Assembly Standing Committee on Judiciary

Good morning, everyone. Welcome to the Assembly Judiciary Committee. Item one, SB 611, Manjivar, and item six, SB 1184, Eggman, have been pulled from the hearing for today. The rules for witness testimony are that each side will be allowed two main witnesses. Each witnesses will have approximately two minutes to testify in support of or opposition to their Bill or to the Bill. Additional witnesses should state their names, organization, if any, and their position on the Bill.

As you proceed with witnesses and public comment, I want to make sure everyone understands the Committee has rules to ensure we maintain order to run a fair and efficient hearing. And I will go over those rules if necessary, but hopefully they won't be necessary to go over those rules. And we have with us our first item for the day. File item two, SB 901. Senator Umberg.

Good morning, Mister chair.

Good morning.

Thank you, Mister chair. And Members, a special thank you to you, Mister chair, and your consultant, Mister Liedtke, for your help on this Bill. It's an important Bill. It simply says that if you are, in essence, someone who believes that we should overthrow the government, that you can believe that all you want, but you can't advocate and believe that and be a Member of the National Guard, that we as a state are not going to train people and weapons and other kinetic activities, if that's your belief.

So if that's your belief and you're advocating it and you're in the National Guard, then you're going to get fired. In other words, you're going to leave the National Guard. And if you advocate that and believe in that prior to enlistment or commissioning, that's not going to happen. That's simply the Bill urge, an aye vote.

Thank you. And no witnesses for today.

I'm it.

All right, sounds good. Anyone here in support of SB 901? Anyone here in opposition to SB 901? Any questions or comments? Well, thank you. Thank you, Chair Umberg, for bringing this forward.

I had a similar Bill a couple years back, the clear act that had to do with law enforcement giving authority, at least for law enforcement, for police departments, police chiefs, to be able to reject someone going through a background process or terminate someone that was affiliated with kind of hate groups, and that also, many of which are part of the same affinity in terms wanting to overthrow the government.

I think this makes complete sense. I believe that this is a model after the new federal guidelines as well. And so I appreciate you bringing this forward. We don't right now acting as a Subcommitee, and so we can't take up the Bill in terms of a formal vote, but we'll do that as soon as we can. Would you like to close?

Well, thank you. Supporting Bill. I simply urge an vote thank you. All right. Thank you, Mister Chair.

All right. Yeah. File item three, SB 959. Senator Menjivar, whenever you're ready.

Really short and quick, Mister Chair, Judic. Committee Members, SB 959 is looking to do what we did with the website with abortion.ca.gov.

It's looking to replicate that for a website to bring resources, consolidate all the resources, the protections, which physicians, which directories are going to be affirming to our TGI population or transgender, gender diverse, and intersex community members. We are asking HHS to put together this website that will have access to the directories.

That would include coverage that would make sure they know what their legal protections are in the State of California. It's pretty straightforward, pretty simple. Mister Chair, I'd like to just turn to my expert witnesses here to testify on behalf of that.

Great, thank you so much. Up to two minutes each.

Good morning, everybody. My name is Mahdi Roby. My pronouns are they/them, and I am here with Trans Family Support Services and Trans Youth Liberation in support of SB 959. I'm an intersex person, the I in TGI, who was born with variations in my sex career characteristics, which refers to differences in chromosomes, hormones, internal reproductive anatomy, and external genitalia.

The intersex community is often overlooked and underrepresented, and far too many of us suffer the consequences. This has been my experience with accessing gender-affirming and TGI-inclusive care. Throughout my life, going to a doctor has ranged from being a slightly uncomfortable to highly traumatic experience.

I've sat through entire appointments, being misgendered, subjected to microaggressions and tasteless jokes, asked unnecessary and inappropriate questions. Further, most doctors, from primary care to endocrinology, have approached my treatment as a trial and error, with complete disregard to the damage caused simply because they had no training on bodies that exist beyond the binary.

I was seen as collateral, a learning opportunity, and an experiment to further their understanding and not as a person. The first time I sought TGI-inclusive care, the only resources available were on social media by word of mouth. I was only able to find one list that had five doctors in my area who were labeled TGI-friendly.

But the resource was unreliable, and I was quick to learn that a doctor simply knowing that TGI individuals exist is not the same as a doctor who is TGI-competent and inclusive. At 27, my distrust of doctors due to past experiences has put a strain on my health and well-being.

Being intersex puts me at a high risk of developing certain cancers, but because of my medical trauma, it was only last year that I started to receive the preventative care I've needed since I was 18. I'm not alone in this. Within the intersex community, health disparities due to improper treatment are high.

To name a few, intersex people who lack access to adequate care are more likely to experience infertility, consecutive reproductive surgery, reduced sexual function, permanent nerve damage, chronic pain, and more. A guide like the one that SB 959 is proposing could have saved me and others like me from the mistreatment and malpractice we experience from those who promise to do no harm.

We deserve access to quality care that is sensitive, informed, and specific to our needs and the ability to find those with the expertise, training, and awareness to provide it. So, I urge your support.

You can go ahead and finish up.

Yeah. I urge you to vote yes on SB 959.

Good close, good close.

All right. Good morning. Chair Kalra and Members of the Assembly Judiciary Committee. My name is Symphoni Barbee with Planned Parenthood Affiliates of California, on behalf of the seven affiliates who provide care through over 100 health centers in the state.

Here as a proud co-sponsor of Senate Bill 959. Gender-affirming care consists of safe, effective, and medically necessary care which is shown to have positive impacts on the mental wellbeing of TGI patients. Despite this, several states have acted to restrict access to this care.

Many of these bans include criminal penalty against health professionals and parents who support their children in accessing it. According to the Williams Institute, 156,500 transgender youth lived in 32 states where access to gender-affirming care has been restricted or was at risk of being banned due to legislation.

SB 959 affirms a person's right and ability to access gender-affirming care and the rights of healthcare professionals to provide it by connecting TGI people and their families to the resources that they need.

This website, created by SB 959, will serve as a trusted information source and resource that will navigate people to accurate and comprehensive information to seek the appropriate care. We respectfully request your aye vote on Senate Bill 959. Thank you.

Thank you. Is there anyone else here in support of SB 959?

Priscilla Quiroz here on behalf of the California Faculty Association and the California Academy of Child and Adolescent Psychiatry, in support.

Thank you.

Craig Pulsipher, on behalf of Equality California proud co-sponsor in strong support.

Thank you.

Stephanie Estrada, on behalf of California Latinas for Reproductive Justice in support. Thank you.

Thank you.

Nora Lynn with Children Now in support.

Thank you.

Erin Taylor with Political Solutions on behalf of the California Commission on the Status of Women and girls, in strong support.

Thank you.

Good morning. Genesis Gonzalez on behalf of Lieutenant Governor Eleni Kounalakis, in support. Thank you.

Thank you. Is there anyone here in opposition to SB 959? We'll bring it back to the Committee. Any questions or comments? Assembly Member Reyes.

I want to thank you for bringing this bill forward. This is the least we can do. Provide a website that has the resources for TGI people to be able to access. So, when the time is appropriate, I will move the bill.

Thank you, Assembly Member.

Yeah, I agree. I second those thoughts. It's long overdue. And I appreciate the advocacy, because with that advocacy, there are going to be many people that are not going to have to suffer in the same manner. We are right now working as a subcommittee, so we can't take up a vote at the moment. Would you like to close?

No, when the time is right. I appreciate the Assembly Member being willing to move the motion. You're absolutely right, Mister Chair.

This would really ensure that we remove people who are misleading the TGI community, that it's really going to be a trusted messenger from the State of California that showcases everything we've done thus far in being a leader in protection of the TGI community just in one stop.

Thank you.

And respectfully asking for an aye vote.

Thank you.

You're going to have to go walk out and find other.

No, I don't. We have a Senator here. I was about to go out and go search for another one. File item five. SB 1061. Senator Limon, good morning. Good morning. Whenever you're ready.

Yes, thank you. Good morning, Chair and Members. First, I'd like to thank the chair and the Committee staff for your work and advice on this bill. I'm happy to take the amendments specified in the analysis. SB 1061 will remove medical debt from consumer credit reports. It does not forgive the debt.

It provides relief to millions of Californians whose credit scores are unnecessarily harmed by these debts. We all know that our health is not something that we can take for granted.

Oftentimes, our need for healthcare services is driven by factors completely outside of our control, whether due to an accident or genetics, the social determinants of health, or just plain bad luck. And we live with a healthcare system in this country that is imperfect, that fails to provide comprehensive and affordable care for all Members of our society.

We also know that medical debt disproportionately impacts low income people, black and Latino communities, and young people. Medical debt that is reported to credit agencies is also often inaccurate, whether due to billing errors, mistakes. Mistakes with reimbursements, or ongoing disputes with insurance plans.

When a consumer discovers medical debt on their credit report, they may not know why it is there or who to contact.

The process for determining whether an alleged medical debt is accurately reported can be time consuming and frustrating as the consumer goes from credit bureau to debt collector to healthcare provider to insurance company seeking to figure out whether a mistake has been made and who is responsible for fixing it.

Medical debt is less predictive of a consumer's willingness and ability to pay future credit obligations than other forms of consumer debt. Some lenders and credit scoring models have come to realize that false signals that the medical debt can send, leading them to remove medical debt from their risk scoring system.

This bill prohibits medical debt from being reported to credit agencies, but again, does not forgive the debt. This bill does not relieve many burdens associated with medical debt. The bill does not forgive debts, nor does it restrict collection practices related to medical debt.

While this bill does not solve all of the problems with medical debt, it is a start. Removing medical debt from credit reports will give consumers a better chance to restore their financial health.

I'm fortunate to work with a great group of co sponsors on this bill, and testifying today is Danny Kondo Kaiser, who will share a consumer's experience with medical debt showing up on their credit report, as well as Carmen Comsti, lead regulatory policy specialist for the California Nurses Association.

Thank you, Senator. And will you be accepting the amendments?

Yes, I will be accepting the amendments.

Thank you very much. Up to two minutes each.

Good morning, Danny Kando-Kaiser on behalf of two of the co sponsors of SB 1061, the California Low Income Consumer Coalition and the National Consumer Law center. Both organizations work with consumers struggling with the financial burden of medical debt, and I'd like to read the story of one such woman, Sacramento based Sonia Hayden.

"In October 2021, I was involved in a major car accident while driving on I 80 from Sacramento to Oakland. The accident happened around 10:00 p.m. in the evening, and I was taken by ambulance to the ER in Fairfield."

"As a state worker, I have full insurance coverage through work, so that was at least one less thing I had to worry about. Fast forward to the summer of 2023, when my partner and I made the decision to try and buy our first home while applying for a loan."

"I was surprised to discover my credit score had gone down significantly due to an unpaid mystery bill. I called the credit card company listed and discovered that the hospital I was taken to after the accident had correctly billed my insurance for everything except for one very expensive test they had done."

"I think it was a simple mistake they had simply forgotten to add my insurance information to it and billed me instead. But somehow I never received that bill. This was incredibly stressful at a time because my credit score negatively affected our mortgage rate at the times when rates were already at an all time high."

"I have spent hours and months on the phone trying to get this fixed, to no avail. Representatives of the insurance company have tried to help, as have has the credit card company. This, I'm sorry, the credit company, not the credit card company."

"This is still showing on my credit score, and there appears to be nothing I can do about it." Stories like Sonia's are far too common in California. We urge this Committee to vote aye on SB 1061.

Thank you.

Good morning, chair and Committee Members. I'm Carmen Comsti, lead regulatory policy specialist with the California Nurses Association, also a proud co sponsor of this bill representing over 100,000 registered nurses across the state. Medical debt information on credit reports negatively affect millions of Californians.

It creates chaos in patients lives and limits access to credit for needed to secure housing, transportation and even jobs. But a patient's ability to pay for a health care that they need is not and should not be an indicator of their credit worthiness. CNA nurses witness firsthand the negative impact that medical debt has on patient health.

When patients worry about medical debt impacting their credit, they too often forego important medical treatments. 78% of Californians with medical debt report skipping care due to costs. That's twice as likely as people without medical debt.

One in two Low income Californians have medical debt, and black and Latinx Californians are more likely to have medical debt than white Californians. Accruing medical debt is often out of a patient's control, particularly for unexpected injuries and illnesses like a broken arm, a heart attack, or even cancer treatments.

As high deductible insurance plans have grown faster than inflation, medical debt has become worse. Even the credit reporting bureaus themselves recognize that medical debt is not a reliable predictor of creditworthiness.

Finally, while we applaud the new federal proposal from the consumer financial Protection Bureau on Medical Debt reporting, we know that the road for federal regulation is long and uncertain. California can enact strong consumer protections today to provide immediate relief to patients by supporting this bill. Thank you.

Thank you. Before we go to public comment, if we can establish quorum, please.

[Roll Call]

All right, we have quorum. Is there anyone else here in support of SB 1061?

Good morning, Mister Chair and Members. Katie Van Deynze with Health Access California, and we are a proud co sponsor of the measure. Thank you.

Brian Leahy, AARP volunteer on behalf of our 3.2 million Members support.

Thank you Kimberly Rosenberger with SEIU and support.

Thank you Rebecca Marcus and support from Calperg, one of the proud co sponsors.

Thank you.

Hi, Anthony Liu from the office of Attorney General. Rob Bonta, one of the proud co sponsors of this bill. And we have Michael Goldsmith, who will be providing technical support, answering technical questions from the company.

Thank you Yvonne Fernandez, California Labor Federation, in support.

Thank you Josh Gagger, on behalf of the County of Santa Clara, in support.

Thank you Autumn Ogden Smith with the American Cancer Society Cancer Action Network, also in support.

Thank you Marvin Pineda, on behalf of the leukemia Lymphoma Society, in support.

Thank you Rachel Bhagwat, ACLU California action and support.

Thank you Markey Seidra, on behalf of the County of Los Angeles and support.

Nika Maslin with the Mesa Verde group representing the consumer federation, co sponsors of this bill.

May Hasaju, on behalf of Western center on Law and Poverty and support.

Thank you. Is there anyone here in opposition to SB 1061? Yeah, you can figure out if a couple of you can make some space. That'd be great. Thank you.

Good morning, Mister Chair and Members. Melanie Cuevas of the California Bankers Association. Unfortunately, we must oppose this measure as it is currently written, unless the definition of medical debt is tied to those debts that are owed directly to a person, provider or to a facility.

Even the CFPB, which released draft regulations on a similar topic just last week, also specifies that medical debt are those debts owed directly to a medical provider or to medical facility. And they even state that much of what consumers understand to be medical debt are debts owed directly to healthcare providers.

The reason that even the CFPB takes this approach is because, from a compliance perspective, the inclusion of credit cards and secured debt simply doesn't work. And as written, SB 1061 would be impossible for our financial institutions to implement.

And that's because our banks don't have itemized transaction level information, and the measure would require lenders and credit bureaus to compel that information in order to distinguish which portion of a transaction actually does qualify as medical debt.

In other words, bank of Melanie does not see that a purchase at a pharmacy, for example, is comprised of a copay, a bottle of water, band aids and candy. So bank of Melanie would see the total amount and when and where that purchase was made.

But the measure would compel that patient or that consumer to share private medical information or transaction level information in order to justify which portions of that transaction would actually qualify as medical debt.

Sharing that private medical information is of very big concern, and we have opposed this in red states where there are legislatures attempting to compel that same information for the purpose of tracking who is traveling across state line for abortion services, for example, financial institutions do not and should not be involved in private medical information in this manner.

I think it's also important to note that even with our amendment, the examples given by the proponents would still be covered. And so at this time, we continue to urge the author to accept the amendments that would clarify that medical debts are those debts owed directly to a provider or to a facility.

Thank you, Chairman Kalra, Vice Chair Dixon and Members of the Judiciary Committee. My name is David Reid and I serve as General counsel to the Receivables Management Association International. RMAI is a nonprofit trade Association which represents banks, credit unions, collection agencies, debt buying companies and collection law firms. We're headquartered in Sacramento.

I am before you today in unfortunate opposition to SB 1061. I say unfortunate because RMEI agrees with the author's position that medical debt should be treated differently from other asset classes due to the unique nature of the debt. Simply put, people do not choose to get ill, nor do they choose to get in an accident army.

I has been consistent in its opposite for one single reason, the overly broad definition of medical debt. I think we can all agree that debt owed to a hospital, medical clinic or medical provider is clearly medical debt. This is the position taken not only by the financial services industry, but also the Consumer Financial Protection Bureau.

However, this bill applies a much broader definition of medical debt, which pulls in other types of financial products, including some credit cards, General purpose lines of credit and secured debt.

The CFPB spent two years analyzing the challenges related to medical debt and considered applying it to other financial products similar to SB 1061, but in the end realized it would be overly complicated and focused exclusively on when the debt is owed to a hospital, clinic or medical provider. We asked the State of California to do the same.

However, if this is not possible, RMAI is requesting greater exemptions in the bill to cover general purpose credit cards, General purpose lines of credit, closed end loans and secured debt.

We also request that the expungement provision contained in the Bill for reporting debt to a credit reporting agency, even in accidental reporting, contain a provision where the reporting entity can seek to correct the error within 15 days of consumer notice.

For these reasons, RMEI remains in opposition if these concerns are addressed, RMEI will change its position to support it. Thank you.

Thank you. Is there anyone else here in opposition to SB 1061?

Good morning, Chair and Members. Mark Farouk, on behalf of the California Hospital Association, we're in opposed and less amended position with the amendments that were taken. I think we're like 90% there to resolving those issues. I wanna thank you and your staff for assistance.

Also, the author has been very patient with her time in talking through this with us. I think we're significantly close to resolving our issue. We'll still be opposed unless amended, but I think we're literally a few words away from being able to remove our opposition. Thank you.

A few words can. Yeah, can mean a lot of things. Anyway, that was my inside thoughts coming out.

Thank you, Mister Chair. Cliff Berg, for the California Association of Collectors, we too remain opposed, have some concerns that have been articulated by the lead witnesses and opposition.

Thank you.

Good morning, Mister chair and Members. I agree with your internal thoughts. Robert Moutrie. Robert Moutrie, California Chamber of Commerce opposed due to the definition of medical debt as stated. Thank you. Thank you.

Good morning, Chair and Members. And Dara Mcdonald here, on behalf of the California Mortgage Bankers Association, would align our comments with those of the California Bankers Association and continue to ask for the amendments too to align the definition of medical debt with the CFPB definition. Thank you.

Thank you. And before I go to other Committee Members, I just want to ask a question the author, because I understand that there have been some clarifying amendments regarding definition of medical debt. May not be to the satisfaction of opposition, but I believe that it includes excluding general purpose credit cards.

That's correct. If you want to elaborate little bit. General purpose credit cards, those have been excluded. This is only the care card, right? This is only the card that's used for medical services that we're talking about. So anything else that's on a regular credit card is out. That's not what we're talking about.

We're talking about medical credit cards that should only be used for medical services if they are not. I think we have a different problem, but certainly just want to be clear.

I also think the analysis does a really good job of describing some of the amendments that we have got into for clarifying language on how we're narrowing it down, including real estate and mortgage and all those other things.

Thank you. Assemblymember Bauer-Kahan.

Well, I wanna start by thanking the author because in her years in the Legislature, I'm not gonna call them many cause that's not nice. But you really have been a huge protector of California's consumers from ways in which the lending industry harms them.

And I think this is a further extension of that work in a way that's really critically important. And I'm sure there's no one on this dais who hasn't been hit with a surprise medical bill or something of the sort.

And we're all fortunate enough to have the skill, the ability to deal with it and the resources as well. So I think the work you're doing here is really important. I appreciate the amendment that was highlighted by the chair, but one thing that was said by the opposition that I think is interesting.

So I agree with you, by the way, on the care cards. So the care cards, credit card issue, I think I agree with you. But what I heard the opposition saying was also, what if you have a line of credit on your home that you use to pay off your medical debt, which I'm sure people do. Right.

I mean, that have huge medical debt, how does that apply here?

And I'm going to have our technical expert here address that particular piece.

Okay, thank you.

So I believe there's been, I believe there's been updates to the provision of the Bill that will exclude anything that's secured, including a second line, including like a second mortgage. So anything that's, anything pulled out that's secured to your real property will not be included as part of medical debt.

So I do see the credit card language in the analysis. I actually don't see that in the analysis. So if somebody could point that to me, that would be helpful.

My understanding in talking with staff, of course, is that lines of credit are specifically excluded unless they're specifically marketed to target just medical debt. Otherwise they're excluded.

So I read that when it says credit card.

So I guess, so this is in the void provision. So we've exempted any secured debt in the void provision.

Okay. So I guess if that's not clear, I take this as your commitment to make sure that is.

Yes, we've exempted it. Okay.

And so I guess that, how does that, if you don't mind, Mister chair, how does that address the bank of Melanie's concern?

I appreciate the question. Unfortunately, it doesn't address why? Because there are, there is a question as to whether when there, and you can speak on this as well, if there is a secured line, what, what does bank of Melanie know again, what that is being spent on?

So do I just bank of Melanie know that it is written on a defined medical, like a medically necessary debt I think I totally understand what you're saying. She just said that she exempted secured lines ability, though, so still be covered from not reporting. Correct.

The secured debt has to be specifically marketed for medical. So, like, if it's, if you bank of Melanie or Bank of Monique, market it, like, you can take out a loan of credit to pay your medical debt, that's not exempted. But if you bank of Monique, me, whatever. Right.

Say, hey, this is a loan for your home and it's not specific to medical debt that is exempted.

And I think that's an area for us of a little bit of ambiguity in that I am not personally aware of lines that are specifically marketed only for the purpose of medical, but I think that there is knowledge that you might take out a second mortgage and use it to pay for a variety of things. Right.

So if the individual banker knows or doesn't know, I think that it gets a little bit complicated. And I think a lot of it hinges on a very, very clear definition. Right.

So I guess what I'm hearing the author say is that her intention? And that's, yes, again, I don't have that language. Is it in there?

So it's in the actual, in the bill in print, it's on page six, lines seven through 20. So, but it does specifically say medical debt does not include any of the following. Debt. oh, in b, a loan secured by real property, unless either of the following.

The lender, mark one, the lender marketed the loan as being for the purpose of paying for a medical service product or device. Or number two, at the time the loan was made, the lender had actual knowledge. The borrower intended to use the proceeds of the loan to pay for a medical service, product or device.

Now, generally, when lines of credit are taken, the bank doesn't really care what you're using it for. And so there are probably very rare situations where this would apply.

Correct. And we are open to looking. I know that the mortgage bankers had said that they were going to provide clarity on marketing. So if this isn't clear enough, this exemption, happy to look at the language.

And I will say that what you cited, what the bankers have cited, which is a known or should have known knowledge, is different than an actual knowledge standard, which is what the language says.

And so I do think that that should address, but it sounds like, I think the author, from what I'm hearing in this conversation, understands that concern of a regular credit card that I go, you know, and I'm sure many of us do this to get points, pay off your medical debt using a credit card.

And there's no way that, you know, the credit card has way of knowing that's medical debt. They obviously can't not report that and not do all the things. But again, if you know that's what it is, which I can't imagine a situation, I'm with the chair, where that would be the case, or you're marketing it specifically.

And it sounds like there can be clarification on that. Potentially, if you provide it, I think that piece of it is going to be addressed, I'm confident, if not already addressed, as it sounds like perhaps the author sees it, but I know her well enough to know she's open to conversations on that.

And then I wanted to one further question, if you'll indulge me, Mister chair, which is, there's very specific language in here about the contract provision that would make it that you have to July of 2025. Anyone entering a contract has to have this language.

What is confusing to me is how this applies to medical debt that is in process today. Right? So I had a surgery six months ago. I haven't paid it. Like, I'm in the process of that being a hit on my credit report. When does this trigger like it does?

There seems to be a retroactivity problem here that isn't even clear to me. When you would. When this kicks in for people who are currently in process, et cetera.

So the law, you know, goes into effect. So the stops, the stopping of reporting it to credit agencies starts on the date that the law goes into effect. So up until now, I mean, people can continue to report it to credit agencies can continue on, you know, their plan of process for debt collection.

The reporting piece also that starts on January 1st of 2025 is, again, it doesn't void the debt. It just says the entity has to process whatever has to go through their process, but cannot report it to credit agencies. So whatever debt is in existence, what stops is not the debt. We're not.

It's just the reporting to credit agencies. That is what is triggered on January 1st of 2025. So no more reporting to credit agencies. You deal with existing debt just the way that you've been dealing with it. It's just the reporting that starts on January 1st.

So at what point, if I may ask a question of some of the experts, I don't know who wants to? Maybe the author knows this. At what point do you report to a credit agency debt?

Every month. They're reporting now. They've been reporting every month.

So for debt that's accrued prior to January of 2025.

They've been reported. Folks will have been reported already, and it's already impacting their credit scores. So there's nothing that this bill can do to change bad credit scores, different credit scores, you know, impacted scores up until now, and this isn't going to solve for that in the future.

It just says as of January 1st of 2025, the practice of reporting. But it's being reported every month, and it has been for decades.

Right? Yeah, I guess I'm struggling with that because I think that indicates a change in behavior on the creditor's part that doesn't exist versus moving forward, new debt, being treated differently. So I guess that piece of it is a challenge for me. I don't know if anybody wants to address that specifically.

In the healthcare sphere, and especially at hospitals, there's a delay of when it can currently be reported to collection reporting agencies. It has to do with the time, the amount of time it takes for a claim to be submitted to insurance companies for approval process, for someone to realize that they owe money for their medical bill.

All that has to take time. So, generally, at minimum, it's like about 180 days, if not longer, for the initiation of reporting to collection agencies. So even new debt will currently have to pause before it can be reported.

Right. So that's, I think, what I'm struggling with, and I know that's. So, I guess I just. I think what you're trying to do here is really important. I just think that if we make a change in the law, it should apply prospectively to debt. But I guess that's something I'm struggling with on my own.

So, with that, I'll turn it back to the chair.

Thank you, Assemblymember Patterson.

Great. Thank you. What's good to know? We have two banks in the room with the bank of Melanie and the bank of Monique. I entered the wrong field, don't have my own bank.

I understand what you're doing, what you're trying to do here, and we probably all know people who've been straddled with medical debt, obviously, that they didn't ask for. And so, philosophically, maybe I could get to a place of supporting it. But my big concern is this.

I sit on Health Committee, and I've put together a health advisory group, you know, district providers and things like that, and pretty much everybody on that. Number one frustration is always just getting paid, no matter who they get paid from. Right. I mean, whether it's through a debt or whether it's from a plan or something else.

And so my biggest concern is that, and especially if it was put onto the providers or the hospitals, is that this really changes the priority in which people are going to pay what debt they owe because there would be smaller consequences to pay, you know, your health bill over maybe like a credit card or something like that.

So I get a lot of concern because in my district there's a medical group, for example, of emergency room doctors that are literally owed millions and millions of dollars. And I just get concerned with their viability to continue to provide those services.

But that said, I kind of understand where maybe some of the conversation is going before it gets to the floor. So I'll be interested in those for sure. But I just don't want to exacerbate an issue with providers getting paid, basically.

And if you have a response to that, I'd love to hear it, obviously, but those were just my comments.

Thank you. And remember that this does not forgive the debt. Right. So the debt can still be collected. The only thing that this bill does is it says that you can't report it to a credit agency. So that's the difference.

And so we think that the reason that it's important to consider that is certainly because the nature of medical debt, it's a smaller group of individuals that have a medical debt and also because of the inaccuracies. I mean, I think we can all look at our own and say, I have to call the insurance for that.

They didn't, you know, let me make sure that they have the information. Let me make sure that the Doctor's office followed up with the paperwork that's needed. Sometimes it's a coding issue. You heard from one of the witnesses that that witness didn't even know that there was medical debt until they saw it.

So I think for us, again, the issue of collecting on debt, this doesn't forgive it. It's just about reporting to the credit agencies.

Would you mind, Mister Chair? Yeah. On that note, I think something that would essentially ensure that the person actually knows they have the debt or that it's going to be reported.

It's obviously problematic if people's livelihoods or their ability to obtain credit is being limited over a coding error or just some plan or whether it's Medi Cal or any other plan, unable to pay because something happened within the system and then a person gets, you know, penalize as a result. That is an interesting topic.

I'm definitely would be supportive of that. This is more broad. I understand where you're going with it. And I get the. But if something's not going on my credit report and I owe a debt, I think about that. Right. And I'm gonna pay other debts first. So that is a concern I have.

But I like what you're thinking. The accidents that occur that cause people to be unfairly penalized out of their control, that is a problem. And if we could solve that, I'm totally on board with that 100%. So thank you.

Thank you. And I will also just know, I think, and I don't remember what page, but in the analysis, it also says that a survey was done by Kaiser Health Group and about 43% of folks feel that there have been an error with their insurance.

So kudos to the fact that I'm remembering, remember like what page it was, but I read it. Yeah, I knew it was coming.

Assemblymember, Reyes, I do want to thank you. You have absolutely been a leader when it comes to consumer debt and consumer protection. I think this is one step forward, just as my colleague mentioned. And I think with bank of Jim would actually pay that debt.

The bank of Jim may not pay, but the bank of Joe, I think it's very telling when the California Hospital Association tells us that they are 90% there, the fact that it's just a few more words.

Clearly there's been lots of negotiations going on trying to figure out the right language to put in to protect the credit card companies that don't really, they've already paid the debt to the hospital and now it's something they can't report. I get that.

But if we have the California Hospital Association in negotiations telling us they're just a few words away, that says a lot to me. This is an area that we've heard from many groups. The fact that medical debt in your credit report causes so many problems. It's not something that somebody doesn't want to pay.

If they can pay, I know that they will take care of it, but the fact that it hinders their future in such a way as it does now, I think is something that should be addressed. And I absolutely appreciate that you're bringing this up and with that, I would move the bill.

Thank you. Is there a second?

So thank you to the author for bringing this bill. Oops. That would help. Thank you to the author for bringing this bill forward. I do have some questions. So all this pretty much. The opposition is more concerned about the definition of, the definition of medical debt. And I know the author has taken amendments.

I'm curious to see where the opposition like what the opposition thinks of these amendments, does it make it better? It feels like it does make it better. But I just want to hear from opposition to see, you know, where you are with these amendments.

Well, I would say that for RMAI, we very much appreciate the willingness of the author and her staff to work with us and pursue amendments. I would say that obviously, we represent businesses in all 50 states, creditors in all 50 states, and ideally, we like to have uniformity in all 50 states along with the Federal Government.

And I would say the vast majority of the states that have adopted language similar to this have adopted a more narrow, narrower definition. And certainly the Federal Government has adopted a more narrower definition. But that being said, you know, obviously California can do what California wants to do.

What we're asking is if we can't get that narrower definition, that we have appropriate exemptions, as well as addressing the expungement language. And that's really what it comes down to at this point. You know, we, I know there has been an attempt to address the mortgage debt. We think there's still ambiguity, as Melanie mentioned.

But, you know, there are some other types of products that aren't even addressed yet in the exemption, including a general purpose line of credit.

You go to a bank and you get a $5,000 unsecured line of credit, and you put that towards a medical expense that's not covered here, which means that if they put that $5,000 towards a medical debt, even though the bank did not know they were doing that, that is all of a sudden medical debt.

And if it's reported to a credit report, it's expunged. The same thing goes with just a straight out close end line or not a line of credit, but just a loan of $5,000, you go to a bank, unsecured loan, that's not exempted as well.

So there are things that we think that could be tightened up on the exemption side and then obviously on the expungement side. Our concern, again, is an unintentional reporting will then expunge the entire debt. And we think that that's an extreme outcome for something that could be inadvertent and accidental.

So a couple more questions regarding the second example that you used. If someone takes out a line of credit, it does say here that in order for that, it wouldn't include if, it would only include if the lender marketed the loan as being for the purpose of paying for a medical service.

So I think the example that you used, if someone takes out a line of credit to pay for a medical debt, let's say line of credit of $10,000 use, $5000 for mortgage pay or some kind of debt and then $5000 for a medical debt. It wouldn't, that wouldn't be included in the definition, is that correct?

Well, again, I think, and I apologize, I don't have the bill right in front of me.

But, you know, I think the situation that, the real situation that you could potentially have, including on the home equity line of credit, is that what if the consumer said thank you, at the point that they're signing the home equity line of credit, thank you.

I needed this money so much because I needed to pay for a medical debt. They might be telling the person that that's what they're spending the money on, but the bank itself did not market it for that purpose. So that's where the ambiguity that we're very much concerned about exists.

I can, the reason that we're saying that is because it's in either of the following. So either the loan is marketed for that purpose or at the time of the loan, the lender had actual knowledge.

So in the example that Mister Reid gave, if the consumer is taking on that line of credit and says, you know, I'm using it for these three things and one of them happens to be medical, or maybe it's in that sort of ambiguous area where it's, you know, a cosmetic procedure, again, you know, if you're going, you're using a card and buying band aids, are those medically necessary or not?

The lender's not in the position to make the determination of what's medically necessary or not. But under these amendments, with the knowledge standard, if somebody is telling that banker, you know, at the time of origination, hey, I'm going to use it for these things, then does that qualify? Does that help answer your question?

Yeah, I do see that language here, that if the lender had actual knowledge that the borrower intended to use the proceeds for the medical debt, that would be included as well. I'm just trying to think in my head of when that would happen.

I think it would be rare for someone to say I am using what they're using their line of credit for.

And I don't know what your experience has been or if you know, yeah, it's not uncommon for a borrower to disclose what they're using the funds for. So like if you're taking out, you know, a home equity line of credit and you're saying, hey, I'm using it to remodel my bathroom and do x, Y and z.

Okay, well, I'm actually would love to hear from the author as well.

Yeah, no, and I think, look, we've tried to take amendments to clarify that there's the bottom line. If something is marketed for medical debt, whether it's a loan or a credit card, it should be included. If it is not, and we've tried to, I think, capture that in the amendments we've made.

If it's not marketed for that, then it's not, shouldn't be included. And so we're happy to look at any language they have to further clarify that it is about how you market it.

Like if you go out and tell people you can use this money to pay off medical debt in any order, but it's in there, then it should be included. So we've made amendments. If there are more, we're happy to look at language to further define that.

But this is not intended to be for a General credit card, not intended to be for a home mortgage, that is for homes. It is for medical debt. So happy to continue to look at that.

Thank you. And I look forward to more conversations happening between both sides. I will be supporting this bill today. But again, thank you to the author for bringing this important bill forward.

Thank you, Vice Chair Dixon. Thank you, chair. I appreciate your good intentions here in listening to this conversation. Maybe I missed this, but I'm trying to understand. Many people myself, and many of us included, receive reimbursement from our insurance companies for medical services performed, depending on your plan. Some payments are paid directly to the medical provider.

Some people receive a personal or a check personally in the mail. Okay, how for the services provided and so do you address? I don't see where this bill would address circumstances where that those are medical services provided.

They've been reimbursed, the patient has been reimbursed 80% or whatever, the balance remaining after deductible, but they have chosen not to pay back for those services.

So does this bill then not record that debt as a medical expense, and therefore that does not go on their credit where they are perhaps willfully not paying that medical debt that they've been reimbursed for? How do you handle that?

We're actually working with the Committee on amendments to clarify that. And so the health, this bill goes from this Committee to Health Committee. So hopefully in the Health Committee we will further clarify that that is not acceptable.

Okay. All right. Thank you very much, Assemblymember Maienschein.

Thank you very much, Mister Chairman. Chair. We've had a lot of discussion on this, so I won't go into it much other than to say, you know, I appreciate you working on this, the author having served as a colleague with you. I know you work with these issues.

I certainly have had some of the issues raised by the opponents kind of raised in my mind, too. I know this isn't totally done. Just urge all the people to keep working together to get something. I know some of the opposition has come off, and that's always a good thing, or at least been lessened.

But just ask that you, you all continue, all of you, continue to work on this before it gets over in its final form, but appreciate the efforts from all the parties that have gone forward so far. Thank you. And I'll be supporting it today.

Thank you. And yes, this Bill has taken, it's double referred in both houses, so it's taken amendments in every single Committee, and I expect that it will probably have more amendments by the time, you know, it gets to the next Committee and approves them. The next.

Well, thank you. And our medical financing system is very complex. I have some ideas if anyone's curious about what we can do about that. And I also want to thank the Senator for all of her work over many, many years, and we got elected together. Confirm it's many, many years. But thank you so much, miss work.

You've done a tremendous job in really listening to opposition and taking numerous amendments. I think it made this Bill better and stronger and really focused. And so for that, I thank you. Would you like to close?

Thank you. And I just want to thank everyone for the robust conversation. This is a work in progress. It is happening at the national level, and the CFPB actually was one of the first organizations that is supporting this bill, as is with the language.

So this conversation helps us also shape so that by the time you all see, we're able to narrow. But the idea is that we want to make sure that, you know, folks don't have bad credit because of medical debt. So with that, I respectfully ask for an aye vote.

Thank you.

Motions do pass is amended to Health Committee. [Roll Call]

We will place that bill on call. I have to go to public safety.

Senator Demeanor, the good Senator has allowed me to go first, if that's okay with the chair.

Okay, let me get my. I have eight here, but it is okay. Whatever it is all right. We are okay. We are doing Senate Bill 1524. Senator Dodd, thank you.

Very appreciate Senator Wiener allowing me to go first. I've got a Committee hearing I gotta get back to, so, Madam Chair, I want to start by thanking you and your staff for the hard work and some Member Cholera and his team have just been amazing, and we negotiated those amendments that I'll be taking this afternoon when the Bill is heard in the Assembly Privacy Committee.

These amendments respond to the concerns from consumer groups by narrowing applicability and strengthening transparency and disclosure requirements in advertising in the food service industry.

As proposed to be amended, SB 1524 would provide that mandatory fees for food or beverage items sold directly to a customer in a restaurant, bar, food concession, caterer, grocery store, or grocery delivery services do not need to include a mandatory fee or charge their all in advertised price.

However, any fee with the explanation of its purpose must be clearly, conspicuously disclosed on every advertisement, menu, or other display that contains the price of a food or beverage item.

SB 1524 is before you today to address questions and unintended consequences surrounding SB 478, legislation I authored to address a deceptive advertising practice of drip fees or hidden fees.

SB 478 targeted bait and switch practices where business advertises a Low upfront price, only to reveal mandatory fees late in the payment process before providing the final Bill or after providing the final Bill. In working through the implementation of SB 478 as it is set to take effect July 1, potential problems have come to light.

For example, service charges Fund a variety of worker benefits bargained for through their union. They are used to supplement healthcare coverage, pension payments, and other employee benefits. Elimination of service charges would upend these collectively bargain contracts, hurting service workers.

SB 1524 upholds the principles of providing consumers with upfront transparency without inadvertently harming food service workers or small business. With me to speak in support of the Bill is John Ross, on behalf of the California Restaurant Association and Shane Guzman, on behalf of Unite here.

Thank you, sir. Go ahead, please.

Good afternoon. John Ross on behalf of the California Restaurant Association. I need to start by thanking Senator Dodd for all his hard work here in addressing this very important problem and a nod to Assembly co authors, Assemblymember Haney and Senator Wiener, who's also in the audience today.

Significant problem for the industry, and we appreciate everybody's willingness to help. As the Senator said, the problem here was triggered by recent guidance issued by the Attorney General's Office, it suggested that these service fees were captured by AB 478. I mean, SB 478.

We don't really need to get into the legal arguments about whether it is or isn't, but this Bill at least attempts to provide clarity in this area. To not do this would have significant negative impacts on restaurants throughout the state.

Thousands who have depend on service charges and other mandatory fees to both address compensation inequities, as the Senator spoke to a moment ago, and to ensure that they can provide adequate benefits to workers.

This Bill codifies what we think is the best practice of most restaurants throughout the state, which is to ensure that there is clear and conspicuous disclosure upfront before someone orders food. That's, we think this consistent with the spirit of SB 478 and captured by these amendments. And we thank you all and ask for your aye vote.

Madam Chair. Members of the Committee, Shane Gusman. On behalf of Unite Here, we too would like to thank the Committee and the staff for working so hard in the Bill, the authors and their staff. This came together very quickly. It's a problem that needs to be solved by July 1.

Otherwise many of our Members are going to lose benefits and pay, which we have negotiated in a variety of places, including restaurants, banquet and other venues. And so we really need this Bill to happen.

I can't tell you how many of our Members have contacted their legislators, our locals, and we never viewed this as when 478 was coming through, we never viewed it as a problem for what the service charges that benefit our Members. Had we done so, we would have come here a little bit earlier.

In that vein, we ask for your aye vote.

Very good. Do we have any speakers, main other witnesses to come speak, please. And please state your name and organization.

Amy Hines Scheich, representing unite here, local 11. And there are 32,000 Members in Southern California in strong support. Thank you. Thank you.

Hello. Keeley Morris with Edelstein, Gilbert, Robeson and Smith. On behalf of San Francisco International Airport. The airport supports this Bill as they believe it will preserve their restaurant workers access to healthcare. Thank you.

Thank you.

Amelia Zimani with the California Travel Association in support.

Thank you.

Good morning. Genesis Gonzalez. On behalf of Lieutenant Governor Eleni Kunalakis, as a proud co sponsor and support. Thank you. Thank you.

Good morning. Sabrina Lockhart. On behalf of the California attractions and Parks Association, in support. Thank you.

Thank you.

Good morning. Chair Members will bet Frank. On behalf of the California Hotel and. Lodging Association, in support.

Thank you, chair Members. Nick Romo. On behalf of the San Diego County Regional Airport Authority in support.

Thank you, Madam Vice Chair. Members Beverly Yoo, on behalf of open table in support. Thank you.

Very good. Do we have any main opposition witnesses? Please come forward.

Wherever you like, if it's okay with the chair.

Sure. Of course. Good morning, madam Vice Chair. And Members Robert Horrell, Executive Director of the Consumer Federation of California. We have an opposed, unless amended position to the Bill as previously in print.

Let me just open by saying that we were just a lowly supporter of SB 478 last year, but we always thought that restaurants were included in the bills it was moving through. So the lack of clarity, it's helpful to get some clarity there.

We would also note that we do wish as well that the AG's office had come out with some guidance earlier than in last month. Having said that, I think there's a broader statement I'd like to make, and then I'll get into some detail about the amendments that are in front of the Committee.

Well, they're going to be taken at privacy later this afternoon. Our broad view is that consumers deserve to know upfront what something will cost. This has been a permitious problem that's gotten worse and worse over the past decade.

Especially I don't care if it's a concert, sporting event, rental housing, newer used vehicle, a rental car, a hotel room, a house rental, your account with a credit union or bank, a mobile phone plan, your cable Bill, streaming service or a restaurant or takeout.

And I would just note that in many of those industries I just listed, there are big problems with hidden injunct fees being added on. It's why the Biden Administration has made tackling hidden and junk fees such a high priority and why much of CFC's work for the past couple three years has been focused on this issue.

So we had a concern with the Bill in print. We thought it was overly broad. I'm not going to dwell on that point because I want to focus on the amendments here that are before the Committee today.

I have two a, we appreciate the narrowing the work of the staff, the work of the chair, the work of the authors and interested parties. I would note we were not involved in those negotiations.

So I'm looking at this language for the first time as of a day ago, when I saw the language in the analysis that was revolutionary submitted. I have two comments about the amendments. One, it says, first of all, I don't think the delayed implementation of an additional year to July 12025 is fully warranted.

We'd like to see that a bit Shorter. This has an urgency clause because you've got SB 478 taken effect July 1 of this year. So we think that clear and conspicuous is not some new standard. Clear, conspicuous as a standard has been around a long time.

The other thing I would just point out is that some of the disclosures that are happening, especially in the food service industry and the restaurant industry, are not accurate. So I would urge the addition of the word accurate.

We have many examples of add ons to bills that say or create the false impression that they go to the workers when they, in fact, do not. That is misleading. I would argue that's a separate law violation, in addition to that.

So I would urge you, as you're amending this Bill quickly, this afternoon at privacy Committee, to include that word accurate, to make sure that there's accountability for the charge, because that has not always been the case. With that, I thank you very much.

All right, thank you. Any other speakers in opposition, if you want to come forward to the microphone? No? All right, thank you. Do we want to bring it forward to the dais, to the Committee? Any comments, questions? Mister Joe Patterson.

Well, thank you. Well, appreciate the work on this Bill, Senator. You know, I think the restaurant industry in particular, and my mom's a waitress at a restaurant in your district, but I don't want to say which one, because I know you've been there. We all go there. We've all us Napa people go there.

But free advertising, right?

Yeah, yeah, exactly. I don't want other people to stalk my mom. She's just trying to work hard. But in the restaurant industry and prior to this job, I plan. For the last 10 years, I planned events at hotels and facilities all around the state.

And I've never seen this as an issue in terms of not falsely misleading or something, because when you're doing a $200,000 event or something like that, it's pretty bad business practice to go in there and, zero, I'm sorry, I forgot to mention the 20% plus plus, you know, on top of the $200,000 Bill.

So, in my experience, everybody has been very clear on this, and I've always received it upfront. I actually don't think it's a problem that's ever really existed that people have been trying to mislead, but this Bill improves. It just adds some guidance that, hey, look, you should put it up front.

And that's what they're going to be doing under this Bill. And it already happens, honestly, in my experience. But I'm glad this protection is going to be there to protect everybody. And I'm not really sure, I'm not really clear on the opposition, but I'm also on privacy Committee.

So between now and 1:30, if you want to stop by my office, maybe you can change my mind. But with that, I'll move the Bill.

By the way, thank you. Any other comments, Mister Haney?

Yeah, I just wanted to quickly thank the Senator for coming forward and working with all the stakeholders to try to address this. I know that in many ways this was not the intention of your original Bill.

So for you to come back and be willing to fix it and be responsive to the concerns that people have had, I think is really honorable and necessary.

And I can say, and I know my, my counterpart, Senator Wiener is here as well, this has led to very extensive concern and consternation in my city as well, to say the least.

And so we're grateful that we're both going to be able to address it, but also clarify with the amendments the level of upfront transparency that needs to be there, I think is important. We've also heard from consumers as well, concerned about that aspect of it.

And I think that we do need to make sure that if there are these service fees or other fees, whether it's for healthcare or going directly to the employees, that consumers really do understand what those are upfront. And I think you're striking a balance here. And with that, I'll second the motion.

Very good. Any other comments? Well, I'll take a moment of privilege here to speak. I want to thank you, Senator. A week ago I received a call here from a restaurant owner in Newport Beach and telling me all this. And that's the first I heard that. I talked to my district office.

He says, zero my God, we've heard from every restaurant owner. And now to be able to say we're working on a fix. And it really is impressive so quickly to be able to move this change and to be cognizant of the issues that were unintentionally created by last year's Bill. I just want to say thank you.

And it's a good message that we send back to our restaurant owners in our district that Sacramento does listen. And so I'm pleased with that. And with that, your closing statement.

Yes, thank you very much. First of all, I'd like to thank all the Assembly committees and the co authors for allowing this Bill to be heard so quickly and get through the system because we know timing is everything. I wish we had been on this a little bit earlier, but we are where we are.

So I thank the Assembly institution for. For their help in that regard to Mister Harrell's comments. I think that. I think a careful review of the amendments include what he's concerned about, because we are looking for accurate statements in there. But we'll be hearing this again, as Mister Patterson said later today. Respectfully ask for your.

I vote well, thank you. And we do have a motion, Mister Patterson and Mister Haney. And let's call the roll, please. Thank you.

Motions do pass to privacy and Consumer Protection Committee. Kalra Dixon. Dixon aye. Baur-Kahan, Brian Connolly. Haney. Haney aye. Maienschein. Maienschein aye. McKinnor. Pacheco. Pacheco aye. Patterson. Patterson aye. Reyes. Sanchez. Sanchez aye.

We're still on call for one more. Okay. Thank you all. Appreciate it. All right, we'll move up. Mister Wiener. Senator Wiener, thank you. And this is Senate Bill 1037?

Yep.

Great. Thank you, Madam Vice Chair. Thank you, colleagues. Today I'm presenting Senate Bill 1037, which is sponsored by Attorney General Bonta.

Colleagues, in recent years, we have made significant strides in passing strong state housing laws to ensure that cities up and down the state are part of the solution in terms of more quickly building the millions of new homes that we need so that people can actually afford to live in the State of California.

And while many cities, and I want to make clear I'm not broad brushing cities with this bill, I think a significant majority of cities are working very hard to comply with state housing laws to get their housing elements certified to issue the permits that they are required to issue.

While that is definitely the case, there is a minority of cities that are not, and a small minority that are absolutely acting in bad faith in refusing to follow state housing laws. And unfortunately, the way our laws are set up, they sort of feel like they can get away with it.

And the reason is that right now, if a city just blows off its obligations under state law, refuses to issue a permit that is absolutely mandated under state law, or just refuses to come into compliance with housing element, what happens is after plenty of time with HCD, saying, please come into compliance, you're violating the law, please come into compliance.

And then in the small subset of cases where the Attorney General gets involved, which is the really egregious cases, and the Attorney General says, please come into compliance, please come into compliance. And they don't. And then that rare situation arises where the Attorney General files a lawsuit.

So by the time we get to a lawsuit, it's probably a year or two in with many opportunities to come into compliance, and the city has refused. So a lawsuit's filed, and then it goes all the way through litigation from beginning to end with plenty of opportunities to resolve it and settle, and they don't.

And then the judge enters a judgment against the city. Then what happens? The city still has several months to cure its violation and not have any consequences. They don't have any fines, nothing. We would not tolerate that in any other form of law enforcement.

You can violate the law, have a million opportunities to stop violating the law, refuse to stop violating the law, lose in court, have a judgment entered against you. Oh, and then you can correct it, and there's no consequence.

So what this bill does is it provides a consequence that in those rare, egregious, bad faith cases where the Attorney General has filed a lawsuit and it does not happen very often, this is a truly small subset, and it goes to a judgment, then the court will issue a fine between 10 and $50,000 a month, going back to the origination of a violation.

The court can use its discretion for that range. And that money will not just go into the General Fund. That money will go and be held in trust for that city, for affordable housing in that city. So the city won't even lose the money. So this is a very reasonable, well crafted bill.

And I respectfully ask for an aye vote. With me today to testify is Jana Staniford, legislative advocate for the Attorney General, and Steven Stenzler with the Housing Action Coalition.

Please proceed.

Good morning, Ms. Vice Chair and Committee Members. My name is Jana Staniford. I'm a legislative advocate in the office of the Attorney General. And I have with me Alex Fisch, who's a special assistant Attorney General for housing, who can help answer any technical questions you may have.

On behalf of Attorney General Rob Bonta, I want to start by thanking Senator Wiener for authoring this important bill, which the Attorney General is proud to sponsor. As you know, California is facing a severe housing shortage and affordability crisis. The Legislature has passed strong housing laws in recent years to address this crisis, including over a dozen ministerial approval laws.

But those laws will only move the needle to address the housing crisis if they're followed. Attorney General Rob Bonta has made enforcement of housing laws a top priority and has taken action against some of the most egregious violators.

But the remedies available under existing law are not effectively deterring local governments from violating these laws in the first place.

Despite the ministerial approval laws on the books, several cities have been reluctant to process qualifying applications ministerially, instead imposing local requirements and other creative policies and practices that deviate from the clear, objective standards that the Legislature has established. This frustrates the purpose of ministerial approval laws, which is to streamline approvals and build housing quickly.

And while local governments are tasked with planning to meet the housing needs of their communities, there are over 180 jurisdictions out of compliance with housing element law. Effective monetary penalties will serve as a deterrent and will encourage settlements when the Attorney General warns local governments that they're out of compliance.

We need every local government to do their part to meet their fair share of regional and statewide housing needs. And when local governments shirk this responsibility and refuse to comply with the law, they should be held accountable. We respectfully ask for your aye vote.

Next speaker, please.

Good morning, Madam Vice Chair and Member Steven Stenzler with Brownstein on behalf of the Housing Action Coalition. The Housing Action Coalition is a member supported nonprofit that advocates for building more homes at all levels of affordability to help alleviate California's housing shortage, displacement and affordability crisis.

We're here today in strong support of SB 1037, which should give the Attorney General an important new tool to enforce state housing law. A few key points from HAC's perspective, this bill is not a tool for regular day to day enforcement of housing law.

It is narrowly crafted to only apply to jurisdictions that have acted with willful and flagrant disregard for their responsibilities, to plan for and approve necessary housing, and have repeatedly refused to correct their behavior.

There are many off ramps available to locals before the penalties are assessed, and it's only after a lawsuit has been completed and a judgment entered, a process which can take years, that they will be enforced. The authority to seek these additional penalties is absolutely necessary because of the realities of development economics.

The sad truth is that if a project is delayed long enough, market conditions can change, financing can fall through, and capital can dry up, meaning that even if a project ultimately prevails in court, the victory is moot.

Given the dire need for housing at all income levels and in all corners of the state, we simply cannot allow for units to be lost in this way.

The ability to seek additional penalties for improper denials of streamlining is an important tool and a credible threat that the Attorney General can use in enforcing the laws that this body passes. For these reasons, Housing Action Coalition is in strong support. Thanks the Senator for his work. Ask for your aye vote.

Thank you. Let's take it out to the speakers coming forward to speak in support of Senate Bill 1037.

Holly Fraumeni with Lighthouse Public Affairs. Excuse me. On behalf of SPUR in support today as well as Fieldstead and Company and then Mr. Stenzler also asked me to speak and testify in support on behalf of Housing California. Thank you.

Thank you. Next, Speaker.

Andrew Dawson, the California Housing Partnership in support.

Good morning Chair and Members of the Committee, Sosin Maddenat here on behalf of California YIMBY and support. Thank you.

Any other speakers in opposition? Excuse me. In support? Any others? Any speakers? If you're a witness in opposition, please come forward. If you're a main witness, come forward to the table, please. Thank you.

Good morning Chair Members Brady Guertin, on behalf of the League of California Cities in respectful opposition, wanted to thank the Committee analysis for looking at the vagueness of the language. We are still very concerned about that. We acknowledge that they talk about prior precedent and state law.

We'd encourage the author's office to write that specific state law on the Bill so it's more clear. The other thing I wanted to bring attention to is that if the goal is to address acting in bad faith, there's no language that does that.

Now granted, there's a policy and a process to go through potentially, but you know, if the goal is to settle, there's also a cost of local governments that I think we need to be aware of. So even if they're trying to act in good faith and they have to settle out, I think that's of concern.

And more importantly, I think the housing element process has had considerable challenges as we've seen, with how many cities are out of compliance and we don't want vague language to come out and arbitrarily fine them for not complying with state law despite their best efforts to do that.

I know that's not the intent of the author's office, but we think some better clarity in the Bill would be helpful for that, which is why we're still respectfully opposed the Bill and have offered amendments that have not been accepted. Thank you.

Very good. Thank you. Any speakers in opposition please come forward.

Alyssa Stillhigh, on behalf of the Cities of Carlsbad, Corona, Merced, and Rancho, fairly and respectful opposition.

Thank you.

Good morning, Karen Ross, on behalf of the Town of Truckee and the City of San Marcos in respectful opposition, thank you.

Good morning Chair and Members. Cassandra Mar. On behalf of the town of Apple Valley and the City of Downey in respectful opposition, thank you.

Priscilla Quiroz here, on behalf of the City of Beverly Hills in respectful opposition, thank you.

I'll bring it up to the Committee. Any comments do you have? No, no. Assembly Member Connolly, please.

Thank you, chair. Want to also thank the author and the Attorney General's Office for the work on this Bill and appreciate the interaction with my office. So just a few questions.

Just wanted to fully understand where the Bill is now and in this regard, also, kudos to staff for a great Bill analysis, for flagging some of these issues. So right now, there are multiple standards being put together in the Bill, all of which have a legal basis.

Interestingly, I, even as an attorney, have not seen them all put together in one Bill. So, for example, arbitrary or capricious, procedurally unfair, unlawful, etcetera, I will note that bad faith is not expressly called out.

That's something that, if that's the true intent, probably could be, but to the extent possible, how would the amalgamation of these various standards be applied? And what kind of action specifically does the Bill target?

Yeah, no, I appreciate that Assembly Member, and I think it's really important in terms of framing this in the context of how infrequently this is going to apply.

And I appreciate the opposition, at least not early today, hopefully no longer talking about honest mistakes, because initially some of the opposition was focusing on honest mistakes resulting from fines. And this is not a situation where it's like something happens and two days later they write a ticket and say, boom, here's your fine.

This only happens after what will probably be many months or years of HCV, of the Attorney General writing detailed letters saying, hey, this permit was required to be issued. You didn't issue it. Please correct it.

So by the time the cases that will be subject to this, it's like all the process with HCD, pre-litigation, with the Attorney General, the entire litigation process, which can take a long time, and then only cases where a judgment has been entered.

So any city that was really trying to, like, in good faith resolve it, it's going to be resolved probably long before we get to this point. The problem is, you have certain cities, I mean, I'll just name the most egregious one, which is Huntington Beach. Right.

Cupertino used to be in that category, but then they got a different City Council, and it's sort of just thumbing their noes at the state and saying, so sue us. We have an attorney, so it's not a big deal. Sue us.

And so I think by the time you get to applying this standard, it is going to be so clear that this is like an outlier kind of case. So these are all, as you know, established concepts under the law.

And I think it's similar to what a writ of mandate would be like if you're challenging, say, an agency action. So we think it's reasonable. You know, we're always open to conversations about, you know, as we have been throughout this process, about refinements, but we think it's a reasonable approach.

And I'll ask maybe Mister Fish, who spoke well about this in the last hearing, to maybe add on.

Sure, I'd just add, you know, on housing element violations. It's a timing thing. It's a. It's a limited subset of housing element problems. So if a city doesn't meet the number of, you know, if the market doesn't produce the homes that are called for in the renallocation, that's not where this comes out.

This is where a city simply chooses not to submit, not to adopt a compliant housing element. And, you know, we're making progress. I think in the next round, the next read around, everyone will understand the new process a lot better. So I'm not.

I think this will be good encouragement on top of the education that's already happened in the ministerial approval process. That's a really important part of what this Legislature has done over the last several years. And, you know, without going into investigations, that may or may not be happening.

SB When I think about the ministerial approvals, that could be a problem. I'm thinking about individual homeowners trying to use the laws that you've all created. And there's a tremendous power imbalance between the city and the homeowner developer for an ADU, for an SP9.

And there are ways for cities to bring disagreements about state law without violating those homeowners rights. And so in those instances where cities want to call the question, there are processes available that wouldn't give rise to this penalty, whereas if they're causing problems for applicants, they shouldn't be doing that.

I appreciate that clarification. You kind of both anticipated my next question or thought, and that is really, that it sounds like these penalties would be a measure of last resort.

And in that regard, and Senator, you started to touch on this, what actions would the AG take before resorting to these civil penalties, like what dispute resolution or airing of legitimate differences would occur?

I think that probably best for the AG to comment because they're the ones who do it. But it's first, it's HCD first. Yeah, typically.

And I know that there's often a lot of back and forth, and then it's only when HCD has sort of gotten to the end of the rope that HCD then refers it to the Attorney General.

So even pre Attorney General, there's been a lot of back and forth offers of technical support and so forth, and then it gets to the Attorney General.

Yeah. And I would appreciate hearing from the AG.

Thank you very much. That's very well said. And I'd just add on the, the HCD part, that with a housing element dispute, HCD is not allowed to call our office and refer the case until there have been two meetings with the city. So the Legislature has built in quite a bit of buffer on housing element ministerial approval.

We really don't want to commit attorney resources to years long litigation. So this would probably typically start. We work closely with HCD and their housing accountability unit, the most likely place it would start. It's possible that AG obviously has an independent capacity, but we would not go lightly.

I can't think of an action we've taken that hasn't started with a letter detailing what the problem is. And again, without commenting on things that are happening, we do a fair bit of work that is not visible, that prevents litigation already. And that would certainly be the case with this additional incentive for cities to comply.

And I was going to say, as someone who represents a city that has, you know, and I, in the past, I have publicly advocated that there at one point that there should have been a lawsuit brought against San Francisco, because the city, in my view, was not doing what it needed to do. So I'm equal opportunity here.

But HCD spent an enormous amount of time working with San Francisco back and forth to bring the housing element into compliance. And so I saw that firsthand for my own city, and it was a lot of resources that HCD put into that.

Yeah. And I think, and I appreciate that. I think as you're hearing from the cities, it is going to be important to have dialogue, to have dispute resolution. This is more of, let's say, a hammer, and it should not be the first in the first instance. So with that, I'll leave it that again.

Thank you to the AG's office, to the Senator, particularly working with my office on some of the concerns. I'm going to be supporting the Bill today, and look forward to seeing, seeing the discussion around the Bill continue. Thanks. Thank you.

Any other questions from the Committee? Yes, Mister Patterson, thank you.

Second time I've seen this Bill and I'll just say for I don't know, maybe nobody cares on this Committee, but I'm gonna say it anyways.

When we were going through this discussion and housing Committee, I came in thinking that I was gonna oppose the measure, but it's really limited to, and I'm pretty pro-housing in that Committee, but this still had some concerns for me.

But having been through a housing element cycle when I was on the City Council and I saw the back and forth with HCD, and by the way, there were definitely things I didn't like that they asked us to do.

And I think that's a problem that, or an issue that we should think about addressing at some point because they were trying to change ordinances that I didn't really think were related and was kind of outside their purview. But that is what it is. But anyways, we came up with an agreement.

We told them, yeah, we'll think about it, and we came up with a housing element that I think hopefully will work. But also just a couple of things I want to say is that although, and I would say a little bit of caution on that, there are 180 cities out of compliance.

I mentioned this kind of last time too, because a lot of those cities are making efforts. And really this Bill is limited to the most egregious after there's been a judgment made in the courts that there have been violations. And so that is such a limited number of cities we're talking about.

And so because of that, that kind of tempted me. But also there's this one other point in why I find myself supporting housing legislation is that I'm a property rights person. I've always thought that property, in the Republican world of things, you have local control and you have property rights.

And property rights has always been a foundational view of, you know, not of my party. And so I feel like when a developer comes in and they say, hey, look, I have a property right by right to do this project.

The state has granted me this entitlement that should be no discretionary review, and all of a sudden the city comes in and says, hey, no, we're going to slow this down. We're going to mess it up for you after they've invested money and resources and time and things like that. And I think that's totally unacceptable.

And so that's what led me to support this Bill at the end of the day is people really, it's just the most egregious cases at the end of the day.

So I'm going to be supporting it again today, and I'll be supporting it again on the floor as long as it doesn't get messed up between now and then. And so thank you for bringing this Bill.

As long as you don't call him Jim. Madam Vice Chair.

Yes. Thank you. Chair.

Well, I'll have a different opinion, and my colleague and I have talked about housing in our respective districts, but to me, having been through a housing element with it for a city, my city, where I live on, the City Council was in full compliance with HCD and did all the right things and checked all the boxes with a little bit of pushback.

My concern about this Bill in particular is that it is so targeted and using Mister Connolly's word, the hammer. I'm not a lawyer, and I generally follow this case from the news that it's not so much of a matter of permits, it's a matter of the rights of charter cities.

And I think that's why you see the long list of cities that are dealing with this. As long as I'd been on the council for eight years, I knew that there were prior lawsuits.

The City of Irvine had a lawsuit 2004, 5 or 6, period, on the same, the previous arena allocation issue, and they lost because the state assumes priority jurisdiction over housing or declaring an emergency. I forget what the technical term was.

So as I understand, the City of Huntington Beach and there are three other cities that have actually prevailed in Superior Court and are going through that process where they defended their rights as a charter city. And I think that's really a fundamental core issue on this matter.

And so I think the punitive aspect of this Bill is unseemly, given that there are back and forth with any lawsuit. They're back and forth, back and forth, back and forth. But it's to resolve the fundamental core issue, the rights of a charter city in the State of California.

That's where I come down, and I cannot support the Bill. Property rights is involved, but it's really in the state constitution, the right of a city to determine what's best for zoning and land development and all the other rights that are spelled out for charter cities. So that's where I come down.

And I just think this is, if you were to say that this would take effect three years hence, when all this has been resolved, but I think it's punitive to one particular city when there are three, at least three other cities, three cities in Southern California and LA County prevailed at the Superior Court level.

So we'll see where that's going to end up. So I just. The punitive nature does not sit well with me.

Yeah. And just because I was giving Huntington Beach as an example, I gave San Francisco as an example, too. There are various cities that have had issues, and I think it is a small minority. So thank you. Okay.

Thank you. Thank you, Assembly Member Reyes.

Thank you. Just like my colleague, this is the second time I'm seeing this. I had an objection or opposition from one of my City of Colton. I appreciated that. My colleague also asked the questions about the process.

There are lots of details to it, just as you mentioned in the housing Committee as well, that this is first, you try to bring everybody in to conversation for compliance. That's the goal, is for everybody to comply.

But if they're not, and they're being egregious about it, they're being intentional about it, there has to be a next step. And I appreciate also the fact that the penalties that are gathered are then held in trust for that very city for their housing. That's an important detail.

Also, I appreciate this Bill and appreciate all of those steps that are taken before the AG comes in. And even then, there are discussions with the AG. So with that, if the Bill hasn't been moved, I would move the Bill second.

We have a motion in a second. Any other questions or comments? Thank you, Senator, for bringing this forward. I know that we all have a role to play, and we. I mean, all cities have a role to play when it comes to our housing crisis, because it's an extreme crisis.

And I know coming from local government, like many of us, including yourself, it's not a comfortable position to be in, to be able to put in mechanisms that kind of force the issue and kind of force folks to the table.

But I think there are situations where local jurisdictions abdicate the responsibility of being regional partners in resolving this critically. And probably the most important issue that I think most Californians would agree we're facing. So thank you for bringing this forward.

I know it's difficult to have these conversations, and I appreciate the Attorney General's Office as well, in partnering with you in this. Would you like to close?

Thank you. Thank you for the conversation. Really thoughtful dialogue. I appreciate it. Fundamentally, this is about the issue here is, when we pass state housing law, is it actually a law, and are we going to enforce it, and are there consequences for violating the law? I think the answer needs to be yes.

And I respectfully ask for an aye vote.

Thank you. Roll call vote on SB 1037, please.

Roll Call

Thank you. That Bill is out.

Thank you very much, colleagues.

All right, let's start with the consent calendar. If we could. Is there a motion on the consent calendar?

[Roll Call]

All right, consent calendar is out. We need a motion on file item two, SB 901, Umberg. Is there a second? All right, we have a motion. A second. We please take roll call vote on SB 901.

[Roll Call]

That Bill is out. We also need a motion on file item three, SB 959, menjavar. We have a motion in a second.

[Roll Call]

All right, that Bill is out, and we will move the call on item five, SB 1061, Limon.

[Roll Call]

That Bill is out and we'll move to items we'll move the call and file item seven, SB 1524, Dodd.

[Roll Call]

All right, that Bill is out, and we are adjourned.