payday loan fees without ever reducing the principal of the loan. Those who oppose payday lending refer to this as a “debt trap”. Studies have shown that borrowers engage in a sequencing practice where a payday loan is incurred, paid off when the borrower gets paid and then a new payday loan is incurred within a short time thereafter. Data collected by DBO reveals that of the 11.5 million payday loans reported for 2016, 83% were subsequent transactions made by the same borrower. Of these subsequent borrowers, nearly 2/3 of the loans were made on the same day as the previous loan pay off. This sequence of taking out a payday loan, paying off the loan and then taking out a new payday loan is a proxy for loan rollovers which are prohibited by law for individual lenders. Although technically legal, sequencing has the same effect of eroding the value of a loan through a series of loan fee payments that do not reduce the loan principal as described below.

Example 1: Sequencing One Loan

(Two Week Pay Period)

Example 2: Sequencing Four Loans (Two Week Pay Period)

For a borrower that finds they are unable to pay back the payday loan upon receiving their next paycheck, the results can be serious. Multiple loans sequenced over several pay periods can lead to a significant drain on a borrowers finances without reducing the principal amount of the loan (or loans).

Interested parties on all sides are concerned where borrowers will go if loan stacking is prohibited. One thing seems clear from looking at the charts above, providing access to capital through payday loans to borrowers that do not have the ability to pay them back in a timely manner does not really provide access to capital. The rapid erosion of the benefits of a loan through sequencing and made more serious by stacking multiple loans across multiple lenders seems to support the Legislature’s decision to include greater consumer protections for loans larger than those offered through payday loans.

Unlike the CDDTL, the CFL, which governs loans above $300, requires lenders to evaluate a borrower’s ability to repay along with additional consumer protections that seek to protect borrowers from incurring debt that they are not able to pay back.

Data

Each year DBO is required to conduct a survey of payday lenders to collect up-to-date information on licensed lenders activities in order to assess the financial health and compliance practices of California’s payday loan industry. The most recent data available is the 2016 annual report titled, “The California Deferred Deposit Transaction Law Annual Report and Industry Survey (report).”

It is important to remember that the data provided to DBO comes directly from the lenders and does not include any borrower identification that would allow for tracking borrower activity across multiple lenders. The following chart shows borrower activity as seen from a single lender perspective aggregated for all lenders.

The clear implication of what this chart shows us is that the original intention of the payday loan program, namely using the payday loan for a one-time short-term emergency, is no longer the case. As can be seen, more people take out greater than 10 payday loans per year than do those that take out a single loan.

What this chart does not show us is how often and to what extent a single borrower accesses payday loans across multiple lenders. A single borrower can borrow 6 payday loans from lender A, 3 loans from lender B and 1 loan from a third lender C, only to be counted as 3 separate borrowers at three separate payday loan lenders.

This lack of lending transparency is what allows individuals to take out multiple loans across multiple lenders and far exceed the $300 limit established by the Legislature for the payday loan program. The creation of a real-time database as provided in this bill will allow both lenders and the DBO to track borrower activity and prevent loan stacking.

Consumer Financial Protection Bureau (CFPB)

The CFPB is a federal consumer protection agency. In November of 2017, the CFPB issued a final rule for, “Payday, Vehicle Title, and Certain High-Cost Installment Loans.”

This final rule contained a provision dealing with payday lending that once implemented would prohibit any payday lender in any state from entering into a loan agreement with a borrower if that borrower has an outstanding payday loan. The rule also contained provisions that would create a national real-time data base to ensure compliance with the one-loan-at-a-time policy. Once in effect, this rule becomes the law of the land.

This rule was developed and finalized under the Obama administration. It is unclear if the current administration will seek to repeal the rule or simply chose not to enforce its provisions.
There is currently legislation in Congress to repeal the rule, but again, it is unclear whether or not Congress will act upon it.

According to the author, it is the uncertainty over the commitment of the current administration to enforce these rules that has led the author to introduce this legislation to protect California consumers.

Opposition to one-loan-at-a-time

To the extent that borrowers are engaging in borrowing behavior where they take out multiple payday loans at the same time, restricting borrowers to one-loan-at-a-time will reduce the total volume of payday loans made each year. As noted above, it is difficult to determine the full extent to which this practice is used and therefore the impact on the industry. Additionally, it is difficult to determine if the reduction in loan volume will be felt uniformly across all lenders favoring brick and mortar stores over online lenders or visa versa.

The CFPB, when examining the implementation of a one-loan-at-a-time policy in Virginia, noted a significant reduction in loan activity. However, after five years they found that the physical proximity to an active payday lending store was not significantly greater than had existed prior to the one-loan-at-a-time policy. The number of storefronts was reduced but more than enough storefronts remained to meet the needs of borrowers.

Opposition to the database

The primary concern of lenders with the database is cost. Data collection and oversight activities by DBO are paid for through fees assessed on licensed lenders. Establishing and maintaining the database and the additional activities required by DBO to enforce the one-loan-at-a-time policy will increase cost to the department which will be passed on to the lenders through license fees. Additionally, lenders will be required to gather and report more date than is currently required. It seems reasonable to assume that loan processing costs will increase.

HEARINGS IN OTHER COMMITTEES:

This bill will be heard in the Assembly policy Committee on Privacy and Consumer Protection as well as, the Assembly fiscal Committee on Appropriations.

REGISTERED SUPPORT / OPPOSITION:

Support

California Reinvestment Coalition

Coalition for Humane Immigrant Rights

Consumers for Auto Reliability and Safety

Consumers Union

East Bay Community Law Center

Law Foundation of Silicon Valley

Mission Economic Development Agency

New Economics for Women

Public Counsel

San Francisco Office of Financial Empowerment

Opposition

Beach Financial, LLC

California Financial Service Providers

Cashback Loans

Check Into Cash Inc.

CURO

ER Financial, LLC

Evolution Lending

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081