Assembly Standing Committee on Banking and Finance

Vice Chair and chair. And being that we don't have a Committee, but we can start as a Subcommitee. So welcome to the Assembly Banking and Finance Committee. Whether you are here in person or whether you're watching virtually, I am grateful that you have joined us right 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.

We do have nine bills on the agenda today, no consent calendars, so we will be limiting testimony to two minutes for each primary witness, and additional witnesses will simply state their name, organization and position. With that, it is time to move on to the hearing. And we have an author here. File item number two.

AB 2424 Assembly Members Schiavo and the recommendation for this is do pass as amended, to the Committee on Judiciary and would like to invite the Member up to the desk to present her Bill. That would be AB 2424. Assemblymember Schiavo, you're welcome to come and present. When you are ready, go ahead and begin.

Thank you, Mr. Chair and Members trickling in. Very much appreciate, first, I want to thank Committee staff for their work on AB 2424 and make clear that we'll be taking the amendments that were recommended, and thank you for the thoughtful process. California's existing foreclosure process is, in too many instances, grossly unfair. As we'll explain, the current process obscures and legitimizes the large scale extraction of billions of dollars of wealth from low income communities.

When a mortgager can't pay back their mortgage loan, the lender is allowed to sell the property at any auction, the lender takes back the loan's remaining balance, and the homeowner receives surplus funds, if there are any. Under this process, the homeowner often loses tens or hundreds of thousands of dollars of accrued home equity because of the auction process.

On the other side of the ledger, wealthy or corporate, sometimes all-cash investors benefit from these unfair and below market sale processes by acquiring properties as a bargain rate. For every dollar the investor purchases, the investor purchaser saves in buying the property, the homeowner loses that in equity. Foreclosed homeowners are often low income, elderly, immigrant, or disabled. Frequently, the home is their only asset, and the home equity is their lifetime savings.

That cumulative effect of taking billions of dollars of home equity from these consumers puts once housing-stable but low income communities at risk of homelessness and inhibits economic mobility. AB 2424 will require foreclosing lenders to postpone a foreclosure sale if the homeowner provides the lender with a listing agreement for sale of the property. This would allow the homeowner the opportunity to maximize the sale value of their property while still ensuring the lender is made whole.

AB 2424 would also set a minimum bid requirement for the first attempted foreclosure auction so the secured property will not be sold below a certain threshold, calculating at 75% of the property's market value. This process would allow the homeowner the opportunity to recover more of their equity through the foreclosure sale process, retaining accumulated wealth in California's most vulnerable families and communities.

Estimates that approximately 65,000 foreclosure sales took place in California during the four year period from 2017 to 2020 and estimated average losses of $115,000 in equity for each. Sadly, in too many real world solutions, 120 days of failure to make a mortgage payment is not enough time to correct the situation.

For example, an instance of divorce or the passing of an owner, four months just isn't sufficient for the marital or deceased estate to make arrangements to either bring the loan current or otherwise sell the property for fair market value. AB 2424 doesn't seek to prevent the mortgage holder from getting repaid. It only seeks to balance the equities so that both the bank and the owners of the property get a fair share of their interest and value of the home. Here today are Robert Herrell and Sil Vossler with Consumer Federation of California to testify as well.

Please, go ahead.

Good afternoon, Mr. Chairman and Members. Robert Herrell. I'm the Executive Director of the Consumer Federation of California. We're the sponsor of the measure. In a moment, I'll hand it over to Sil Vossler, an attorney in private practice who can tell some context. What I'd like to do...

Would you mind if I interrupted you?

We have to seize the moment of a quorum.

Not at all.

Indeed.

And so if you'll give us the liberty to do that, Madam Secretary, will you call roll?

[Roll Call]

And we have established a quorum. So please, we're celebrating.

Thank you, Mr. Chairman. So we're the sponsor of the measure. We've been working on this issue for a few years now on and off. And what you see far too often are people who paid their mortgage religiously for decades in some cases literally decades. Getting close-ish to being able to pay their home off. Disproportionately low and moderate income people of color, disabled residents in the home, and then kind of financial ruin occurs in one way or another.

If I could, Mr. Chairman, to cede the rest of my time, I'd like to read a statement from someone who was going to be a witness today, but who, as will become evident when I read her statement, is not here today. I am testifying anonymously. I'm 71 years old, and I lost my home in foreclosure in February of 2024. I apologize for my absence from the Committee. I hope to speak anonymously because I feel too much shame and pain to testify in person.

I bought my home in Santa Cruz in 1987. By 2024, my home was worth 1.4 million, but it was sold at a foreclosure auction for approximately $850,000 to pay off a $790,000 loan. Although I had built up a life savings of $600,000 in home equity, I only received $55,000 from the foreclosure of my home. I believe that the loan that was foreclosed was predatory. My broker has been arrested for an unrelated fraud. I thought he was helping me refinance, but foreclosure went through.

I live in shame that I let him take advantage of me and that I did not seek help from a legal source sooner. I have not yet been able to tell my daughter about what happened. I raised both my children in that home. One of my children has since passed away. My husband died in that home. Over the past 35 years, I worked hard to provide for my family and built up a life savings of over half a million dollars of home equity.

It was all the money I had saved for retirement. Now my home is gone, along with virtually all of my life savings. I believe it is unfair that all my 35 years of accumulated equity can be extinguished due to my failure to make a loan payment. I hope the Legislature takes protective action to protect the life savings of other borrowers who, due to circumstance, find themselves in foreclosure. Thank you for your time, and Mr. Chairman, with that, we urge the Committee to support this bill.

Thank you for your testimony. Next witness.

My name is Sil Vossler. I'm the Principal of the Vossler Law Firm in Oakland, a firm exclusively handling cases related to predatory lending and foreclosure of predatory loans. Many of my clients past and present have lost their homes in foreclosure. One of my clients had her $800,000 home sold for $50,000. At 77 years old, as a retired immigrant widow with a dependent adult daughter, she lost $750,000 she had saved up in home equity. Her life savings.

Another client, at 86 and with cognitive decline, had her Oakland properties, a primary residence and a rental property, sold for $205,000 combined in a foreclosure auction. Those properties were worth $1.5 million together. After saving for her lifetime building up a substantial savings and intergenerational wealth, this 86 year old woman was left with nothing. Without legal intervention, she would likely be dead or pushing her last remaining belongings in a shopping cart down the streets of Oakland, like so many other people.

It's profoundly unfair that somebody can do the right thing for so many years, buy a home, make their payments for decades, and save equity for retirement, just to have that equity stripped from them at the moment they need it the most, the moment they're losing their home. This bill doesn't give the lenders a haircut. It protects the borrowers from the worst elements of our foreclosure system, one that can be oftentimes very inequitable.

It's the product of good faith negotiations with the banks and trustees and others. It's a common sense reform which could offer protections to borrowers in their greatest moment of need. Thank you.

Thank you for your testimony. Are there any other witnesses in the room in support? Please come to the microphone. State your name, who you're representing, and your position.

Good afternoon. Cassie Mancini on behalf of the California School Employees Association in strong support.

Good afternoon. Dani Kando-Kaiser on behalf of the California Low-Income Consumer Coalition in support.

Thank you. Any others? Seeing none, we will move to opposition. Is there anybody in the room that... Please come forward. You have two minutes.

Thank you, Mr. Chair and Members. Mike Belote speaking on behalf of the United Trustees Association. I want to say very clearly, like I never said before, maybe, in all these years, we are not opposed to AB 2424. We have removed our opposition to the bill based on the discussions with the sponsor and author and work with your Committee. And we want to thank you and the Committee for your thoughtful evaluation of the bill. There are things that I agree with and I disagree with in the presentation.

But here's one thing we all agree on, foreclosure ought to be the last resort when a loan goes unpaid. All kinds of things can happen to people that cause them to go into default on a loan. And many times the best option is to sell the property in a fair market sale between a willing buyer and willing seller.

We've been talking to Mr. Herrell and Mr. Vossler for years about this, and we think this is a fair approach. And it contains elements like you can ask somebody else to get in line to receive notices of foreclosure documents if they occur on your property. Your son, your daughter, your lawyer, your financial planner. Often somebody can help you explain what's going on and avoid foreclosure. But another principle we agree on is no one should lose their house to foreclosure when they're actively trying to sell it.

And that is the principle at play in the bill as amended. Give people time to list the property for sale, and if they have a buyer, give them a little more time to avoid foreclosure. Foreclosure is the final remedy when nothing else works. And so we're proud to have worked on the bill, remove our opposition. There are some operational details that we'll continue to work on with the author in good faith. But we are proudly not opposed to the bill now.

Thank you so much for your testimony. And I see a line already formed. Others that are in opposition, if you'll just state your name, organization, and your position. Thank you.

Jason Lane, California Bankers Association. We are pleased to remove opposition of the bill. Thank you.

Indira McDonald here on behalf of the California Mortgage Bankers Association. Also pleased to remove opposition from the bill. And, on behalf of the California Land Title Association, I was asked to make a similar comment and look forward to working with the author on the outstanding dialogue on amendments. Thank you.

Mr. Chair and Members, Cliff Costa on behalf of the California Mortgage Association. Also here, pleased to remove our opposition. Look forward to working out those last remaining issues, and thank the Chair and the Committee for their hard work. Thank you.

Good afternoon. Shari McHugh representing the California Credit Union League. Also please remove our opposition. Thank you.

Good afternoon, Mr. Chair and Members, author. Rob Moutri, California Chamber of Commerce. Also removing opposition due to amends. Thank you.

Thank you very, very much for that. Any others in opposition? Seeing none. We'll bring this to the Committee for questions or comments. Please, Assembly Member Dixon.

Thank you, Chair. So I just want to be clear. There's no opposition.

You saw the line of people. Yes.

Well, as you know, that's great to see this kind of cooperation on a very important matter. So thank you very much. I'll be pleased to support it. I'll move.

Thank you. We do have a motion.

I'll second that.

And we have a second. Assembly Member Rubio.

Yeah. I just wanted to also thank you for, and thank the Committee, for their work. I know it's difficult to come together, but negotiations work that way. So I really appreciate you all working with the opposition to get this done.

I want to be able to give incredible amount of credit to the Assembly Member, to the author, and your office, as well as the sponsors and the Chief Consultant for really diving in and doing some hard work. However, I do have some comments, having thanked you for your good work and us being able to move forward.

As you know from our discussions that we've had, that I am not opposed to the idea of making foreclosure sales more competitive, and I am not fully opposed to the idea of introducing conditional offers in the process. But I just don't think we're quite there yet. I think there's a lot of work that we got to do to get through all the details to encourage the opposition to... I encourage the opposition to think creatively about what that process could look like or how it could work because I don't think this issue is going away, nor should it. So with that, would the author like to make closing statements?

Thank you so much. I appreciate that and appreciate everyone coming together and continuing to work on this issue and for the thoughtful feedback. You know, at the end of the day, we want to make sure that people are not losing their life savings that they've invested in in their homes. Right. This is the nest egg that a lot of people rely on, and the only one they have a lot of times.

And so, you know, we will continue to work on the other pieces and may have to be in a future iteration that we work on some of it. But, you know, in the middle of a housing crisis, when we know there's so much demand, it's really hard to justify why people are getting rock bottom prices on these homes when they should be able to recover some of that equity, and we hope that this bill is going to make a big difference to be able to do that. So appreciate an aye vote, and thank you so much.

Thank you so much. And we do have a motion from Assembly Member Dixon, second from Assembly Member Rubio. So, Secretary, please call the roll.

On the bill AB 2424, the motion is do pass as amended and refer to Committee on Judiciary. [Roll Call] That bill has seven votes.

This bill has seven votes. We'll keep the roll open for absent Members.

Thank you so much.

It does pass. Thank you so very much. We will move to the next item. Well, we'll go back. Item number one, Assembly Member Gabriel, AB 2432. The recommendation is do pass to the Committee on Appropriations and, Assembly Member Gabriel, just when you're ready, please feel free to start with your opening statements.

Thank you, Mr. Chair and colleagues, and a special thank you to your Committee staff and you for your thoughtful assistance and feedback on this measure. I am pleased today to present AB 2432 which would establish a permanent source of funding for programs serving victims of violent crime. Modeled on the bipartisan Federal Victims of Crime Act, or VOCA, AB 2342 makes it easier for state and local prosecutors to hold bad actors accountable, enhance deterrence, support crime victims, and protect our communities in several important ways.

Most importantly, AB 2432 will help provide essential funding for programs that provide vital, and in some cases even life saving, services to victims of crime in the state of California. This year, California's crime victim service providers, who provide critical support to victims of human trafficking, domestic and sexual violence, and child abuse, face an expected reduction of federal funding of approximately $170 million, a cut of approximately 40%. This would be devastating.

In practice, that means fewer staff, longer wait times, less assistance, and fewer of the vital services provided by so many of these nonprofits, whether they be domestic violence service providers, rape crisis centers, legal assistance providers, or those who help victims of human trafficking. To prevent this tragedy, AB 2423 would create a state analog to the violence against Victims of Crime Act so that we can better raise additional funds and better support these essential programs and services.

I'm proud that this measure is supported by a broad coalition of law enforcement, victim services, and criminal justice groups that includes Attorney General Rob Bonta, the California Partnership to End Domestic Violence, the Coalition to Abolish Slavery and Trafficking, California Women's Law Center and the Ventura, Los Angeles, and Santa Clara County District Attorneys, among others. It has no recorded opposition.

With me today to testify in support of this measure are May Rico, the Executive Director from Haven, which provides critical services to crime victims in Stanislaus County, and Evan Ackiron, the special assistant to the Attorney General on white collar and corporate prosecutions. Thank you and respectfully request your aye vote thank you.

You have two minutes each please.

Assembly Member Grayson and Members of the Committee, my name is May Rico and I'm the Executive Director of Haven in Stanislaus County. I'm here today to speak in support of AB 2432 establishing a new revenue stream for crime victims in California. Haven is a private nonprofit, providing services to survivors of domestic violence, sexual assault, and human trafficking in Stanislaus County, including emergency shelter since 1977.

Last year, Haven helped over 2,500 survivors of abuse and violence. Funding for crime victim services in California has not kept up with the increased demand as we come out of the pandemic. More people are seeking help while our resources to serve them are shrinking. Nor can we retain the experienced staff they need when we can't keep up with competitive wages. In July of 2022, our funding included two housing grants and a legal grant funded by VOCA.

Today, those grants are gone, knocking out most of our housing program and two thirds of our legal program. Today, if someone calls for help with the restraining order, it will take time to find someone who can provide legal assistance and even more time to get an appointment. When someone is hunting you, someone who knows all the places you'll go to hide, and all the people who will help you, that time matters.

Two years ago, there was a good chance we could provide transitional housing assistance to anyone in our emergency shelter. Now we're very limited in the direct assistance we can provide, and our master lease units are gone. Today, someone in our shelter is unlikely to find their own housing in the four to six weeks they're able to stay with us. Crime victims in California deserve better.

They come to us because they are in a system that's already failed them once, and when we can't meet their needs in a timely manner, they're failed again. They need to know when they pick up the phone, their call will be answered quickly. We can't ensure that without the funding provided by this measure. Your support for AB 2432 will ensure our life saving programs continue. Thank you, and I respectfully ask for your aye vote.

Thank you for your testimony. Next witness.

Thank you. Good afternoon, Mr. Chair and honorable Members of the Committee. I appreciate the opportunity to discuss AB 2432 with you on behalf of one of the co-sponsors, Attorney General Rob Bonta. We also would like to thank the chief consultant for the detailed bill analysis, and we applaud Assembly Member Gabriel for his authorship of AB 2432. Currently, the default criminal fine in California is $10,000 per felony conviction. That applies equally to individual defendants and that applies equally to corporations.

There are certain specialized criminal fines that may result in a more serious fine. For example, there is a financial penalty enhancement available to the judge that punishes any defendant, whether individual or corporate, who commits multiple related felonies of specified types and takes above a certain specified amount. This proposed enhancement that we find in 2432 would apply to corporate defendants and corporate defendants only.

It would supplement the existing financial penalty enhancement by giving the court additional discretion to impose financial penalties that more match the seriousness of the crime whenever the crime was committed by a corporation. The bill would hold corporations accountable for their criminal wrongdoing. It still requires the prosecutor to prove intent with each crime that's being charged and to prove each crime beyond a reasonable doubt before the enhancement would be sought.

As mentioned earlier, 2432 is a win-win due to declining VOCA funding that's linked to federal prosecutions. Attorney General Bonta recently joined a coalition of AGs representing 32 states and territories urging Congress to provide critical support and services to victims and survivors of crime by taking steps to increase VOCA funding with short term bridge funding. Last but not least, you may be asking, why is this bill before this particular Committee?

The answer is simple, that in an earlier version, our definition of corporation was pegged or referenced or incorporated the definition of corporations that's found in the corporation's code. The bill has since evolved and it now has a self contained definition of corporation in the amendment that does not reference the corporation code.

I'm happy to answer any questions, and we respectfully request your I vote so the state may create a supplemental state funding stream for VOCA and California Victims Compensation Board by supporting prosecuting agencies with bringing these criminal cases forward on behalf of vulnerable Californians. Thank you.

Thank you for your testimony and we will turn to the public. Any other folks in the room that would like to state your support? Name, organization, and position.

Natasha Minsker, Smart Justice California, in strong support.

Lisa Mantarro Moore with the Stanislaus Family Justice Center and also the California Family Justice Network. Strong support.

Magaly Zagal with Greenberg Traurig on behalf of the California Partnership to End Domestic Violence. Proud co-sponsor, also asked to register support for the Crime Victims Alliance and the Los Angeles District Attorney's Office. Thank you

Grace Glaser, on behalf of Valor U.S. and the Coalition to Abolish Slavery and Trafficking. Proud co-sponsors and in support and also in addition with the Center for the Pacific Asian Family, Tri Valley Haven, Peace Over Violence, Project Sanctuary, YWCA Golden Gate Silicon Valley, Waymakers, Wild Iris Family Counseling and Crisis Center, Reach, and East Los Angeles Women's Center. Thank you.

Kristy Broduer Dermody, representing CALICO Center, which is the Child Advocacy Center of Alameda County, in strong support

Holly Fleming with Children's Advocacy Centers of California. Proud to be a co-sponsor in strong support. I'm also asked to speak on behalf of Homebridge, Victims Empowerment Support Team, Women Inc., Jewish Family Services of LA, Interface Child and Family Services, Shelter From the Storm, and House of Ruth in support.

Good afternoon. Kathy Cady on behalf of the Children's Advocacy Center for Child Abuse Assessment and Treatment, which is in Covina. And also on behalf of the collaborative of all of the Children's Advocacy Centers in Los Angeles County in strong support.

Denise Wyatt, executive director, Family Healing Center, Child Advocacy Center in strong support, Fresno County.

Good afternoon. Cheryl Marcel, CEO of Stand Up Placer in strong support. Thank you.

And with that, we will move on to opposition.

Yes, thank you.

Yes, opposition, two minutes.

Yes, I'll be much shorter than that. Thank you. Good afternoon, Mr. Chair and Members, Author. Robert Moutrie for the California Chamber of Commerce. We are regretfully opposed AB 2032 at this time. I want to first apologize for the lack of opposition letter. Again, that's on us in the mess of this year. And I had clients reach out to me late in the game. So my apologies for that delay. I appreciate the author's office reached out to us and we've started those talks. But again, that's an apology on our side for the delayed nature of them.

Sensitive to the concerns from the lack of money for victims and the VOCA funding federally. My brother as a DA, you know, talks all the time about the lack of services for victims and the issues when he prosecutes. So absolutely sensitive there. Still gathering information from my members around the penalty size, how it affects them, things like that. So I can't share those points at this time, but I look forward to working with the author on it. And again, apologies for the late notice. Thank you.

Thank you so much. Any other members or any other folks in the room, opposition, please step forward. Seeing none, I will bring it to the Committee. Any questions or comments? Yes, Assembly Member Dixon.

Thank you, Chair. Thank you, representative from Cal Chamber, because I was curious why there were no business positions on this. I think the merits of your bill, Assembly Member, are compelling and one would empathize with all of these victims' rights. I've been a strong advocate of victims' rights organizations for many, many years. I'm trying to understand the nexus between a corporation found guilty for something that has nothing to do with any of these victims' situations.

Sadly, and it appears to me, correct me if I'm wrong, that you're just looking for deep pockets in the business community, assuming that they should pay. To me, this is an example of why companies have to leave California. It's such an anti-business measure that they're the deep pockets and they're being scapegoated for crimes they did not commit, but have to pay a serious penalty, up to $25 million. Is that correct?

I mean, it's just shocking to me, and I think the needs of every one of these organizations is compelling and meritorious, and I'm sorry that they have to feel that they have to look to corporations to fund for a crime that they did not commit. I'm just shocked that we are just really pointing the finger at businesses in California. Hardworking, small, all corporations are not Fortune 500 companies. They could be family owned corporations.

$25 million can destroy a company just because the District Attorney thinks that this should be part of the penalty process, and it's a money gathering, usurious process to go after businesses have nothing to do with this. If they were involved directly in the crime that affected and created those victims, 100%. But I'm trying to understand the nexus. So what is compelling this?

Yeah, it's a fair question, Assembly Member, and I'll just say part of the, you know, we had a very different presentation of this bill in Public Safety, trying to focus on the deterrent aspect of this and how it affects white collar fraud. So let me say a couple of things.

First of all, this bill is based on the federal law, the Victims of Crime Act, that has funded all of these programs, and all of these wonderful folks have gotten, who are doing God's work, have gotten their proceeds to fund their work from the federal VOCA Bill, which is distributed through the state of California. That was a bipartisan measure signed into law by President Reagan in 1984.

The idea here that when corporations are committing misconduct, committing crimes, found guilty by a jury of committing that misconduct, that part of the restitution that they should pay to victims, often there are many, many victims of that corporate. It could be a large financial fraud. Think of the subprime mortgage crisis.

In the letter submitted by the Attorney General's Office, they point out an oil spill in Santa Barbara County, where the pipeline company, who was found guilty of breaking the law, of committing corporate misconduct, paid a $3 million fine when the estimate was that they had caused over $200 million in damage to the residents of Santa Barbara County, to the environment, to the people there. So the idea here is not simply that we're looking for deep pockets.

This is, this is not something that is meant to just go after and take money from businesses. This is about when people break the law, harm large numbers of Californians, and then, unfortunately, have been able to skirt justice by paying these very small fines that do not approximate the harm that they have caused. I'll note for you also, this is an approach that has been adopted in both red states and blue states.

As you can see in the analysis, Texas, the state of Texas, has a version of this. They believe that when corporations break the law, when they are found guilty by a jury of breaking the law, that they should pay fines that are commensurate with the harm that they have caused to people. So part of what I didn't emphasize here is the deterrent aspect of this, the accountability aspect of all this. And again, we're not making this up out of whole cloth. We are simply copying what has been done on a bipartisan basis at the federal level and what has been done in other red and blue states.

Okay, let me. You provided some good information for me. Let me just follow up with the question. So if there was a crime, oil spill. Couple questions. Did the judge determine the penalty, the fine? So that wasn't the company. I mean, it was. It should have been more or less, whatever that was at the discretion of the judge?

So part of the challenge we have right now is that the fines in the state of California are limited by law, and we have some of the lowest in the nation. So even though there are a variety of things that the judge can look at, ultimately the prosecutor doesn't have the ability to seek larger fines, and the judge doesn't have the ability to grant those larger fines.

So what we're doing is providing additional flexibility for the prosecutors to seek this white collar enhancement at their discretion and then at the discretion of the judge. And if you look in the analysis, you can see there's a whole range of circumstances that we asked the court to take into consideration when they're assessing the fine. I will tell you part of the reason we have that $25 million in there.

Most of the time, the fine will be pegged to the loss suffered by the community or the harm inflicted on the community. As we have seen, though, in cases involving wildfires and other large natural disasters, corporate criminal misconduct can sometimes result in the loss of human life. We have seen people that have been killed in the state of California by criminal negligence and other criminal conduct by corporations.

So that $25 million is in there for the absolute most horrific cases where, again, this is a corporation that has been found guilty by a jury of breaking the law that has resulted in the loss of human life, potentially the loss of life of many people, as we have seen since some of these wildfires.

I don't want to excuse any corporation if they've been found guilty of committing a lot. There's a fine, there's a penalty. Appropriate penalties should be laid against them. I totally agree. I'm concerned, again, with the nexus to the victim's rights. If they were victims of the oil spill, 100% that's a legitimate victim of that particular crime. But broadening it to include all kinds of victims' rights beyond the scope, the definition of the crime committed, to me, looks like it's aggrandizing off a crime.

And then again, the prosecutors and have, no wonder the DAs want this. So it goes into a special fund, and who knows where it goes. The victim should receive, the victim of the crime, in my opinion, should receive the fine.

Yeah. Do you mind? Let me just clarify that, and then I'll turn it over to our colleague from the Attorney General's Office. The California Constitution and actually, state law require restitution to the victim.

Yes.

The first thing that is going to happen is those victims of the oil spill. But part of what we try to do, as we do with criminal punishments, is to create deterrence, right? That's why sometimes we'll put people in jail or apply other punishments.

So we have gotten into a situation now, and this was part of the theory, I think, of the federal bill that President Reagan signed where corporations can write off the harm they impose on the community as simply a cost of doing business. And so these additional discretionary fines that, again, these are going to be reserved for the most egregious cases, right? So money that went into VOCA was from things like Enron and other things where literally, in some cases, millions of Americans were harmed.

It's to impose an additional measure of deterrence. It just so happens that it provides a really important funding source for a lot of these folks over here who are doing God's work, but it's that additional, you know, the restitution to the individual is the first box that we check, and that's actually in the text of this legislation.

You want to go over and beyond that.

Yes. Which, again, modeling what was done on the bipartisan federal legislation, what states like Texas have done. I don't know if the.

Would the witness like to clarify or make a clarifying statement?

Yes, as the Assembly Members said, so restitution directly to the victims is first. That always happens. Then there's a question of punishment for the criminal defendant. If the criminal defendant is an individual, we talk about incarceration, we talk about alternatives to incarceration. We talk about probation. When it's a corporation that's a defendant, they've already paid restitution to the victim. And now we're talking about punishment because they've committed a crime.

Right now, the only thing there is, is a fine, and it maxes at $10,000. $10,000 is no longer an adequate punishment for corporations. They've paid the victims, they paid them back. But we don't want, again, crimes to just be pay the victim back and move on. There should be punishment. Pegging the punishment to two times the harm has become the modern trend for corporations that commit vast harms. Either wide scale frauds that financial institutions can commit, environmental crimes, fires, things like that.

So the default in this bill is you pay once to the victims, that's the restitution, and then you pay up to twice the amount of the harm as a maximum as the corporate punishment.

Who determines the harm?

That's up to the judge. So normally the restitution is determined first, and that's a factual finding by the court and it's slugged out between the prosecution and the defense. The judge makes a finding that restitution is x, that's the amount of harm, and then the judge can up to, double it, whatever the judge thinks is necessary for adequate punishment, adequate deterrence, so that that kind of activity is no longer just a cost of doing things.

And Texas, the United States, Illinois, Oregon, Washington, New Jersey, are all states that have adopted laws like this. Again, where the benchmark is twice the amount of harm is the cap. There's an alternative base amount also. So if that doesn't work, that's why we have the $25 million in there as an alternative. Sometimes, like a fire, it may be that the harm is very difficult to determine. And you have a ballpark.

We all agree it's between $10 million and $15 million, but we can't get an exact amount. The judge then has the discretion to hit that ballpark with the $25 million and use all the factors that we have listed in the bill: the seriousness of the offense. Is this a first offense? Is this the third offense? How large is the corporation, how small? All of those factors.

I appreciate that. You did a very fine job. So thank you for explaining that. I appreciate that. Thank you very much.

May I add something?

Actually, we're going to turn to Committee, if you don't mind. Other Members of the Committee, with questions or comments? Seeing none. With that, Assembly Member, would you like to close?

Yeah. Thank you. Thank you very much. Appreciate the, again, appreciate the excellent and thoughtful feedback from you and your Committee and would respectfully request an aye vote.

Thank you so very much. Do I have a motion and a second? I have a motion from Assembly Member Fong and a second from Assembly Member Soria. Secretary, will you please call the roll?

On the bill, AB 2432, the motion is do pass and refer to Committee on Appropriations. [Roll Call] That bill has seven votes.

Bill has seven votes. It gets out, but we will keep the roll open for absent Members.

Thank you very much.

Thank you so very much. Item number three, AB 3108, Assembly Member Jones-Sawyer. Recommendation is do pass to the Committee on Public Safety. Assembly Member Jones-Sawyer, feel free to open up with your statement as you are ready.

These schemes are becoming more and more common and they profit by deceiving the californian most valuable populations. Homeowners with Low credit veterans, non English speakers and those who are unbanked or underbanked are all prime targets. Predatory brokers will pinpoint victims when they are in financial distress, then convince them to sign a mortgage they don't fully understand or which is misleading or untrue. For most of these people, their only asset and source of equity is their home. When they sign a predatory mortgage, they risk losing everything.

Unfortunately, the vast majority of these cases go unprosecuted. As you know, I rarely come before this Committee. My mother was a victim of a mortgage scam. My family has basically lost their home to someone who took out the equity in a reverse mortgage scheme supposed to paint the house, took out $800,000 instead of $8,000 out of a home.

A home that I grew up in, a home that I rode my bike at, a home that I had my bike stolen from, and a home that we were supposed to be a legacy to all my family and was supposed to be the wealth that would be generational for my nieces and nephews. When someone signs these documents, regardless of their understanding, current law considers their signature a legally binding agreement which is virtually untouchable.

That is, in addition to the narrow definition of mortgage fraud deters most attorneys from taking on these cases, including district attorneys whom I went to, who refused to take it and said the only way you recourse is through a lawsuit. And for seniors like my 87 year old mother, she doesn't have the tens of thousands of dollars to go through a lawsuit to make that happen.

That in addition to the narrow definition, AB 3108 will clarify that brokers who deceive and misguide consumers are committing mortgage fraud and will give victims a chance to achieve justice and regain their hard earned money. With me to testify in support of the Bill is Robert Herrell, on behalf of the bill's sponsor, the Consumer Federation of California, and Sil Vossler, a consumer attorney with experience in predatory lending cases. Thank you.

Thank you, Assembly Member, for your statement. Witnesses, two minutes each.

Good afternoon, Mister chair Members. Robert Herrell with the Consumer Federation of California. In a way, this Bill is sort of a sister Bill to the Bill that you heard at the beginning of this hearing by Assemblymember Schiavo. The assemblymember was very eloquent in talking about not only his personal case, but the problem here.

What happens is the notice of default, when someone begins to get in some sort of trouble, winds up serving as a sort of bat signal to fraudsters and scam artists that you have someone who is in some sort of financial duress and at risk of losing their home. And what inevitably happens is the scammers and fraudsters kind of come out of the woodwork along with some legitimate folks who might be able to help the homeowner in distress.

But when you sign that contract as the Assembly Member, as the author said, that winds up becoming an extra bind, even if the contract was produced in a fraudulent manner intended to mislead the consumer.

And so what you have is the more recent scam, which Mister Vassar will go into a bit more detail about over the last three or four years in particular, is to take someone who's under duress and shift them over from a residential loan product that they've been in, into a commercial product that serves two important purposes. One, you have fewer consumer protections in the commercial lending space than you do in the residential lending space.

And two, many of these products wind up with some sort of massive balloon payment after six months or a year. And a person who's under that level of financial duress, unless a miracle sort of happens, they're not going to be able to afford that balloon payment six months or a year down the road. So we would urge your support for this measure as the sponsor of it. Thank you.

My name is Sil Vossler. Again, I'm with the Vossler law firm, and I handle primarily predatory lending cases like what we're talking about right now. In 2001, California enacted legislation to combat predatory lending, which typically occurs in the subprime mortgage market. Those provisions are codified in division 1.7 of the Financial Code, and they apply to consumer loans, not to commercial loans. In practice, in order to evade these consumer protection statutes, predatory lenders and brokers will steer borrowers into signing commercial loan documents which are unsuitable for them.

This includes my 91 year old client who's on Social Security making $1,400 a month, and she was steered by her broker into a commercial loan which required her to make a balloon payment of $850,000 after one year. This, of course, is manifestly impossible. And my client had no discernible commercial interest in the property. Yet the broker got her to sign those documents anyway. Worse, her broker had actually steered her into four such loans in a four year period, consuming a majority of her accumulated home equity.

Approximately $700,000 gone in four years. She was losing her home in foreclosure when her daughter came to me for help. These loans and these tactics are methods that predatory loan brokers and lenders will use to quickly liquidate and appropriate a homeowner's accumulated home equity. We've had conversations with mortgage brokers and lenders and advocates in this space, and it seems that everybody recognizes that this is a major problem and our goal is a narrow one.

We want to make sure that the borrowers who the Legislature has already said should be protected from these kinds of practices, that they're covered by the umbrella of division 1.7, even when, or especially when they're the victims of fraud. And I've already shared a number of my cases with the Committee. This is my primary area of practice, and I urge your support.

Thank you for your testimony. We will turn to those in the room in support. Please come to the microphone. State your name, organization and position. Thank you.

Dani Kando-Kaiser, on behalf of the California Low Income Consumer Coalition, in support.

Thank you. Any others in support? Seeing none, we will go to opposition. Is there opposition in the room? Seeing none, let's bring it to the Committee for questions or comments. Seeing we have a motion by Assembly Member Dixon and a second by Assembly Member Soria, would you like to close?

And I want to thank you. You know, when I went to the proper authorities about this, what was distressing is they said they get five of these a week. That's five seniors more a week that are being scammed just in Los Angeles alone. And so I thank you. You will be helping quite a few people who can't help themselves. Respectfully ask for your aye vote.

Thank you, Assemblymember Jones Sawyer. We do have a motion and a second. Secretary. Will you please call the roll on the Bill AB 3108.

[Roll Call]

The bill has seven votes. It gets out, we will keep the roll open for absent Members.

Thank you, Mr. Chair and Committee.

Thank you, sir. Next is file item number four, AB 2935. The recommendation is do pass as amended to the Committee on Human Services. Assembly Member Maienschein, when you're ready you can begin with your opening statement. Thank you, sir.

Well, thank you very much, Mr. Chair and Members. I want to begin by accepting the amendments as proposed in the analysis. AB 2935 is important legislation to protect foster youth. Foster youth are especially vulnerable to having their identity stolen due to the large number of people who have access to their personal information. Each time a foster child changes placements, additional individuals gain access to their information, including their Social Security number.

Children have always been an attractive target for identity thieves because their credit reports are clean and are often left unmonitored for many years, providing ample time to cause substantial damage to the child's credit. Once a foster youth reaches 14, or if they come into the system after the age of 14, current law requires county welfare departments to check with the three credit bureaus to see if a credit report exists.

Because children should not have credit reports, the existence of a report is likely the result of fraud. However, our current laws only come into play after a youth has been victimized. This bill seeks to prevent identity theft in the first place by requiring the credit bureaus to automatically freeze an individual's credit reports when they receive an inquiry from a County Welfare Department regarding a foster youth. Placing the automatic phrase will prevent actors from being able to open accounts in a child's name. With me to testify in support is Ed Howard, on behalf of Children's Advocacy Institute.

You have two minutes.

Thank you. Good afternoon, Mr. Chair and Members. Ed Howard, senior counsel of the Children's Advocacy Institute, pleased to sponsor this bill. We were going to have a witness who was a former foster youth come with me today, but regrettably, she was unable to come. With your permission, I will read an abridged version of of what her statement would have been. Thank you. My name is Kyra Endoso.

I was the second oldest child of eight, and on most days I was called mom as I was more present than our own mother. When I was 15 years old, I went into foster care. At 17, I started working with the intention of saving up to move out and access extended foster care. It was then that I learned I needed a decent credit score to rent an apartment. I decided I should check my credit report.

It came as a shock when I learned that I actually had a credit score, even though I wasn't supposed to. My credit score was 319. I discovered that my biological father had been opening accounts using my Social Security number as well as getting business loans under my name. Shortly after I turned 18, my foster parents handed me all my belongings in a trash bag and in the middle of the night, told me to leave. I had nowhere to go. I couldn't rent an apartment.

I worked four jobs to combat the impact of my low credit score. I spent countless hours on the phone, forced to retell my story to a plethora of strangers. I wrote endless amounts of appeals, same documents and story over and over. Oftentimes, credit bureaus denied my claims because they saw my father using my Social Security number as justified since he was my parent. I felt like I was drowning in my own pleas for help. My experience dealing with the bureaus was cold and impersonal.

Some questioned why I didn't just call my father and ask him to close my accounts and stop using my Social Security number. All of this took several overwhelming years. Did I finally bring my credit score back up? Yes. But does what happened to me still impact me to this very day? Also yes. While dealing with all of these battles, my brother ended up committing suicide at 20 years old. I didn't learn until after he passed that he had also been victimized by our father's identity fraud.

I hope we can all come together today so that less foster children have to suffer through these crimes. I will observe the obvious. Kyra did nothing wrong. We, by force of law, made her life our responsibility. I respectfully ask for your aye vote.

Thank you for your testimony. To those in the room in support, please step forward. Name, organization, and position, please.

Nicole Morales, on behalf of Children Now, in support.

Thank you. Any others? Seeing none. Those in opposition, please step forward. Seeing none. We will bring it to the Committee for questions or comments. Assembly Member Petrie-Norris.

Very briefly, what a nightmare. What an absolute nightmare. So thank you so much, Assembly Member Maienschein, for shining a light on this and bringing this forward. Would love to co-author. Thank you.

Thank you.

I'll just say one more thing.

Yes, Assembly Member Dixon.

Thank you, Chair. Thank you for bringing this forward. I mean, sometimes I often wonder why we have so many bills to consider. Aren't there enough laws? And you bring attention to something that is really essential. And I thank you and thank you on behalf of your clients there. Thank you very much.

Thank you for those comments. Do I have a motion or second?

Second.

So I have a motion from Assembly Member Petrie-Norris. Second from Assembly Member Rubio. Secretary, please call the roll.

On the bill, AB 2935, the motion is do pass as amended and referred to Committee on Human Services. [Roll Call] Bill has eight votes.

The bill has eight votes. It gets out, we will keep the roll open for absent members. With that, we will go to the next item, item number five, AB 2618. Vice Chair Chen, you are presenting AB 2618. The recommendation is do pass to the Committee on Local Government. Please, when you are ready. You may begin.

Thank you, Mr. Chair. Appreciate your time. Again, I wanted to thank you for your time, for allowing to present AB 2618. First off, I want to thank the Committee for working with my staff on this bill. Until January 1, 2026, Government Code Section 53601.8 allows, but does not mandate, a local agency deposit up to 50% of their overall surplus funds with a depository institution that uses reciprocal deposits as a means of collateralization.

Using reciprocal deposits allows the depository institution to accept a deposit from a local agency exceeding the Federal Deposit Insurance Corporation or National Credit Union Association's standard insurance limit of $250,000 while maintaining full insurance coverage over the entirety of the local agency's deposit. Unless extended on January 1, 2026, the maximum 50% of local agency funds that may be placed using triple deposits will be reduced to 30%.

AB 2618 eliminates the January 1, 2026 sunset date, thereby extending current law and the permissive ability for local agencies to deposit up to 50% of their overall surplus funds with a depository institution that uses reciprocal deposits as a means of collateralization. Here to testify with me, we have Jason Lane, director of government relations for the California Bankers Association. He'll make all my Legalese much simpler.

Thank you. You have two minutes.

Thank you, Mr. Chair and members of the committee. I'm Jason Lane, California Bankers Association. Appreciate Assemblymember Chen carrying this bill for us. We're removing a sunset date to a portion of the government law that allows local agencies to continue to invest surplus dollars in community banks and credit unions. That ensures that those deposits then help the local community. The theory is it keeps the dollars local and community banks and credit unions can then go out and make loans into the community, which in turn helps the local economy.

The provision of law that was enacted in 2019 by Assemblymember McCarty increased the thresholds that a local agency could invest using reciprocal deposits to 50% of its surplus funds. Previously it was 30%. We're removing the sunset date to that law. This also ensures that because of the the community bank or credit union can participate those deposits out to other community banks and credit unions, it ensures that every dollar of those local agency funds are FDIC insured. o we urge your support and passage of this bill today. Thank you.

Thank you for your testimony. Those in support, please come forward. Name, organization, and position.

Good afternoon, Chair and members. Robert Wilson, California Credit Union League, here in support. Thank you.

Thank you. Any others seeing none, we'll go to opposition. Anyone in the room in opposition, please come forward. Seeing none, let's take it to the committee for questions or comments. We have Assemblymember Petrie-Norris. I will accept the motion from you and second from Assemblymember Dixon. Thank you so very much. We do have a motion and a second. Member, would you like to close? Vice Chair?

I respectfully ask for your aye vote, Mr. Chair. Thank you.

Thank you for your brief closing. Secretary, will you please call the roll?

[Roll Call]

Congratulations, Vice Chair. Unanimous. Your bill gets out with nine votes.

Thank you, Mr. Chair.

Thank you. Vice Chair Chen, you're next up again. File item number six, AB 2981. Recommendation do pass to Committee on Appropriations. You may begin when you're ready.

Thank you, Mr. Chair. Appreciate it. First, I want to again thank the Committee and for working with my staff on this bill and we'll be taking all the Committee amendments.

AB 2981 is designed to address the problem that the current commercial lender is licensing application process where the DFPI is incompatible with how very sophisticated and high value private credit providers capital. In short, the application asks questions that are not suited for publicly traded corporations with special purpose lending entities. AB 2981 does not exempt these BDC lenders from regulation, rather deems them to be licensees and subject to the same regulations as other commercial lenders.

And this way DFBA licensing resources can be more focused on commercial lenders who are making small business loans. To attract companies in California that are engaged in periodic and large volume commercial lending projects, AB 2981 relieves institutional finance lenders from DFPI and licensure if they do not make any consumer loans in the preceding calendar year. It has made five or fewer commercial loans or the principal amount of all loans made by the finance lender on the preceding calendar. You have each exceed $350,000. Here to testify, we have Sarah J. Atriloni on behalf of Ares Management, LLC.

Thank you. You have two minutes.

Hello. Thank you, Mr. Chair and Members, for allowing me to speak in support of AB 2981. I'm Sara Atriloni. I'm an attorney for non-depository financial services companies who do business or want to do business in California, including Ares Capital Corporation.

I'm based in Colorado where I was appointed by the current and past governor to represent the state at large on the Colorado Banking Board, which is the supervisory authority over Colorado chartered banks trust and money transmitters and was previously a trial attorney with the U.S. Department of Treasury's Office of Thrift Supervision and an acting deputy enforcement director and one of the founding employees of the Consumer Financial Protection Bureau. I'm here on behalf of Ares Capital Corporation.

Ares Capital has a lending portfolio of approximately $22.9 billion which consisted of 505 portfolio companies backed by 232 different private equity sponsors. This type of complicated corporate setup for these private capital businesses has become an issue with licensing when it comes to the DFBI. These business development companies would greatly benefit from AB 2981. Formally speaking, most BDCs are closed end funds that hold a portfolio of loans and trade on the stock market.

BDCs, given their status as registered investment companies under the Investment Company Act of 1940, are required to distribute at least 90% of their net investment income to shareholders and are subject to oversight by the SCC. Ares generally targets as borrowers the top 2% largest companies in the U.S. Their borrowers are sophisticated and the loans are very large, often many millions of dollars.

Here in California, Ares served as the administrative agent, joint lead arranger, and joint book runner for a new senior secured credit facility to support the continued growth plan for Avetta. Avetta is a supply chain risk management SaaS platform that connects global enterprise customers to contractors and suppliers. It is headquartered both in Orem, Utah and Irvine, California. This is just one example of the kinds of loans that Aries puts into Californian business.

The problem is that the license application with the DFPI is incompatible with this private lender business model. AB 2981 is designed to address the problem that the current commercial lender licensing application process is not consistent with how very sophisticated and high value private credit provides capital. California Financial Code Section 22100 requires any individual or company that engages in the business of making commercial loans or acting as a broker to obtain a finance lender license using something called the National Mortgage Licensing System. The license application requires detailed, sensitive personal information about finance company owners, including fingerprints and personal financial disclosures.

And if you can.

Oh, you bet.

Move to closing.

In any case, we're hoping that this bill will streamline the license application process in order to improve opportunities for large commercial lending in the state of California.

Thank you so very much for your testimony. Any others in the room in support, please come forward. Seeing none. Opposition? Any opposition in the room, if you will come forward. Name?

Not in opposition, but we do not have. Robert Harrell with the Consumer Federation of California. We don't have an official position on the bill. Just in light of the rest of today's agenda, we just want to tread very carefully in terms of licensing streamlining. And so we look forward to engaging with the author, sponsor, and DFPI on this measure. Thank you.

Thank you very much. Anyone else in opposition? Seeing none. Let's bring it to the Committee for questions and comments. Seeing no questions or comments. Do I have a motion? Assembly Member Dixon. Motion. And Assembly Member Rubio with a second. Mr. Vice Chair, I want to thank you for bringing this forward.

I do appreciate you and the sponsors' candor, by the way, and the willingness to think of certain ways or different ways to strike the right balance and to keep this bill as narrow as possible. However, as the analysis explains, there are a lot of details to really work out in this. So my request is that you work with the regulator and try to figure out those details as the bill would move forward.

Absolutely, Mr. Chair. You have my commitment on that, sir.

Thank you so very much. And with that, we do have a motion and second. Secretary, please call the roll.

On the bill, AB 2981, the motion is do pass and refer to Committee on Appropriations. [Roll Call] That bill has eight votes.

And that bill has eight votes. It gets out, we'll hold the roll call open for absent Members. Thank you, Mister Vice Chair. And I took your agreement as your closing statement, by the way. Thank you.

The next bill file in order is AB 2017. Chairman Grayson, you're presenting AB 2017 at your pleasure. The recommendation's do pass to the Committee.

Good afternoon, Mr. Chair, Vice Chair, and Members. I am pleased to present AB 2017, which will help prevent fee creep in the banking industry by prohibiting state chartered financial institutions from charging a non sufficient fund or a NSF fee to a consumer for a transaction declined instantaneously or near instantaneously. This bill would codify into state law a rule that has been proposed by the Consumer Financial Protection Bureau, or CFPB, in January in order to proactively set regulations to protect consumers from abusive practices.

As noted in the Committee's analysis, despite their modest use of banking use by banking institutions, the CFPB has been very critical of NSF fees for their clear lack of purpose. Consumers receive no service at all in exchange for the fee, and the fees themselves, which average $34, do not represent the marginal cost to institutions for declining the transaction.

It has been shown that NSF fees are most likely to be assessed on financially vulnerable consumers, increasing financial strain, while also negatively affecting the consumer's overall perception of the banking system by prohibiting a financial institution from charging a consumer an NSF fee when the consumer's attempt to initiate a transaction is declined instantaneously or near instantaneously due to non sufficient funds. AB 2017 will rein in junk fees and protect financially vulnerable consumers from charges that they cannot afford.

So with that, I would like to introduce my witness, Robert Harrell, who will be testifying on behalf of Consumer Federation of California. You probably haven't heard of him, but he is going to be a witness and testify today.

Mr. Vice Chair and Members. Robert Harrell with the Consumer Federation of California. I'll be quite brief on this bill. These are transactions that are denied. The transaction did not occur. You should not be paying upwards of $30 to $35 for a transaction that was denied.

CFPB has taken a look at this. The concern is that in the larger landscape of junk and hidden fees, when you have a bill in the other house looking at overdraft fees, and you have also a separate proposal with the Consumer Financial Protection Bureau at the federal level on overdraft fees. There's no proportionality whatsoever. The transaction cost of NSF is extremely small, and yet $30, $35 is being charged.

I would just finalize by noting a report from the Department from DFPI about a year ago that noted that between overdraft and NSF fees, there is a big problem in California with some state chartered credit unions charging a lot of those fees. So we urge the Committee to support this bill. Thank you. Happy to take any questions.

Do we have any additional members in support?

Hello, Danny Kando-Kaiser on behalf of both the National Consumer Law Center and the California Low Income Consumer Coalition in strong support.

Hello. Brian Augusta on behalf of Rise Economy in support.

Any witness in opposition?

Good afternoon, Mr. Vice Chair, Members of the Committee. Robert Wilson, California Credit Union League here in opposition to AB 2017. First, I'd like to thank the author's office staff for taking time to sit down with us on the bill. These transactions are not prevalent amongst my members. You might be asking why are we opposed to the bill?

We're opposed to the bill for two reasons, which are laid out in the Committee analysis very well. The first is there's a lot of action happening federally on this with the CFPB, as the Chair has indicated. So we want to make sure if the CFPB were to zag one way and this bill's going the other way, we want to make sure that we're all on the same page when those final rules come out. Something I think we can definitely iron out.

And then the second reason is there's just a lack of definitions in the bill, which I know is something that we will continue to work on. Instantaneous seems pretty obvious, but what is near instantaneous is that 30 seconds? Is that a minute? Is that five minutes? We don't really know. So we want to make sure we iron out those definitions, and those are the same concerns we have federally as well. So I look forward to continuing conversations and happy to answer any questions. Thank you.

Thank you. Any other witnesses in opposition? Seeing none. I'll take this back to Committee. Any questions? No. Do we have a motion and a second? Mr. Chair, would you like to close?

I respectfully ask for an aye vote.

Just one quick thing, Mr. Chair. I just want to say thank you so much for working with the opposition, and I know that you'll continue to do so. Thank you, Mr. Chair. With that, Madam Secretary.

On the bill, AB 2017, the motion is do pass and refer to Committee on Appropriations. [Roll Call] That bill has eight votes.

Thank you Mister Chair. The Bill is out. The next Bill file order is AB 2062. Mister Chair, at your pleasure.

Thank you so much. Slide on over. I like this chair more. Thank you so much Mister Vice Chair and Members, I am so pleased to present Assembly Bill 2062, which will update and strengthen California's credit union charter. Credit unions can either receive a state charter or a federal charter. Making sure California's state charter is competitive is very important.

We want credit unions to form here and we want them to succeed in this state as a financial. As the financial system changes and the landscape for credit union shifts, the Legislature must occasionally update and modernize the law. This is why every few years we see a Bill just like AB 2062. AB 2062 will make assorted changes to the rules around membership applications, declaration of dividends and virtual Member meetings. These changes are modest, but they will help the credit unions better serve their membership.

And with that, I would like to introduce Robert Wilson who is a great witness on this Bill. He'll be testifying on behalf of California Credit Union on how great this Bill is and how much he supports it.

Thank you Mister chair. And some are calling this the Bill of the year. I would agree. Thank you for authoring this Bill. I think the Chair did a great job of summarizing the changes.

I'm happy to answer any questions the Committee has, but these are very important matters to my membership. Keeping the charter as attractive as possible is great. My Members love having their regulator in their backyard as opposed to back in DC. And so making these changes is a big deal to my membership. So happy to answer any questions. Thank you. Ask for an aye vote.

Thank you. Any additional witnesses and support? Any witnesses in opposition? Moving the second. Any other questions from Committee?

Mister Chair, would you like to close?

Respectfully asked for an aye vote.

Madam Secretary, please call the roll.

AB 2062. The motion is due pass and refer to Committee on Appropriations. [Roll Call]. That Bill has nine votes.

Thank you, Madam Secretary. The Bill is out. Mister Chair, your last bill AB 2993 at your pleasure.

Thank you very much again Mister Vice Chair and Members. I am pleased to present AB 2993 which will establish important consumer protections in the home improvement lending industry. First, I would like to accept the Committee's amendments that are outlined in the Committee analysis. This Bill is in response to a problem that has become far, far too common. A contractor shows up at a vulnerable consumer's home.

The contractor convinces the consumer to take on a new home improvement project, such as an example H Vac or a new solar energy system. The contractor helps the consumer sign up for a consumer loan with unclear terms. But the contractor never actually finishes the job and while the consumer is trying to resolve matters with the contractor, the lender comes knocking and demands payment. As a General contractor myself, I do not believe the customer should have to pay for a job that is not finished.

And yet, time and time again we are seeing cases just like this. This Bill establishes new rules for finance lenders who make home improvement loans. In doing so, this Bill supports the efforts of the contractors state license board to rein in unscrupulous contractors.

Under AB 2993 home improvement lenders must do the following, confirm the terms of the loan with the property owner before the loan agreement becomes final, keep important records about the loan and then follow an established timeline for when funds go to the contractor and when the borrower starts payment. These reforms will ensure that borrowers understand the types of loans they are agreeing to and will help ensure that these projects are completed as promised.

I want to thank those who have sent to our office their constructive suggestions, and I am committed to working in good faith as the Bill moves through the legislative process to craft a Bill that protects consumers and rewards those lenders and contractors who follow the rules and do right by their customers. And with that, I would like to have my witnesses self introduce as they testify.

Good afternoon, Vice Chair and Committee Members, and thank you Assemblymember Grayson my name is Joseph Jaramillo.

I'm a senior attorney with Housing and Economic Rights Advocates, or HERA. We're a nonprofit legal services organization that serve low to moderate-income consumers throughout the state with their debt, credit and household financial concerns. And HERA supports AB 2993 because it would add very important consumer protections for home improvement loan borrowers. Home improvement financing has emerged as a unique niche lending industry in the past few years that has some unique components that have given rise to the problems that Assembly Member Grayson has described.

These include the fact that the finance lenders are deputizing contractors and their salespeople to go door to door and telemarket not just the home improvements that they're selling, but the financing itself. And also the finance lenders are directly paying the funds, the loan proceeds to the contractors. So this has created some somewhat perverse incentives for not all contractors, but the unscrupulous ones. You have contractors that are going out there and misrepresenting the terms of the financing.

Many of our clients don't even know they were signed up for financing. A lot of it is done through electronic signatures and electronic tablets. And so when they're putting in their consent to the home improvements, they don't realize they're also signing up for an expensive loan, and oftentimes the work is not finished before the loan proceeds are disbursed to the contractor, and the homeowner gets billed for work that's not finished or that's not functional, including solar panels, HVAC systems, etcetera.

And so it's led to a lot of problems. And we've got, we've helped so many people, and there's so many people that we can't help because the law is not strong enough in this area.

And so AB 2993 really addresses these problems by creating a system whereby the home improvement lender has to communicate orally with the customer, has to tell them the terms of the loan, make sure they realize that they are getting into a loan to pay for these home improvement contracts, and that will not release the funds to the contractor, all the funds, the final funds, until the work is done, and will not bill the customer until they have what they signed up for, the product that they were looking for.

Right now, the big problem is when we raise this with a lender, we raise it with the contractor. Sometimes they go out of business, they go bankrupt, and so we can't get relief from the contractor. So we raise it with a lender. And the lender's response is, well, we're not responsible for what the contractor told you. You know, we're not responsible if they told you it was a free government program or you would have to pay $100 less and take, that's, that's the contractor's problem.

They're not our agent. And, you know, if the work's not finished, well, you know, bring it up with the contractor, but you still have to pay us back on this loan because you signed up for it. So we urge your support for this Bill. It's very important. And I would like to have my colleague, Veronica Sotomiller, who is an attorney for one of our clients, share one of our client stories that shows why this Bill is necessary. Thank you.

Good afternoon. Thank you for having us here. My client, Rodolfo Bravo Morales, could not be here today, so I will be reading a statement on his behalf. In December of 2022, a person came to my house to talk to me about installing solar panels. I was told that the solar panels would help me save money on my energy Bill, and I would not have to pay an energy bill at all. The salesperson identified himself as Bobby and spoke to me in English and some Spanish.

About two weeks later, I received a phone call from a person who claimed he worked with Bobby, and he emailed me the home improvement contract which was in English. I opened the contract on my phone and signed it via docusign. I never received a copy of the home improvement contract in Spanish, which is my native tongue. I am a monolingual Spanish speaker. Fully explained the terms of the contract either. Several weeks later, the contractor came out and the solar panels were installed.

The contractor, however, did not finish the job and the proper permits were never issued and permission to operate was never obtained. I was left with the non functioning panels. I called the contractor numerous times with no response. I also called the financing company and they initially told me that they would investigate and get back to me. They never did. Instead, I started getting billed by the finance company on a monthly basis.

After contacting the financing company again, they acknowledged that they had dispersed the funds to the contractor. They acknowledged that the contractor had not finished the job as stated in the contract. Despite all of this, I was told by the finance company that it was my responsibility to make my monthly payments to them until the contract was paid in full.

Ma'am, you may want to do close it up.

Thank you. Thank you for your time.

Back to the Committee. Any questions or comments? It's been moved.

Vice Chair. No, I just want to thank the author and our chair for taking this on to protect vulnerable consumers across the State of California. At times it is our duty as a Legislature to intervene and to make sure that we are establishing new protections for consumers. So with that eager to support, are.

There any additional Members in support in the witnesses? Please come right now.

Kim Stone, Stone Advocacy on behalf of the California Solar and Storage Association, in the support if amended position.

That's a horrible story. I'm so sorry and really grateful for working with the author and the Committee.

Dani Kando-Kaiser, on behalf of both the National Consumer Law Center and California Low Income Consumer Coalition, in strong support.

Brian Augusta, on behalf of the National Housing Law Project and Rise Economy, in support.

Robert Horrell with the Consumer Federation California, in support of this Bill.

Chris Peterson with Fortifi Financial, support if amended. Thank you.

Mckinley Thompson Morley on behalf of the Solar Energy Industries Association, support if amended thank you.

Matt Klovenson, on behalf of Home Run Financing really appreciate the conversation so far. We're also in a support if amended position and appreciate some of the amendments made already. Thank you very much.

Anybody's in opposition? Anyone in the public? No seeing none. Any folks in the community like to make any comments or questions? If not, Mister Chair, would you like to close?

Thank you, Mister Vice Chair.

I just found out yesterday that I have very dear friends that live in Morgan Hill that have become victims of this very issue that we're addressing in this Bill. It's heartbreaking. It's destroying lives of folks that had no idea what they were getting into and have no way of recourse to get out of it. And so with that, I respectfully ask for. And I understand there's a lot of work to be done, some details to get through.

We'll get through those as the Bill moves forward, but we must address this for our constituents. Thank you. I respectfully ask for an aye vote.

Mister Chair, once again, thank you for your leadership. It's been moved and seconded. With that, Madam Secretary, please call the roll.

On the Bill. AB 2993. The motion is due pass as amended and referred to Committee on Judiciary. [Roll Call]. That Bill has nine votes.

The bill's out. Thank you, Mister Chair. All right, we're going to do add ons for Members that were not present for certain votes. If the secretary could just start from the very beginning. And we'll do add ons for Members.

[Roll Call]

That Bill gets out with nine votes. We have completed our agenda for today's hearing, and with that, I do believe that all Members have added on. The Assembly Banking and Finance Committee is now adjourned.