Assembly Standing Committee on Banking and Finance

The Assembly Banking and Finance Committee is called to order. Sergeants, if you will, please call the absent Members. And we do not, obviously, have a quorum, so we will begin as a Subcommittee. Welcome to the Assembly Banking and Finance Committee. Whether you're here in person or whether you're watching virtually, I am grateful to have you join us here in Room 444. I do want to note that we are accepting written testimony through the Position Letter Portal on the Committee's website.

I also want to welcome back returning Members: our fantastic Vice Chair Assembly Member Chen, as well as Assembly Member Cervantes, Assembly Member Dixon, Assembly Member Fong, Assembly Member Petrie-Norris, and Assembly Member Soria. I also want to welcome our new Committee Members, Assembly Member Maienschein and Assembly Member Rubio, and welcome to the Committee. I consider ourselves very lucky to have at least our two new Members joining our existing ones, and I'm looking forward to a productive 2024. With that, it is time to move on to the hearing.

And again, we do not have a quorum as of yet, but we are operating as a Subcommittee, and we do have our first author here, so why don't we start with File Item Number One: AB 2031. The recommendation is 'do pass to the Committee on Business and Professions.' Assembly Member Gipson, you are the author of AB 2231. Sorry about that. It's AB 2231. And Assembly Member Gipson, when you are ready, you can begin with your opening statement.

Thank you very much mister chairman and members. I'm delighted to be here with you today. Thank you for allowing me to present Assembly Bill 2231, which seeks to propose a mandatory continuous education for pawn brokers in California. And this bill is sponsored by the Pawn Brokers Association of California. This bill will require that before receiving a licensure, all pond brokers would receive at least 8 hours of training related to laws, laws, regulations, businesses, business practices, customer service, security and ethics.

This bill would also require that every two years, pawn brokers would go through an additional continuous education to stay up to date on new regulations. And I just want to say that I'm proud of this industry taking upon themselves in order to impose such regulations, but also the continuous education because this industry started out with about 1000 pawn shops in California and now they have dwindled down to about six to 700 pawn brokers. And most pawn brokers are mom and pop businesses.

And so they want to make sure that they are up to date on with all regulations and laws, which I think is moving in the right direction. Very few industries take it upon themselves to ask for continuous education credits like this. This means that small business owners are being forgotten about and falling behind because of what's taking place in our economy. At the same time, California is facing with some of the most challenging economic environments in recent memories.

Lastly, projected shows that at least 9 million households in the United States are unbanked and nearly a third households have credit scores below 650. And someone may be in his room today. But anyway, and so this is a step in the right direction. While this bill would be groundbreaking for California, we have already seen examples of similar programs that have been successful in Ohio and also Mississippi.

If we want to continue to tell the rest of the nation that we are in the forefront of the fight to retain small business, mom and pop businesses, Assembly Bill 2231 is absolutely essential and the right way to go. With me to provide supporting testimonies and support is a familiar face of former California State Senator Cathleen Galgiani, who's here, and also Pat Rogers, who is a board member for the California Pawn Brokers Association, who will also testify in support of this bill.

Wonderful. Thank you mister Gipson and witnesses.

Thank you so much. And first of all, I want to start by saying how wonderful it is to be back. And I thank Assemblymember Gipson for authoring the bill for us. I thank you and your staff for all the work that you have done and the thoughtful analysis on our proposal. As mentioned, California Pawn Brokers works to promote the pawn industry as a safe and responsible way for consumers to access short term credit. And Assemblymember Gipson talked about the unbanked population that our businesses largely serve.

Number one, when you come in for a loan, there's no credit check that's done. So if you have no credit or low credit, you are guaranteed a loan. And that's particularly important for those who have ruined their credit in the past or who are just starting out. Secondly, pawn brokers offer small dollar loan amounts.

You can't really go to a bank and ask for a loan of dollar 100 or dollar 300, but you can go into a pawn shop and offer your collateral and get a small dollar loan like that. And then finally, for those that have some kind of a financial emergency, maybe a car breaks down or there's been a health issue and somebody needs to make a medical bill payment, the transactions are immediate.

You can go to a pawnshop and same day you can receive the loan that you need. So mandatory education will establish and maintain professional standards essential to protecting both consumers and pawn brokers. And with me today, I have Pat Rogers, who is a past President of the statewide association and he's led the continuing education committee that started last year in January, and we've worked very hard to come up with the proposal that is before you today. Thank you, and I ask for your aye vote.

Thank you, Kathleen. Pawn shops in California are an important financial safety net for individuals that do not have access to traditional credit like short term loans or credit cards. Pawn loans are based on the value of collateral, not on a credit store, making these accessible to individuals with poor or no credit history and it does not affect their history or their credit worthiness.

Credit score. This bill proposes that as a condition of precedent to the issuance of a pawn broker license, an applicant shall complete at least 8 hours of approved pre licensing education. This bill also proposes a minimum of 8 hours of continued education for all pawn brokers in California every two years, coinciding with the pawnbroker's license renewal. AB 2231 authorized the creation of a pawn Broker Education Council, which shall be responsible for creating the education curriculum, approving providers and instructors, tracking completion of courses, and issuing certificates of completions to be submitted to local law enforcement along with the normal applications of licensure or renewal. Mandatory education will ensure that pond brokers are up to date to the latest laws and regulations.

The pawn industry is constantly changing and pond brokers need to be aware of the new laws and regulations in order to comply with them. Pawn brokers who are better educated in a wider variety of items, are knowledgeable enough to assess, recognize counterfeits, are better able to serve their clients and give a better value to their clients. CE benefits both the pawnbroker and their customers.

Before I close, I'd like to thank the committee staff for their thoughtful analysis and I'd like to take a moment to respond to one issue that was raised. It was regarding the expansion of the CE requirements to all staff. We envisioned that the courses could be made available to all staff on a voluntary basis. However, we believe that mandated requirements, at least initially, should apply to the licensee who is responsible for setting company policies, procedures company wide, as well as training their employees.

That being said, the council could always expand education requirements for additional staff through its bylaws. In closing, I wish to reiterate that our goal with AB 2231 is to ensure the highest level of integrity within the California pawn industry. Once again, I'd like to thank the committee staff for the thoughtful analysis and I respectfully ask for your aye vote.

Thank you so much for your testimony. And it is very clear that we can establish a quorum at this time. So we'll take a break from testimony to establish that quorum. Madam Secretary, will you please call roll.

[Roll Call]

Wonderful. We have established a quorum. Thank you for the testimony that we've heard and also thank you for that clarification at the end of your testimony as well. Having said that, we will move to other witnesses and support that are in the hearing room. If there are any, please step forward. State your name, organization, position. See no one running to the microphone. We will expeditiously move to those in opposition. I see no registered opposition. Do we have any in opposition in the room to step forward to the mic? Seeing none. From there we will bring it back to the committee. Are there any questions or comments from committee members? Assemblymember Dixon, you are recognized.

Thank you, chair. I just have a few clarifying questions. So why did it take so long to establish a council? And the pawn brokers have been around for hundreds of years I imagine.

Nobody wants to invite regulation and getting a consensus amount among us that we're going to bring more regulation upon the industry. There's a little bit of pushback.

I see.

And we as an Association have been part of a continued education. That's a big part of our, our Association as it is. And so we've been doing that. And so the argument is, well, why do we knew it? We're doing it ourselves now. But not everyone's part of the Association, nor will they ever be.

But this would require everyone to be a member. And then you talked about the small.

Excuse me, I'm sorry, not be a member of association. That's something else. Just that it's required that they are educated, that they participate and participate.

Everybody would be required for the 8 hours, you mentioned the small loans. Now did I understand that correctly? Is there any control on the interest rates?

Nothing here affects the interest rate, but everything that every loan that we do is in statute, you know, there is a maximum fee, a maximum interest, so.

It can be used areas rates for small loans.

No.

Okay. Because that's already related by another statute.

Right.

All right, since you brought up this subject, I will just let you know that there is a bill that's in the senate right now that will address fees and that's being heard in the senate committee on Wednesday.

And loans as well. And loans as well, or just the fees?

The fees on the loans.

Okay, all right.

So what, just so the legislature will.

Wait to see that it gets here?

Yes. And it will get to you.

For those kinds of loans. I think that could be potentially problematic. High interest rate for people who are not in a good economic position to pay high interest rates. I just want to be sure there's enough, sufficient control over that. All right, thank you very much.

Thank you.

Are there any other questions or comments? We have a motion from Assembly Member Soria and a second from assemblymember Rubio. Seeing no other comments or questions from committee, would the author like to make a closing statement?

Very briefly. Thank you very much mister members, and thank you for moving the bill. Really believe this is in a step in the right direction by helping not only the small mom and pop businesses that's in the space of being pawn brokers, but also accountability and transparency and making sure this industry stays on top of regulations, laws and things of that nature. They take it upon themselves to regulate their own industry.

And I think that's what really made me very excited about taking upon this bill because I think it's the right thing to do and also hopefully that we can move forward in California. So thank you very much. Respectfully, ask for an aye vote.

Thank you Mister Gipson, for your work on this bill and also working with the committee staff as well. And with that, we do have a motion and a second. Secretary, please call the roll.

The motion is do pass and refer to committee on business and professions. [Roll Call] That bill has five votes.

This bill does pass, it gets out, we will hold it open for absent members.

Thank you very much.

While we have an opportunity, let's address the consent calendar. There are three bills on the consent calendar. AB 3148, motion is due pass to the Committee on Appropriations. AB 1934, motion is due pass to the Committee on Appropriations. And AB 2422 motion is due pass to the Committee on Appropriations. Motion by Assemblymember Rubio, second by Assembly Member Soria. With that secretary, please call roll.

[Roll Call] Six votes.

That bill gets out, we'll keep open or consent, we'll keep it open for absent Members to join or to add on. With that, we are waiting for authors. So if sergeants, if sergeants could get a hold of authors and absent Members, that would be great.

And we do have an author here. Mr. McCarty, I know you just walked into the room, but we are ready for you. The next bill and fire order is item number two, AB 2457. The recommendation is do pass as amended, to the Committee on Local Government.

Those amendments are detailed in the Committee analysis. Assemblymember McCarty, when you are ready, please feel free to begin with your opening statement.

Thank you. And thank you for working with us on this. And we accept the Committee amendments. This is a district bill from some of you are in Sacramento, if you pay your utility bills, hopefully we pay those bills on time. It's called SMUD here local public power. This is a bill that's on behalf of the entity.

This extends a program which I created in 2019, helping them to enter into business partnerships through their governance structure allows them to help keep rates low and focusing on their long term goal of 100% clean energy.

This extends a sunset of a program and we do have some technical amendments that we're taking on behalf of the Committee. With me today is a representative from SMUD and respectfully ask for your vote after the presentation. Thank you.

Thank you. Mccarty. We have two minutes per witness. Please feel free to begin when you're ready.

Chair Grayson and Members of the Committee, I am Laura Lewis, chief legal and government affairs officer for SMUD. We're the 6th largest community owned electric utility in the nation. We serve about 1.5 million residents in Sacramento County and small portions of Placer and Yellow counties. As a publicly owned utility, every dollar in revenue that we generate is invested in the community or used to offset any future rate increases.

Thank you for the opportunity to address the Committee on AB 2457, a bill that would allow CEMA to continue the authority to hold nonstock equity in a corporation. This authority is important because it allows us the opportunity to realize a return on the products and services that we help develop, which will help keep our rates affordable.

Importantly, SMUD does not pay anything in these deals beyond what we would normally pay to procure the product or service.

As way of background, in 2019, the Legislature passed AB 689, which granted SMUD this pilot authority. With this legislation, we're looking to extend the program as well as make some additional clarifications. SMUD often partners with companies to develop innovative products and services that enable us to achieve the state's clean energy goals and maintain affordability and reliability for our customers.

For some of these products and services, SMUD provides access to our intellectual property, devotes staff time, and provides critical field testing to ensure their effectiveness.

The companies that we partner with may then capitalize on our contribution by marketing these products and services to other utilities. As an example, before the passage of AB 689, we worked with a company to develop software that analyzes a customer's meter data to compare customer energy usage and encourage energy efficiency.

If SMUD had obtained a security interest in that company, our customers would have seen a substantial return when that company later sold for millions. SMUD exercises authority under AB 6089 to enter a partnership with a company that is developing long duration energy storage that will be essential for us to meet our carbon reduction goals reliably.

We are currently negotiating a second deal with a company that is developing medium and heavy duty all electric work truck chassis. To meet our carbon reduction goals, we will continue with these innovative partnerships regardless of whether we continue with this authority.

This authority simply allows our customers to reap the potential financial upside of the partnerships should the company succeed. And thank you for your time. I'm happy to answer any questions.

Thank you for your testimony. Another witness.

That's it.

Wonderful. You complete the whole group right there. If we have any other witnesses here in the room, simply state your name and organization as well as your position. Thank you very much. As they line up, go for it.

Good afternoon Chair and Members. Derek Dolfie on behalf of the California Municipal Utilities Association, in support.

Thank you.

Good afternoon Mr. Chair Members. Russ Buckingham for the sea of Sacramento, in support.

Good afternoon. Keelin Fong, Sacramento Asian Chamber of Commerce in support.

Good afternoon Mr. Chair Members. Obed Franco, on behalf of the California Electric Transportation Coalition in support.

Thank you very much. Seeing no other, we will turn to witnesses in opposition. If you are in opposition, please feel free to come forward. Seeing none, we will bring it to Committee for questions or comments. Committee Members, we have a motion by Assemblymember Petrie-Norris. Second by Assemblymember Soria. And would the author like to make a closing statement?

No, thank you. Respectfully ask for your aye vote.

That was short and sweet. Thank you very much. I do want to thank you for your work in accepting the amendments and working with Committee staff. Thank you very much for your work there. We do have a motion and a second. Secretary, please call the roll.

AB 2457. The motion is do pass as amended and referred to Committee on Local Government.

[Roll Call] That bill has eight votes.

McCarty, you enjoy unanimous support. Thank you very much. This bill gets out with eight votes. Going to the next bill that we have, file item number three, AB 2908. Vice Chair Chen, you are presenting AB 2908, the recommendation? The recommendation is do pass. And when you are ready, Vice Chair Chen.

Thank you, Mr. Chair. I really appreciate that. In the interest of time, I want to defer my time to my key witness testimony, since there is support from the Chair.

Thank you.

Thank you very much. I'm Chris Delfino, a corporate lawyer and founder of the Sacramento based law firm Delfino Madden, and I'm here to speak in support of AB 2908 on behalf of the California Lawyers Association, Corporations Committee, and nonprofit organizations Committee.

I'm also the former co chair of the corporations Committee. Current law allows shareholders of for profit corporations and nonprofit public benefit corporations, mutual benefit corporations, and cooperatives to participate in shareholder meetings, member meetings. So long as certain procedural requirements are satisfied, they can participate remotely.

However, the ability of shareholders and members to attend meetings electronically without having to provide the unanimous consent of the shareholders or members or as a result of an emergency, will end December 31, 2025.

The committees believe that allowing for remote shareholder and member meetings has reduced impediments to shareholder member participation at these meetings, especially for those who may have financial or physical difficulties to traveling or to attend such meetings. Corporations plan their annual shareholder and member meetings months, if not years, in advance.

It is my understanding that if this change is not made to the current law in 2024, this same change to the law will not occur until late 2025. Such a late change would undermine the efficiency and effectiveness of the planning both by the corporation and the shareholders and members who would plan to attend. So as a result, the Corporations Committee and nonprofit organizations Committee Support AB 2908.

Thank you so much for your testimony. Do we have anyone else in the room in support? Please come forward. Seeing none, we will go to opposition. Are there any in opposition in the room? Please come forward seeing none as well. So we will bring it back to Committee for questions or comments. Seeing if there's.

We have a motion by Assemblymember Petrie-Norris and a second by Assemblymember Fong. He beat you, Assemblymember Dixon. It's okay. It's all by yourself over on the side. It's fine. So with that, I do want to thank you for your good work on this bill. And would you like to make a closing statement?

Mr. Chair, I just want to thank your staff for working with my team on this bill. And with that, I respectfully ask aye vote.

Thank you, Vice Chair. And with that we will. We have a motion. A second. Secretary, please call the roll.

AB 2908. The motion is do pass.

[Roll Call] That has eight votes.

Vice Chair, you enjoy unanimous support? The bill gets out with eight votes.

Thank you, Mister chair.

Thank you very much. We will go back now to. Let's start with the consent calendar for add ons. Madam Secretary, will you call roll for consent calendar?

[Roll Call] That has eight votes.

Consent calendar gets out with eight votes. And if we can go to file item number one. AB 2231. Do pass to Committee on business and professions add ons.

AB 2231. The motion is due. Pass and refer to Committee on a business and professions.

[Roll Call] That has seven votes.

I think I threw it off because I made the announcement. So, having said that, this bill does get out with seven votes and I believe that wraps up our business for the day. Just double checking here. And we have completed our agenda for today's hearing. We will move on being that everyone has added on that can. And with that, the Assembly Banking and Finance Committee is adjourned.