Senate Standing Committee on Banking and Financial Institutions

Alright, we will begin the Committee on banking and financial Institutions today. We have one Bill that is up. We're going to begin as a Subcommitee, and then we will ask for a roll call when we have a quorum. So we will begin with Senate Bill 378. Senator Dodd, please feel free to begin.

Thank you very much, Madam Chair and members. I'm presenting SB 278 pertaining to elder financial abuse. SB 278 is about protecting seniors from financial scams.

As amended, SB 278 would enact the California Emergency Financial contact program for financial institutions who are mandated reporters of suspected elder abuse in California and would outline what is expected of them if they reasonably suspect abuse is occurring.

The Bill was amended in the Assembly to require financial institutions to notify a joint account holder or emergency financial contact of suspected abuse of a senior, if a trusted contact has been provided, and to delay by three business days a transaction if they reasonably suspect abuse.

Amendments provide banks and credit unions with liability protections when they properly carry out their responsibilities as set forth in the statute. Amendments delay implementation by one year to give financial institutions time to implement the law, and amendments include enforcement provisions for any institution that repeatedly violates the law or violates the law with reckless disregard.

Finally, and importantly, the amendments clearly provide that if the application of the enforcement provisions are held invalid for one covered entity, the enforcement provisions are invalid for all. The Bill enjoys broad support from consumer and legal aid organizations, senior disability rights groups, and many more. There's no longer any opposition to this Bill.

I'm going to repeat that there's no longer any opposition to this Bill because we had a great banking chairperson here in the Senate and also in the Assembly, and we worked with the proponents and the opposition to make sure that we dialed this Bill in just right.

Members, this is a very important Bill to protect a vulnerable and growing population of senior citizens. I respectfully ask for your aye vote.

Thank you very much, Senator Dodd. We do have quorum, so we're going to go ahead and call the roll, please.

[Roll Call]

Alright, so we have established quorum. Thank you, Senator Dodd. Do we have any witnesses in support, please, just two minutes.

Good afternoon. Just very briefly, Danny Kando-Kaiser, on behalf of the co sponsors of the Bill, the California Low Income Consumer Coalition, as well as Elder Law and Advocacy, also stating sponsorship of the other co-sponsor, Consumer Attorneys of California. Thank you.

Great. Thank you very much. Any additional witnesses in support, please just state your name and position. See no additional witnesses in support. Do we have any witnesses in opposition? All right. See no witnesses in opposition. Members, any questions or comments? We're going to bring it back to members. All right and Vice Chair Niello.

Thank you, Madam Chair. Senator Dodd, I compliment you for tackling what is kind of a, it's obviously a problem and it's difficult to address. And I think the difficulty is reflected in how the Bill has changed from its original form to now, first of all, a question.

There is a covered account holder, and it means an account holder who is an elder or dependent adult. How do we define that? How does a bank define that? Is it of a certain age, and do they have to be formally notified that an adult is a dependent adult?

On behalf of consumer attorneys, one of the co-sponsors. Can you repeat that question? I'm sorry.

How does a bank know that a account holder is an elder or a dependent adult?

So the bank has the information of the person's birthday so they would be able to know if they're over 65. And the Bill includes language for a dependent adult. They have to have actual knowledge. So that's the standard for dependent adults.

So they may not know that it's a dependent adult?

For dependent adults if that's correct, they would have to have actual knowledge so that they would have to be told or some other way that they have that knowledge.

The Bill doesn't say age 65, though, at least not that I can see.

So the Bill refers to the mandated reporting statute. So that's the current law. Is that for mandated reporters of suspected abuse, the standard is 65 and older. So that is what we're referencing. And. Sorry, I ran over here. So I apologize.

All right. I understand. Okay. In other words, they're relying on the authority elsewhere in code for that definition.

That's correct.

Now, the concern that I have. You. Know, if you deposit a check from Bank of America to Wells Fargo, you can't use those funds for a few days because of the float. Right. I'm sure you're familiar with that practice. Fairly standard. The money is available to you after a certain number of days.

My concern is that's what's going to happen with regard to this. Anybody over 65, if they want to withdraw $5,000, the bank's going to delay it for three days because the reasonable suspicion is going to be proven by whether there's abuse or not.

And if there is no reasonable suspicion, but the bank is looking at a potential violation.

I realize if it's repeated, but the point is the bank is looking at a potential violation if there ends up being abuse of any sort, then seems to me the natural behavior of the bank is to candle that just like they do a deposit of a check from another bank and just explain to the elder, I'm sorry, we're not going to be able to process this transaction for three days.

What's to push back on my contention?

Well, let me start and then back me up here. First of all, most of these that have been a problem have been in wire transfers, not bank to bank, not necessarily a check here or a check there, I would say, because this has been brought up by the banks to me.

Senator, you're going to have, a lot of your colleagues are going to be upset about this because banks are going to start withholding these transactions for, you know, for three days.

I would suggest to you that if a customer is in front of their banker trying to wire $25,000, let's just say, for example, somewhere for an investment, somewhere for a child or anything else, and they can't explain to the banker's satisfaction that this is a legitimate transaction, that they know exactly what they're doing, that they probably ought to hold it for.

They probably ought to hold it for three days. And I just think this idea that the bank is going to arbitrarily hold everything for three days is not well founded because the bank, first of all, they've taken the steps, they've asked them the appropriate questions, they've complied with the law.

Sooner or later, this customer is going to go to a different bank, one that maybe perhaps knows their customer better. That's what I've got to say to this.

And I would just add that I think with any policy change, there's always a possibility that there is more of a balancing factor one way or the other. Maybe one bank will be more cautious, depending on there might be like a pertinent type of scam going around, and it flags things for them.

They may delay things if those things are flagged. I think it's always going to be a balancing, and in our view, we were trying to be very careful and try to give the banks what they need to be able to make the best decision, given they're the ones interacting with the consumer.

They know their consumers, especially the smaller banks, community banks.

So I think giving them that tool that they need to, if they really do reasonably suspect there's fraud, give them the opportunity to, you know, call the trusted contact or a joint account holder, usually, you know, a kid that's on the account like I'm on my parents account, so I think we're trying to give them that opportunity.

I think you're right. There may always be that possibility of an inconvenience. Right. But I think, on balance, if it's going to result in seniors not losing their life savings, I think it's a worthwhile analysis. So.

I don't want to draw this out. But you say the banker is reviewing this. In this, in most cases, the banker is a 25 year old teller who's standing on the other side of a teller with a bunch of more people in line trying to pursue transactions.

And so the bank's going to have to set up some procedure. Okay. The customer walks in, the customer's over 65, flag for the teller, send them to a manager to talk about it, I guess. But perhaps, are there any bankers in the room that could provide some wisdom to me on what my concern is?

All right. Seeing none, I think we're going to.

Okay, well, my only point is you're talking about on balance. On balance, a banker does not want to be accused of violating this law. Not only is there are there consequences, but it'd be extremely poor publicity.

And the only way to avoid that is to just delay for three days any transaction that comes before a teller by somebody who's over 65. I realize you disagree with me. I'm just expressing, that's my concern,

Senator, I even went to my bank, which is mechanics bank, and I went to a different, because I needed to get an investment in. I went to a bank right up here, actually, it was up the road in Rockland to do a transaction and to be able to wire it out, they needed original signature.

I went to this bank and they had a list, the teller, right there. Had a list of questions. Do you know who this person is that you're wiring this money to? And they asked the questions, and I was just absolutely blown away. The issue is there are a lot of great banks.

They're probably represented by the California Bankers Association or the credit unions that are already doing this, and they're doing it very successfully. Unfortunately, we do not have bills for those that are good actors.

We're trying to take care of the bad actors and making sure that they do the work, just like the, the good banks that are doing that kind of work every single day. I really believe that we fine tune this.

We've worked with the banks, we've worked with the credit unions to the point where their opposition is no longer here. And I would suggest that if the banks have changed their position on this that perhaps you too can senator.

Thank you.

First of all, I thank you for doing business in my district, Rockland. But secondly, I transact with banks also, and I'm a little bit older than you, maybe I look a lot younger, but I'm older than you, and I've not experienced that. So I think it's somewhat inconsistent.

Thank you, Members. Any other questions or comments? We do have a motion by Senator Min. I want to thank the author and sponsor, sponsors and everybody for all your work. This has been a two year process of this discussion for this Bill.

I will also say that I think that this adds an additional tool for financial institutions, for our banks. I think of the fact that my parents have their favorite teller that they go to, and they've been going to talk to that teller for over 20 years at their local credit union.

And I know, I am very confident that if that teller saw something that was inconsistent or suspicious because of that 20 year relationship, they would flag it in a way. And I think that this provides an additional tool.

I'm particularly thankful for the amendments that we've taken to think about our community banks and some of our more local banks that do have that personal interaction and that they know the patterns, trends of their, you know, of their customers in a more intimate way.

And we want to make sure that they're also in a place that this works for them. So I want to thank you all for your work on this and allow you to close.

Thank you very much, Madam Chair. I really would like to thank our sponsors, but moreover, not moreover, the same amount of thanks to the bankers, the CBA, to the credit union representatives, and also the community banks for coming to the table, continuing to come to the table, and working these issues out to where we.

I think we have an acceptable Bill that's going to protect seniors from here on in. Respectfully ask your aye vote.

Thank you. We have a motion by Senator Min. The motion is for the Assembly amendments be concurred in. Can we please call the roll?

Senate Bill 279. The motion is that the Assembly amendments be concurred in. [Roll call]

Thank you. So this Bill has five votes. We will wait for, I think, one absent member, if that member can come here. Otherwise, we will have to close the roll, given that there is another Committee that is waiting for the hearing room.

So with that, we are going to go ahead and close the roll and adjourn our Committee on banking and financial institutions.