Senate Standing Committee on Judiciary

All right. The Senate Committee on Judiciary will come to order. We're actually looking for Senator Miello, if he's within earshot. We have a special order of business set for 9:30 on SB84. All right, so we're holding this Committee hearing in room 2100 of the O Street building.

I see we have a number of witnesses who are already present for the special order of business. I ask all Members to please present themselves in room 2100 so we can establish a quorum. We have a very long calendar today before the presentation these bills. We're not going to establish a quorum because. Because we don't have one.

But we will soon. I hope a bit of housekeeping. There are 49 bills on our agenda today as file item number 47, SB378, by Senator Wiener was pulled by the author and would be heard next week. As I mentioned, we're going to start with File item number one, SB84, as soon as Senator Niello appears.

After that, we'll hear the rest of the bills in file order. We'll continue to hear bills until 11:45 when we'll take a break for lunch. And the Democrats and I believe the Republicans also have caucus at that time.

At 1:30, we'll come back to this room, room 2100, to hear the rest of the items on the agenda starting with SB437 and SB518 by Senator Weber Pierson. After we hear those bills, we'll continue to hear bills in file order. We have 14 bills on consent today, and they are as follows. Filem number six. S.B.

822 by Senator Becker. File number nine, S.B. 597 by Senator Cortese. File number 15, S.B. 676 by Senator Limon. File number 19, S.B. 471 by Senator Menjevar. Filem number 20, S.B. 270 by Senator Ochoa Bogh. Filem number 21, S.B. 673 by Senator Ochoa Bogh. File number 26, S.B. 616 by Senator Rubio. File number 28, S.B.

255 by Senator Searto. File number 30, S.B. 648, by Senator Smallwood-Cuevas. Filem number 34, S.B. 768 by Senator Durazo. Phylum number 36. S.B. 504 by Senator Laird with amendments. Phylum number 39, S.B. 678 by Senator Nialo. File number 44, S.B. 452 by Senator Weber Pearson. And finally, file item number 48, S.B. 44, by Senator Umberg all right.

A couple other housekeeping matters is that because we have so many bills today, I'm going to ask Committee Members to basically restrict their comments and focus on questions. We have ordered dinner tonight, but we did not order breakfast for tomorrow morning. So we hope to be done today.

And I'm frequently sarcastic, but I'm kind of not right now. So just to go over the housekeeping rules that have existed during this year's session for Judiciary Committee. So what we're going to do for witnesses, there'll be two primary witnesses in support, two primary witnesses permitted in opposition to each Bill.

Each primary witness will have two minutes to speak. After the primary support witnesses speak, I'll invite other supporters to state their name, their affiliation and position. And unfortunately, if you go beyond that, I'm going to have to cut you off. I'll do the same for the opposition.

Two witnesses, two minutes each, then your name, your position and your affiliation. After we hear from support and opposition, we'll turn to Committee Members for questions. If you wish to further provide information on your position on the Bill, please go to our website and you can submit a letter to the Committee with the methods that are prescribed.

So, we're going to begin. Senator Niello, special order of business: SB84. Are you prepared? We're going to proceed as a subcommittee, so the floor is yours.

I see I have a large audience on this side of the daisy.

Senator. I'm sorry, Niello.

I can't start until the chair says you may proceed.

You may proceed.

So thank you, Chair, and Member, for allowing me to present SB 84. This bill would grant entities the ability to fix a construction-related violation within 120 days of being served with a notice before a lawsuit moves forward.

This bill gets to the heart of the purpose of the Americans with Disabilities Act: finding deficiencies in building construction and providing the entity to actually fix the defect and thus making the facility more accessible to all.

The number of boilerplate ADA cases filed by just a few serial litigants and even fewer law firms had continued to explode, targeting individuals of marginalized communities with limited access to justice, and solely for the purpose of demanding monetary settlements.

Of the 3,850 complaints in 2021, 3850, only 5% resulted in a judgment, demonstrating that the key motivator for filing is to settle. Existing law requires attorney to submit construction-related disability access complaints and pre-litigation letters to the California Commission on Disability Access.

The most recent published data from 2023 showed an increase of over 1,600 complaints than the year before, for approximately 4,600 total cases, alleging more than 10,500 violations. The trend is unfortunately going in the wrong direction. Opportunistic lawyers often target businesses and marginalized communities with large populations of immigrants, whose first language is not English.

These individuals are generally less familiar with the American legal system, and have less trust in it, and are highly likely to settle these meritless cases out of fear, regardless of whether they actually violated the ADA. They simply believe that they have no other option.

There's a growing number of lawsuits targeting Chinese-owned businesses, especially after the anti-Chinese hate that rose during the COVID-19 pandemic. 120 businesses in the predominantly Asian-rich Richmond and Chinatown neighborhoods in the Bay Area were sued. In 2021, ADA litigation in the U.S. District Court for the Northern District of California tripled in 2020.

Of the suits filed, nearly 85% were from one law firm on behalf of their serial litigants. It's estimated that the firm's earnings from the ADA litigation were over $60 million dollars from 2018 to 2022 alone.

This problem is evidenced by there being more disability access lawsuits filed in California than the rest of the 49 states combined, and just a handful of plaintiffs filing thousands of suits. These meritless lawsuits and settlements are putting some of these marginalized business owners out of business and crushing their goal of living our American dream.

As a result, communities suffer. They lose staple small businesses that have served the areas for years and potentially employees out of jobs. The unfortunate reality is that there is no enforcement of compliance once the settlement is reached, and often the plaintiff no longer has any interest either. That is where this bill would help.

SB84 would ensure that the deficiencies are actually fixed, access is increased, and all can enjoy the business. If they don't, they will be penalized and face damages.

These lawsuits are not about promoting the ideals of the ADA, but rather about the illegitimate transfer of wealth from historically marginalized communities into the pockets of ADA plaintiffs' lawyers, a kind of perverse reverse Robin Hood scheme. The legal action, in other words, is more about profiting off someone's honest mistake rather than actually increasing access.

For instance, a case about a sign or a parking space not being the right shade of blue, missing engravings, and tables that are wheelchair accessible, or a disabled access emblem not being the correct size, will not result in an increase in access. These amenities are already accessible.

The claim that businesses will not have incentive to be proactively compliant is without merit. Businesses not only want to serve as many customers as possible; they will face quick backlash if their facility is unaccessible.

Balance must be struck between protecting the rights of the disabled to have physical access, while also protecting the rights of business owners to have meaningful access to justice, equal representation, and be protection from meritless litigation.

With me today to testify is Dora Jefferson, Yucatan Restaurant locations in Los Feliz and Pasadena, and Brittany Vaez, Gorilla Tacos, and Go Go Tacos in Los Angeles.

Alrighty. Thank you very much. Each witness, two minutes. Go ahead, ma'am. It's working.

My name is Dora Herrera, owner of Yuca's Restaurants in Los Angeles, who, together with my family, have managed to overcome the unexpected twists and turns things thrown at our restaurant. For 49 years, we've been serving the community. You hear there's another popular restaurant closing, and you think another establishment overcome by the pandemic. But you'd be wrong.

It's not the increase in crime, entertainment, strikes, or the indirect impact of the recent wildfires either. No, it's attorneys that prey on minority owned small businesses like mine. At the start of the pandemic, when businesses were at their most recent vulnerable, we received a lawsuit because our table was 1/16 of an inch too low.

The legs of the table we inherited from the restaurant's previous owner were the wrong kind. The counter was too deep. The aggregated money demand for these egregious mistakes left us filled with horror and shock.

Never mind that we've gone out of our way to attend to the needs and comfort of our differently abled customers, who have happily been eating at Yucca's for decades. I suddenly understood why a man had been stopping at several businesses along our boulevard with a measuring tape and a camera, without attempting to place an order.

A man who had never before come to our restaurant. Believe me, I know. The proposed settlement did nothing to alleviate or rectify the subject area. It simply lined a lawyer's pockets. In 2023, California did propose a law requiring potential plaintiffs to notify a business of the violation and give us time to correct the issue, prior to filing.

But before I got out of Committee, that guardrail was removed. Time has shown, as he said, that the lawsuits without the guardrails have, in fact, increased. It is still the reason many business owners permanently close their doors. And when that happens, we all lose.

Even the predatory lawyers who can no longer squeeze money out of a dead horse. I ask you today for your aye vote for SB84, providing much-needed relief to small business.

Thank you, ma'am. If you could wrap it up.

Thank you.

Thank you.

I'm struggling to bring Their customers the best we have to offer, who provide a large portion of California's revenues.

Thank you so much. All right, next witness, please.

My name is Brittney Valles. I own Gorilla Tacos and Go Go's Tacos in Los Angeles. I'm also the co-founder of the Independent Hospitality Coalition and, regarding her, over the years, my restaurant has received many ADA lawsuits despite having compliance checks when we opened.

Our very first lawsuit came because, while restocking, our staff left a cardboard box on a ramp, and an individual came by, took a picture of it, and two weeks later, we received a lawsuit notifying us that we were being sued. Because it was our first lawsuit, and because we were afraid, we settled for $11,000.

And that cost does not include the fees that we paid to our attorney to litigate the matter. More recently, we were sued because vandals in one of my restaurant's neighborhoods stole a bunch of things in the parking lot, including the ADA signs. I fixed it that day, but it was too late. We received another lawsuit.

Incidents like this are unavoidable. And despite our compliance checks, the environment is not static. Things like graffiti on a crucial sign leave us exposed to a lawsuit. The law, as it stands, also disproportionately affects small businesses like mine. We don't have the resources to be agile, as agile as large companies.

As codes get updated, we don't have lawyers to keep us informed, as we're just trying to keep the lights on. And we can't compete with large corporations in this way. One oversight could cost us everything, with each ADA lawsuit feeling like a shakedown, rather than a push toward accessibility.

The ADA is meant to protect our most vulnerable and not to enrich opportunistic lawyers exploiting businesses trying to survive. I made the decision to close one of my restaurants because I knew one more lawsuit would push us into bankruptcy. And as a new mother, I just couldn't risk it anymore.

So I'm here today to support SB84 because small business owners deserve the chance to be educated before being brought into litigation. And we want our spaces to be accessible. That's the most important thing. 120-day right to cure gives us that opportunity, and it both protects the intent of the ADA.

You could wrap it up. That'd be great.

Yeah. And keeps our small businesses alive.

Thank you so much. All right, others in support of SB84, please approach microphone. Give us your name, your affiliation and your position.

[Roll Call]

If you're opposed to SB84, we'll have two primary witnesses. In opposition, please approach the microphone.

Good morning, Chair Umberg and Committee Members. My name is Russell Dawson Rawlings, and I am a 26-year resident of Sacramento, currently residing in vibrant downtown Sacramento. In addition to navigating my chosen home of Sacramento as a significantly disabled person, I am the communications and strategic partnerships manager for California Foundation for Independent Living Centers, an organization led by and for people with disabilities to promote and empower people with disabilities to live independently within their chosen communities.

It's important that we understand that whenever we talk about the Americans with Disabilities Act, the ADA, there is no government agency enforcing the rights of people with disabilities. Theres this proposed legislation, SB84, creates an additional barrier: the notice and cure.

This is much like a very physical barrier that we often experience, which, for me, means that I am entirely denied access. It's like a step that you must overcome into the front door.

And again, as a person with a disability who's lived my entire life, I have never pursued any sort of legal action against a restaurant and often find that communication is the best way to get access. And small businesses are very able to do that.

Thank you, sir. Wrap it up.

So, the problems with SB84 are that they create that additional hurdle, the 120-day period where no access can actually be created. It creates an additional cost for those who are seeking remedy, and the majority of people with disabilities are in a situation where these legal expenses are prohibitive.

Thank you. The real thing here is that, again, the experience of us that live in California, we benefit from the action. We are against SB84. Thank you.

Okay, thank you very much. All right, next witness, please.

Good morning, chair and Members. My name is Eric Harris. I'm with Disability Rights California, and I'm based in Sacramento. I'm here today strongly to oppose SB84. First, I want to lift up some of the protections that businesses already have for a reasonable amount.

A business can currently get protections from litigation if they get a Certified Access Specialist inspection, or a CASP inspection, which all businesses should try to do. The protections include immunity from litigation and financial support for fixing accommodations issues.

Next, I would just like to respond to a couple of the arguments that the proponents of the Bill have made. So the first argument, there are a few bad actors abusing the ADA to shake down businesses. This Bill does nothing to stop that. It does not address unethical litigation practices, and it does nothing to promote ADA compliance.

Courts already have tools to address frivolous litigation, and they use them regularly. Second, too many lawsuits about minor technical violations. Access standards are not arbitrary; they are designed requirements calculated to provide access to as many disabled people as possible.

A ramp that is one inch off compliance can cause me to fall out of my wheelchair and injure myself. The Legislature has already written into law a list of access barriers presumed not to cause hardship; there are no damages. Finally, I just want to state an analogy related to this Bill.

Let's say a business owner only had urinals in their bathroom, only urinals for a man. That might be totally acceptable because it's only a, quote-unquote, minor inconvenience if I can use a urinal. But, of course, for somebody who does not use a urinal—for a woman—that would be a major inconvenience.

And I think that if we said, if that person were to sue that business for only having urinals, let's wait 120 days, and they'll get a chance to fix that problem, we would all say that that is a problem because it violated their civil rights. Thank you so much, Senator.

And again, Disability Rights California and other disability organizations express our opposition to this Bill.

Thank you very much. All right, if you're opposed to SB84, please approach the microphone, give us your name, your affiliation and your position on the Bill and ask the sergeants to sort of organize a line here.

Thank you. Go ahead.

[Roll Call]

Good morning. Veronica Bravo here for State Council on Developmental Disabilities in opposition. Thank you.

Robert Copeland, member of [unintelligible] in Sacramento, strong opposition.

Thank you.

Good morning. Nina Weiler-Harwell, AARP California. We could not get our letter in on time, but in respectful opposition.

All right, thank you. We move the microphone.

Alexa, Placer County. I vote against. Thank you.

Okay, thank you very much, ma'am. All right, Anyone else opposed to SB 84, please approach the microphone.

Hello, my name is. Hello, my name is Joe Wilson from Resources for Connected Living here at Sacramento.

Thank you.

Good morning, senators. Dan Okenfuss representing the California Foundation for Independent Living Centers, in opposition.

Thank you.

Warren Cushman, Community Resources for Independent Living in Hayward, in strong opposition.

Thank you. Others opposed to SB 84, please approach the microphone. Seeing no one else approaching the microphone, we're going to bring it back to committee for questions. Questions by committee members. Yes, Senator Laird.

Thank you. And my question basically relates to, we heard this bill last session and, and some of us voted to send it along to give you a chance to work things out. And one of the provisions, the 120 days to cure, is believed by the opponents to just be something where people just wait till they're forced to cure rather than adhere to the act.

So my question is, would you just genuinely work with them out of this committee to try to find a way that it meets the issue of the drive by litigation, but it doesn't weaken the protections under the ADA? Will you work with those stakeholders to try to get to a good outcome that serves both those purposes?

If discussing the 120 days would satisfy their concerns, I'm certainly willing to talk about that. The only thing I'd add to that is the presumption that these businesses are intentionally continuing the ADA access violation. And I just, I think that's an assumption that's unfair to the principles of a lot of small businesses. But certainly if that would satisfy their opposition. The 120 days to modify that, I'm happy to talk about that.

I know the Chair doesn't want us to make extensive comments, but that might be true in some cases. That is not a blanket thing. And I think if you're going to bridge the gap, you have to, in a good faith way, decide that you're going to hear them and try to bridge it, because that is the way we're going to have to get there. And I take you, knowing you, forever, I take you at your word that you will work with them and try to work this out.

I will and I have met with a couple of groups this year and also did before. But you know Senator Laird, that I'm always happy to talk about anything particularly to further the ceasing of the injustice of these drive by lawsuits.

Alrighty. Thank you. Senator Allen.

Well, you know you're trying to address a very real issue here and I know you know in order for this effort to be successful you're going to spend time working with the opposition to get various issues with the bill addressed.

But I think there's a sense that we need to do something about this and there's a way to make sure that the folks you've heard from today are going to be protected while also allowing small businesses to do their important work. So I'm certainly happy to support your efforts and also happy to help with those conversations.

But I think in order for the bill to be successful there's going to have to be pretty serious negotiation with Disability Rights California and others. But happy to, happy to move the bill when appropriate and looking forward to seeing how those conversations go.

Thank you. Thank you. Senator Allen, before we allow you to close, a couple comments. I historically have not supported this bill or sort of the like bills. I am going to support it today with the caveat that I may not support on the floor.

Echoing Senator Laird's comment, 120 days to me does seem to be too long a period of time and I encourage you as have my colleagues to work with the disability rights community. I understand that even modifying that 120 days may not remove their opposition, but it may provide some mitigation. So with that, would you like to close?

Thank you very much. Mr. Chair, a couple of things. There are two co-authors that are not recorded currently but have expressed support. Senator Allen being one and also Senator Perez over the break sent a request to me.

I'd like to add also something that I found out just yesterday that furthers the bizarre nature of some of these lawsuits is that a particular potential defendant who had received a letter and was talking with the, excuse me, the litigating attorney about settlement required that the business sign a non-disclosure agreement so that once they paid the settlement they couldn't talk with anybody about it.

I had not heard about that before. That is in my opinion almost unbelievable. But nonetheless I thought it was important. The first witness in opposition made an interesting statement. He said that he's not been part of any of these sorts of so called drive by lawsuits and he's always found that communication is the best way and it is. And this bill doesn't change that at all. In fact, it encourages that as opposed to just immediately going into threatened litigation.

And with regard to the protection of the CASP option, I think it's important to point out that if the CASP inspection does not identify a barrier that does indeed exist, that doesn't absolve the business from these sorts of lawsuits, that still can happen.

And so as I said before, I am more than willing to continue talking with the opposition about that, about this, the 120 days or anything else. And with that, I respectfully ask for an aye vote.

Thank you very much. All right. At the appropriate time, I understand there'll be a motion by Senator Allen and then we will take it up for a vote. Thank you. Thank you. And I see, I think I see Senator Archuleta here. Here's the file order that we're going to go in.

Next is Senator Archuleta file number four, SB779, then file number five, SB468 by Senator Becker, and then file item number seven, SB477 by Senator Blakespear. All right, Senator Archuleta, the floor is yours.

Thank you. Chair Umberg and Committee Members. Thank you so much. The question is, when someone does something wrong, they are held accountable. That's the premise of our laws. That's the premise of everything that we about when we're talking about justice. And this is not a case for the Contractors State Licensing Board.

In cases where there are minimum fines, there are massive differences between the allowed minimum fines and the maximum fines. In 2021 and 2022, maximum fines amounts were increased from 5,000 to 8,000 and from 15,000 to 30,000. But each time the maximum amounts were raised, no corresponding minimum amount was increased or established.

This makes the existing minimum, if there is one, exceedingly low when compared to the maximum amount, like $200 on the low end versus 30,000 on the high end.

An administrative law judge considers the minimum fined amount during citation appeals, resulting in frequent reduced enforcement fines, creating substantial disparities in the final fine amount issued when compared to the maximum.

These restrictions result in fines that are not equal to the seriousness of the violation, do not adequately support the board's investigation and administrative hearing cost, and most importantly, do not provide sufficient incentive to comply with contractors law.

Senate Bill 779 would establish minimum enforcement fines amounts where they do not already exist and raise minimum fine's statutory amounts where they do exist. These increases are needed so that enforcement fines continue to reflect the seriousness of the violation and support the board's consumer protection mandate.

With me here today is Rebecca May on behalf of the Contractors State Licensing Board and the Bill sponsor and I will ask for your aye vote at the appropriate time.

All right. Thank you Archuleta. I understand there's no opposition to the Bill. Ma'am, go ahead.

Good morning, Chair Umberg and Committee Members. Rebecca May, on behalf of the Contractors State License Board. So citations are a very valuable tool in CSLB's enforcement toolbox. Most complaints received by CSLB are resolved without taking administrative or enforcement action.

However, citation is warranted if CSLB is unable to resolve the complaint and the contractor is failing to comply with contractors law.

This is especially effective when the citation orders restitution to the consumer. Statute is mostly silent on enforcement fine amount minimums where maximum amounts are set at $8,000 for general violations and 30,000 for more serious violations, including unlicensed activity. Currently, the only minimum enforcement fine amount in statute is $200 for unlicensed activity.

And this amount has not changed since 1990. SB 779 sets the minimum fine amount for general violations of contractors law to $500 where the maximum is 8,000 and $1,500 for more significant violations, including unlicensed activity and disregard for building laws, where the maximum is 30,000.

In determining the new minimum amounts, the amounts needed to be high enough to encourage compliance and prevent repeat violations, but not so high to be considered punitive or encourage individuals to leave the profession instead of complying with the citation.

The new range proposed in this Bill still allows CSLB enforcement staff and administrative law judges who hear citation appeals enough discretion to consider mitigating circumstances for each citation on a case by case basis. I respectfully ask for your aye vote.

Thank you. Thank you very much. Others in support of SB779, please approach the microphone. Seeing no one approaching the microphone, let's turn to the opposition. If you're opposed to SB779, please approach the microphone. Again, seeing no one approaching. Let's bring it back to Committee for questions. Questions by Committee Members. Seeing none.

Senator Archuleta, would you like to close?

I respectfully ask your aye vote.

Thank you very much. We're a subcommitee. At the appropriate time, I expect there'll be a motion. Thank you.

Thank you.

All right. I see Senator Becker is here. Senator Becker, item number five, SB468.

Thank you. Good morning, Chair and members. SB 468 ensures that businesses using high-risk AI systems to process personal data have strong enforceable security measures in place. It requires these businesses to maintain a written information security program with clear standards based on existing industry best practices.

Artificial intelligence is increasingly being used to make life altering decisions in areas of employment, housing, education, et cetera. And these systems handle vast amounts of personal data. And unlike traditional data systems, they bring unique security vulnerabilities. Attackers can poison training data to manipulate outcomes or use model inversion to extract personal data details just by querying the AI.

And because some systems operate like black boxes, it can be hard to detect when and how that data has been compromised. Yet under current law, businesses are only required to implement reasonable security measures without any clear definition of what's expected.

This bill addresses this gap by requiring a comprehensive written information security program for businesses using high-risk AI systems that process personal data. Violations will be treated as deceptive practices under the unfair competition law and the California Privacy Protection Agency would be empowered to adopt regulations to keep standards current. Californians deserve strong safeguards. Today I'm joined by Steve Wimmer, technical and policy advisor for the Transparency Coalition.

Thank you, sir. Floor is yours.

Good morning, Chair Umberg and members of the committee. My name is Steve Wimmer and I'm testifying to support Senate Bill 468 as a technical policy advisor for the Transparency Coalition, an independent nonprofit which advocates for increased transparency and accountability in generative AI.

Senator Becker has already outlined how SB 468 establishes specific information security practices and responsibilities for deployers of AI systems that use personal information of Californians to make impactful decisions about their lives. But the current reasonable measures just aren't enough. I want to drill into why it's so important to take more action.

These AI systems use vast amounts of data and have an amazing ability to connect the dots in ways that are new and exciting. But when coupled with consumer information, they represent big targets for bad actors. Plus, they learn over time and can be coaxed into behaving in unexpected ways by new data and new interactions leading to incorrect or misleading responses, so called hallucinations. We have information security best practices and technologies that have been proven to secure other types of software systems.

Things like HIPAA, specifically in healthcare, and SOC 2 for software systems as a whole. We should use them for AI systems as well and test these systems so that they are working as intended. These are common sense best practices that do not represent an undue burden on the deployers of these powerful systems.

AI has the capability to do amazing things to enable insights that change lives in distinctly positive ways, but in the wrong hands or guided by faulty or corrupted data that can create lasting harm for Californians. I strongly urge the committee to pass 468 with a strong recommendation.

Thank you very much. Others in support of SB 468, please approach the microphone.

Good morning, Chair and members. Tracy Rosenberg on behalf of Oakland Privacy supporting this bill.

Thank you. Others in support, please approach. Seeing no one else approached the microphone, let's turn to the opposition. If you're opposed to SB 468, please approach the microphone. Going once, going twice, seeing no one approaching. All right, let's bring it back for questions. Questions by committee members. Yes., Senator Niello.

A question about the concern of the Hospital Association and other health facilities that maintain it shouldn't apply to them because of HIPAA requirements and the like. I'm surprised that they haven't testified. Do I conclude by that, Senator Becker, that you've discussed that with them and are prepared to. Maybe you said something about that and I missed it.

I didn't. But I think you can fairly conclude that, yes, we are talking to them. They're not meant to be covered in this bill. So, yeah, we are talking to them to make that, make that clear.

The other concern I have is the private right of action, which many people do categorically on both sides of the aisle. More, of course, on my side of the aisle. Is that subject to negotiation also?

I'd say yeah. I mean, the primary enforcement mechanism should be the data privacy, you know, California Privacy Protection Agency that's empowered to enforce these rules. So I'd say that's been our main focus to date. So I think that is up for discussion.

So you're open to that?

Yeah.

Thank you.

All right. Other comments, questions? Seeing none. Senator Becker, would you like to close?

Thank you. I know you're covering a lot of issues involving AI and security of people's personal information should be on that list. And I appreciate you considering this bill here today.

All right, thank you very much. We're a subcommittee. At the appropriate time, I expect there'll be a motion and then we'll take it up for a vote. Thank you, Senator Becker. Other authors here. Senator Blakespear. I do not see Senator Blakespear. Next would be, after Senator Blakespear would be Senator Cervantes.

In the absence of any other author, I'm going to take up. I see Senator Gonzalez has just come in the room right under the wire. You're here. So item number 12, SB 12. Would you like to go? Or if you want to wait, you can wait.

Witnesses are here. Let me just double, triple check. My apologies. I know we're asking for.

If you want to wait a second, we can do another bill.

Yeah, if you don't mind, Mr. Chair. Thank you.

That's fine. Because I'll go, so. Oh, yeah. Thank you. Let me ask Senator Niello to Chair and for SB 82.

And that is file number 49.

Thank you, Mr. Chair. With your permission.

Senator Umberg, you may proceed.

Thank you very much. I want to thank Amanda Mattson, as always, for her fine work on this Bill. SB 82 ensures that contract terms between businesses and consumers apply only when the specific product or service, covered by the agreement at the time of signing, is effective.

This Bill targets overly broad terms and conditions.

So, for example, if you sign up for, for example, a platform to watch TV, and you sign an agreement in connection with that subscription that says that you will arbitrate any difference, and it just so happens that a truck runs over you in another state from that same business, that agreement to arbitrate a dispute concerning your subscription to some online platform, or some platform to watch TV, doesn't cover the truck running over you in another state, simply says, look it.

When you sign an agreement, your understanding is that arbitration will pertain to the subject matter of that particular agreement. And with that, I have Ms. Savina Thakkar, from the Consumer Attorneys of California, as my witness.

Mr. Vice Chair and Members, Savina Thakkar, with the Consumer Attorneys of California, here as a proud co-sponsor, along with Consumer Federation of California and Consumer Watchdog. SB 82 addresses an increasingly common and deeply unjust problem, the use of infinite arbitration clauses in consumer contracts.

These clauses are so broad that they force people into arbitration for disputes they never agreed to arbitrate, sometimes involving different products, different services, and even people who never signed the agreement. To be clear, this Bill does not ban arbitration. It simply ensures arbitration clauses apply only to the transaction the consumer actually agreed to, and that's it.

We've seen real harm when these clauses go unchecked. In the Disney case, a grieving husband who was pushed into arbitration, over his wife's death at a restaurant, because he had a Disney plus trial subscription five years prior.

In the McGinty case, parents that were injured by an Uber were forced into arbitration because their daughter had an Uber Eats account. These stories are not outliers. They're a warning of where the law is headed if we do not act. SB 82 restores common sense. Arbitration should only cover what the consumer reasonably expected. We urge your "Aye" vote.

Next, we have Professor David Horton, from the University of California - Davis, School of Law.

Good morning, Chair and Members. I'm David Horton. I'm a Martin Luther King Professor of Law at UC Davis. I've written extensively about infinite arbitration clauses and, in fact, at the risk of bragging, I actually coined that term. Infinite arbitration clauses are seriously problematic because they defy consumers expectations and cause absurd results. Let me give you a simple example.

Say you have an iPhone that runs on AT&T Mobility's network. When you accepted Mobility's terms and conditions, you agree to arbitrate any dispute you'll ever have with any member of AT&T's corporate family for the rest of your life. Consider what that means. Suppose you're crossing an intersection, and a Mobility van hits you.

Your tort claim has to go to arbitration. Or you hear a false statement by a Mobility Executive and buy Mobility stock. Your securities fraud claim has to go to arbitration. Or Mobility affiliate, DirecTV, makes obnoxious robocalls to you.

Your telephone Consumer Protection Act claim has to go to arbitration, even though there's no contract whatsoever between you and DirecTV. Infinite arbitration clauses are less a contractual term and more a kind of arbitration servitude. SB 82 offers an elegant solution to this problem.

It requires dispute resolution terms in a consumer contract to pertain only to the product or service provided. As a result, it would prevent companies from forcing arbitration in surprising and bizarre ways. In addition, although the Federal Arbitration Act often preempts state regulation of arbitration, it doesn't do so here.

And to see why, you don't need to look beyond the text of the FAA. Its centerpiece, Section 2, applies to efforts to compel arbitration of controversies that, "arise out of the contract with the arbitration clause."

As a result, a growing number of courts, including the U.S. Court of Appeals for the Second, Ninth, and Eleventh Circuits, have recognized that the FAA doesn't apply, unless there's some nexus between a plaintiff's claim and the contract with the arbitration clause. States can fill this gap, in the FAA, and that's exactly what SB 82 does. Thank you.

Thank you. Any others that are in support, please step up. State your name, organization, and position.

Becca Kramer, Matter with Kaiser Advocacy, on behalf of California Low-Income Consumers Coalition. In support.

Kim Stone, Stone Advocacy, on behalf of Consumer Watchdog, co-sponsor in support of.

Jaclyn Flores, on behalf of California Advocates for Nursing Home Reform, in support.

Cassie Mancini, on behalf of the California School Employees Association, in support.

Good morning. Alfred Ramirez, AARP Capital Response Team, in support.

Erin Friday, former defense attorney, support.

Any other witnesses in support? Seeing none come forward. Primary witnesses in opposition? Two minutes each. Don't even need two minutes?

It'll be very quick. Robert Moutrie, California Chamber of Commerce, stepping in quickly here from my colleague, Chris McKayley from CJAC, who's in a different room, but, you know, glad to work with the author. Presently concerned about FAA issues still. Thank you.

Thank you. Is there a second primary witness? Seeing none come forward. Others who are opposed, state your name, organization, and position.

Carlos Gutierrez, on behalf of the California Grocers Association, in opposition.

Ryan Elaine, on behalf of the California Retailers Association, in opposition. Thank you.

Adam Struck, with the Civil Justice Association of California, in opposition.

Alec Mesropian, with the Los Angeles County Business Federation, in opposition.

Other witnesses in opposition? Seeing none come forward. We'll bring it back to this side of the dais. Do we have questions or comments? Seeing none. Senator Umberg, you may close.

Thank you. Dankeschön. I urge an "Aye" vote.

That was a good close.

Thank you. I'm trying to model behavior, so.

Oh, sorry.

All right. Thank you, Senator Caballero. Senator Gonzalez.

Thank you, Mr. Chair. Members, I'm here to present SB12, which will create the California Immigrant and Refugee Affairs Agency to help meet the needs of our state's large immigrant and refugee population. As we all know, California is home to over 10 million immigrant communities who have significantly contributed to the Golden State's thriving economy.

We've been working on this immigrant affairs agency for some time, Immigrant and Refugee affairs, excuse me, agency for some time. And we want to make sure that we have a sort of a concerted effort in the state government to be able to support these incredible communities.

The agency will follow the example of numerous states and cities who currently provide similar government touch points for these communities and will help California stand as a beacon of support for a population that is unfortunately under constant threat.

I think I was just reading on the Los Angeles Times today there's South Asian community, which is a Cambodian community that I represent in Long Beach, being targeted today by federal agents and testifying in support.

I have Dr. Amada Armenta, faculty Director at the Latino Politics and Policy Institute at UCLA, as well as Dr. Jane Pak, Co Executive Director at Refugee and Immigrant Transitions and adjunct Professor at the University of San Francisco. And then for technical support, we have Cynthia Gomez from CHIRLA.

Thank you. Floor is yours.

Thank you. Good morning. I'm Dr. Amada Armenta, UCLA faculty Member and the Director of UCLA's Latino Policy and Politics Institute, here to express my strong support for SB12, which will promote the full inclusion of over 10 million immigrants in California. We have the good fortune of being the world's fifth largest economy.

And this is really because of the tremendous power that immigrants bring to our state. Their contribution contributions account for about 1/3 of California's total GDP. Immigrants also represent 1/3 of California's labor force and are overrepresented in essential sectors that we all rely on. For example, 46% of all health aides in our state are foreign born.

It's for this reason that immigrant workers are often referred to as California's second responders, those that keep us afloat during and after disasters. That's what we saw during COVID and it's what we're seeing in Los Angeles during recovery efforts.

But despite their contributions, immigrants are often left out of some programs and they underutilize state programs for which they and their children are entitled. This matters because in California, almost half of all kids have an immigrant parent and one in five are part of mixed status families. Now, a statewide office would help close these gaps.

And provide essential services, particularly in states and regions that don't have an Office of Immigrant or Refugee Affairs. Research shows that despite our tremendous political polarization, Offices of Immigrant affairs enjoy strong bipartisan support. Something that's not true for almost any other political issue.

So at a time when the Federal Government is attacking immigrant communities, we urge your support for SB12. Thank you.

Thank you very much. Next witness.

Good morning, Chair and Senators, thank you for the opportunity to provide a testimony this morning. My name is Jane Pak and I am co Executive Director at Refugee and Immigrant Transitions. We're an educational CBO in the Bay Area. At RIT, we partner with refugees and immigrants from 40 countries around the world.

People of all statuses, all places of origin, languages spoken, religions, genders and identities not often represented in one space. Many of us on staff are immigrants or former refugees ourselves. I, for example, an immigrant from still the country of Canada and a child of refugees.

I'm also an adjunct Professor at the University of San Francisco and sit hold a public seat on the State Advisory Council at the Refugee Program Bureau.

I share my multiple positionalities because it's through my work, scholarship and personal experiences that I continue to witness how outdated immigration laws manifest in persistent inequities in the lives of immigrants and refugees. In California, we offer strong programs and supports as people build their lives, rebuild their livelihoods and communities.

However, programs and policies are sometimes inaccessible due to eligibility criteria based on inequitable pathways. At rit, we see daily systemic inequities, barriers and gaps that prevent the full realization of well intended policies and programs. SB12 offers an opportunity to coordinate programs and policies on a statewide level, helping to bridge these gaps and ultimately address systemic inequities.

SB12 would also be inclusive of the spectra of diversities that make up the 27% of California's population who are foreign born and almost 50%, as formally referenced, of children who have at least one immigrant parent at this time, especially as the Federal Administration dismantles the infrastructure of supports for refugees and immigrants and society at large, in many cases, California has an opportunity to shape a brighter future for all Californians. SB12 is one way to do just that. Thank you very much.

Thank you. All right, other witnesses in support of SB12. Please approach the microphone. Give us your name, your affiliation and your position.

Good morning. Cynthia Gomez on behalf of CHIRLA, Proud Code sponsor in support.

Thank you.

Good morning. Valerie Johnson with the California Undocumented Higher Education Coalition in support.

Thank you. Chair Members Jay Alburez with full Moon and strategies on behalf of Alameda County in support. Thank you.

Good morning. Carmen-Nicole Cox on behalf of ACLU California Action in strong support.

Thank you.

Good morning. Carol Gonzalez on behalf of Long Beach City College in support. Thank you.

Others in support. Please approach.

Yes. Tracy Rosenberg, Oakland. Privacy. Bit of a tweener. We are support if amended. We support the goals of the Bill. We have a couple of concerns about the specifics on how it's going to work.

Thank you. All right, others, others in opposition to SB12, please approach the microphone. Going once, going twice. All right, bring it back to Committee for questions. Questions by Committee Members. Seeing no questions by Committee Members. Senator Gonzalez, would you like to close?

I want to thank you, Mr. Chair, and thank the Committee as well for their thoughtful insight and respectfully ask for an aye vote.

Thank you. At the appropriate time, I expect there'll be a motion. All right, I see that Senator Grayson is here. So Senator Grayson, SB362 file item number 11. Senator Grayson, floor is yours.

Thank you. Good morning, Chair and Senators. I present to you today SB362, a Bill that will strengthen our small business financing disclosure framework. Running a small business is hard enough without needing to wade through the confusing array of credit options that can either lift a business up or weigh it down into failure.

I am proud that California led the way in 2018, setting us on the path of providing more complete and helpful pricing disclosures for commercial financing products. These requirements give small businesses the information they need to compare financing offers and to make decisions that best fit their situation.

Using the APR as a basis of comparison across offers, SB362 will strengthen our price disclosure law by improving the accountability of financing providers and ensuring that small businesses receive clear disclosures throughout the marketing process. And today, through the chair, I will have my witnesses self-introduce.

Thank you very much. First witness, please.

Honorable Senators, my name is Louis Caditz-Peck. I'm the Executive Director of the Responsible Business Lending Coalition. We represent over 1000 for-profit lenders to small businesses, nonprofits that serve small businesses, and small business groups themselves, and across our members for profit and nonprofit, many differences, they were unanimous in urging your support for this Bill.

In 2018, California led the nation by passing the first law providing truth in lending protections to small businesses. In 2020, New York followed California's lead, passing an improved version of the law that fixed four holes that we left here in California. This Bill applies those same four fixes. Here's one such hole that the Bill fixes.

Our present rules may enable bad actor financing companies to intentionally lowball the rates that they disclose to small businesses without consequence. The regulations ask potential bad actors to police themselves and slap their own wrists if they decide that they've been lying. DFPI acknowledged the need for this fix five times in their Statement of Reasons in the regulations, and that's what this Bill would do.

In a second fix in the Bill, it requires financing companies to continue to be transparent about their rates outside of the disclosure box that existing law requires. This is a less stringent version of what the Federal Truth in Lending act has required for consumer lending since 1968.

The Federal Reserve Systems head of Small business research spoke several weeks ago at an event that we held with the Aspen Institute, and he explained the need for this fix, which is that financing companies to small businesses are now using what the Fed called novel pricing metrics that can mislead small businesses into unnecessarily expensive financing.

Here's what he said. "A 9% simple interest rate. What's the APR for that?" He asked. "Well, that's 45%," he answered. "What does a 4% fee rate mean?" he asked. "That's also about a 45% APR," he answered.

He said that the Fed research found that a common thread of frustration from small business owners who said, quote, we would like to have standard terms. If we get this clarity, we could make better decisions. And that's all this Bill does. Thank you. Thank you, sir.

All right, next witness please.

Thank you Chair and Members of the Committee. My name is Antonio Aguilar. I'm the Senior Outreach Manager with Small Business Majority. We're an organization dedicated to supporting California's diverse small business community to build thriving and equitable economy.

Small Business Majority also co founded the Responsible Business Lending Coalition, RBLC, which is the only cross sector coalition focused on promoting innovation and stopping deceptive practices that harm small business borrowers. I'm here today to show strong support for SB362.

The federal Truth and Lending act doesn't cover most small business finance financing, so it's left to the state to protect small business borrowers. California made waves in 2018 by passing the nation's first ever Truth in Lending law for small businesses. California has become a champion for small business.

However, more is needed to ensure that our state's entrepreneurs are properly protected when shopping for financing. Small businesses are facing huge uncertainty from economic shifts to tariff threats, supply chain disruptions, workforce shortages and a gutted SBA. And a weakened federal oversight at the CFPB makes strong state state protections at DFPI particularly urgent.

SB362 straightens our disclosure rules by letting DFPI compare estimated versus actual APRs, ensuring that small businesses see accurate rates. It also clarifies DFPI's enforcement authority, something both businesses and regulators support. These protections were once considered unnecessary because businesses were assumed to have CFOs and accountants.

However, 99.8% of California businesses are small sole proprietors running businesses like daycares, food trucks and salons. They don't have CFOs, they don't have accountants or in house counsel to advise them on these complicated contracts drawn by lenders. Accurate APR disclosure is the only way small business can compare financing products and understand the true cost.

Without it, many overpay and often fall into predatory lending schemes. According to our research, 87% of small businesses support legislation like SB362, and so do we. And we urge you to pass SB362 and support transparency and fairness for California and small business owners. Thank you so much for your time.

Thank you very much. Perfect timing. All right, other witnesses who are in support of SB362.

Christopher Sanchez, on behalf of the Consumer Federation of California, in support.

Thank you. Other witnesses in support. Seeing no one else approach the microphone, let's turn to the opposition. If you're opposed to file number 11, SB362, please approach the microphone. Seeing no one approaching, let's now bring it back to Committee for questions. Questions by Committee Members. No questions by Committee Members. Senator Grayson, would you like to close?

Respectfully asked for an aye vote at the appropriate time.

All right, thank you very much. I expect there'll be a motion and a vote at that time. All right, do we have. I see Senator Mengavar appears to be the only author who's present here. So, Senator Menjavar, it would be File item number 18, SB418, is that correct?

That is correct Mr. Chair.

Senator Menjevar, floor is yours.

Thank you. First, I'd like to say I'll be taking the committee amendments on page 13 of the analysis. And those amendments ensure that the notice provided to policyholders encompasses all protected classes as delineated in our bills and clarifies the bill's protections do not override existing state anti-discriminatory provisions.

We all have seen, within the first month of the Trump Administration, the President issued 64 executive orders and one order, executive order in particular, 14187, directed the Secretary of Health and Human Services to review the legality of Section 1557 of the Affordable Care Act, which would make it unlawful for a health care provider who receives federal funding to refuse to treat an individual based on race, color, national origin, sex, age, or disability.

As this administration continues to attempt to roll back essential protections, California needs to reaffirm these protections. And that is what SB 418 is looking to do. Really short and simple. And I would like to turn over to my witness.

All righty. Thank you. First witness, please.

All right. Good afternoon, Chair and Members. My name is Rhiannon Callahan. My pronouns are they/them, and I'm a trans masc individual. Born and raised near Fresno, California, I am here today in support of the passing of SB 418 to protect against discrimination in health care based on race, color, national origin, age, disability, or sex in the State of California, especially due to the harmful nature of the current Federal Administration with the signing of Executive Order 14187.

Today I want to share a personal experience that exemplifies the need for this policy. I attended a City Council meeting on Pride Month and the importance of representation. My friends and I had just finished speaking about the correlation between positive representation and decreasing LGBTQ suicide rates, as it is estimated that 1.8 million LGBTQ youths consider suicide each year in the United States.

The next speaker, who identified himself as a school social worker, agreed with us, stating he has seen this happen amongst the youth he works with. He would then continue to state, but I don't care if they die, as it goes against mine and God's beliefs. Another time I was at a doctor's appointment wearing a college hoodie, prompting my doctor to tell me I should not believe in evolution as it is a university lie.

The only reason I felt safe enough to access gender-affirming care was through the privilege of being a UC San Diego undergraduate student with direct access to their hospitals in San Diego. An experience that I am lucky to have had. It was about a two year process from beginning to end to get top surgery, a procedure that was not cosmetic but necessary for improving my life. Top surgery brought new light to me and those in my life have seen a difference.

Like my 96 year old grandmother who knew nothing stopping me the first time I saw her post-op to state, I don't know what you've been doing lately, but keep doing it. This is the most radiant I've ever seen you. It is for these reasons and more that I urge your aye vote for SB 418. Folks of any identity anywhere in the State of California should feel safe accessing health care. Thank you, Chair and members.

Thank you very much. Next witness. No other witnesses. All right, I'm sorry.

Running not fast enough. Rand Martin on behalf of the AIDS Healthcare Foundation, in strong support of this bill. Thank you.

Thank you.

Craig Pulsipher on behalf of Equality California in support.

Thank you.

Paul Yoder, California Academy of Child and Adolescent Psych Psychiatry in support.

Thank you very much.

Jaclyn Flores from California Advocates for Nursing Home Reform in support.

Thank you.

Eric Harris, Disability Rights California, strong support.

Thank you.

Reverend Dr. Joanne Whitt from Presbyterian Church USA in support.

Thank you.

Good morning. Beth Malinowski, the SEIU of California in support.

Thank you.

Good morning. Thuy Do with the Southeast Asia Resource Action Center and strong support.

Thank you.

Thank you.

Good morning. Tracy Porter with the Social Impact Center with strong support.

Thank you.

Nicole Wordelman on behalf of the Children's Partnership in support.

Thank you.

Good morning. Ryan Souza on behalf of Essential Access Health in support.

Thank you.

Good morning. Kaitlyn Johnson with Political Solutions on behalf of California Dental Association in support. Thank you.

Thank you.

Good morning. Malik Bynum with the County Behavioral Health Directors Association in proud support. Thank you.

Thank you very much. All right, anyone else in support of SB 418, please approach. Seeing no one else approaching, let's turn to the opposition. If you're opposed to SB 418, please approach the microphone.

Hi, good morning. Erin Friday, attorney Democrat and President of Our Duty. Gender identity is made up. Insurance carriers should not be required to cover medical procedures that change bodies to resemble the opposite sex or no sex at all based on the false promise, that false premise that humans have a gender identity.

My daughter believed that she was a transgender boy for nearly two years and left to grow up naturally. She outgrew that delusion. Hormones and surgeries are not life saving. We don't affirm an anorexic belief that she is fat and offer her Ozempic. SB 418 would hold insurance carriers liable for discrimination if they don't fund procedures that permanently alter healthy bodies. Blocking children's puberty, stunting brain development, administering cross sex hormones that forever change the body, and removing or rearranging genitalia. California risks losing billions of dollars of federal contributions to Medi-Cal.

Protectors like me are using the HHS tip line to report on doctors and hospitals that are violating the executive order. Did you know that free samples of testosterone were offered to Lesbian bars in the 1990s? Ever wonder why so many Lesbians are pretending to be males and having their breasts removed?

Why mothers of males always state that they knew their sons were really their daughters because they liked pink and sparkles? The Dutch model, the basis for transitioning children experimented on 70 kids. All but one of them was same-sex attracted or bisexual.

Kind of makes you think that the transgender movement is designed to make gay people appear to be straight people, all while sterilizing them and turning them into lifelong medical patients, doesn't it? Due to this insufficient evidence that benefits outweigh the harms, nations like the UK, Sweden, Finland, Norway, Denmark, Italy, Chile, and Brazil have restricted all these types of treatments. Yet California continues to.

All right, I assume you're opposed.

Yes. I got up when you asked who opposes. Yes.

Okay. Okay, thank you. All right. Others in opposition. Seeing okay.

Nicole Young, Placer County resident, opposed.

Okay, thank you.

Margaret Madden, narrator executive director of CAUSE Californians United for Sex Based Evidence in Policy and Law, and on behalf of Women Are Real, Gays Against Groomers, Democrats for an Informed Approach for Gender, opposed.

Okay. All right. Anyone else opposed? Seeing no one else approaches the microphone. Let's bring it back to committee for questions. Questions by committee members. Seeing no questions by committee members. Senator Menjivar, would you like to close?

Thank you, Mr. Chair. You know, this bill does not require access to coverage of any kind of specific procedure. This bill is looking to just codify in our Constitution the ability for someone to seek health care coverage regardless of their sex, national origin, and not be discriminated based on their gender. So it's not approving any kind of services, but just looking to allow them access to health care without respectfully asking for an aye vote.

Alrighty. Thank you, Senator Menjivar. We're a subcommittee. I expect there'll be a motion at the appropriate time and there'll be a vote.

Thank you, Mr. Chair.

All right. I see Senator Blakespear is here. I don't know if there's any other Members of the Senate, any other authors here. All right, Senator Blakespear, filem number seven, SB477. Okay. I understand there's no opposition to this Bill. Is that right?

To my knowledge. Yes. Thank you, Chair and colleagues, for the opportunity to present SB477. This Bill would clarify language in the California Fair Employment and Housing Act so that the Civil Rights Department can more effectively investigate and prosecute discrimination, harassment, hate incidents and other civil rights violations.

This Bill is nearly identical to a Bill from last year, SB 1022, from Senator Skinner that passed through the Legislature. But this Bill excludes the seven year look back provision, which was considered to be overly burdensome by the Governor, so we've removed that. Since it was enacted in 1959, the Fair Employment and Housing Act has protected Californians.

The protected classes include age Race, physical, mental disability, gender and veteran status. FEHA authorizes the Civil Rights Department, known as crd, to investigate thousands of complaints involving workplace harassment, discrimination and civil rights related retaliation every year. CRD must resolve administrative barriers exacerbated by strict investigative deadlines and inconsistent legislative statutes.

To better protect the rights of our fellow Californians, the Civil Rights Department must be empowered to work as efficiently as possible.

SB477 would resolve administrative inefficiencies by allowing CRD to pause investigations when parties agree, updating the definition of group or class complaints, clarifying the deadline for a complainant to file a course a case in court, using CRD's appeal process. With that, I respectfully ask for your aye vote.

Thank you very much. Witnesses in support of SB477, please approach the microphone. Seeing no one approaching in support. Let's turn to the opposition. If you're opposed to SB477, please approach microphone. Seeing no one approaching the microphone. 123. All right, back to Committee for questions. Seeing no questions. Senator Blakespear, would you like to close?

Yes, thank you. It is critical that we lead in protecting the civil rights of all Californians, especially now. SB477 will equip the civil rights Department with tools to more efficiently investigate, mediate and prosecute civil rights violations. And I respectfully ask for your aye vote.

Thank you very much. All right. Appropriate time. I expect to be motion and a vote. So, Senator Blakespear, you have another Bill. And after Senator Blakespear, we have there's a special opportunity here in Senate Judiciary Committee.

If you're an author and you show up here probably in the next five or 10 minutes, you'll be able to come right up to the podium. So if you're first, a special offer. Special offer. Senator Blakespear, thank you.

I'm happy to take SB561. Thank you. I'm happy to take you up on this offer to present SB561. This is a common sense measure to ensure the safe disposal of pyrotechnic marine flares and other similar emergency distress signals.

Since SB 1066 was vetoed last year, I have worked with both the Department of Toxic Substances control and CalRecycle to address the concerns raised in the governor's veto message. The U.S. Coast Guard requires vessels longer than 16ft operating on oceans to carry approved visual distress signals for use in emergencies.

There are battery powered alternatives, but many boaters carry three pyrotechnic flares because of their increased visibility during the day. Flares expire 42 months after manufacture, meaning they no longer satisfy the Coast Guard requirements. Because they can no longer be used for their intended purpose, and they are reactive and ignitable, based on the safety data sheets, the U.S. EPA classifies expired flares as hazardous waste.

Additionally, expired flares are considered more explosive than new flares by the U.S. Department of Transportation because it cannot be determined whether they were properly stored since being purchased.

Because expired marine flares are both hazardous waste and explosive, they cannot be disposed of in the trash can or at most hazardous waste facilities due to lack of special permits. Alameda County is the only county in California that we have found that actively accepts flares, but even they lack the permits to actually dispose of those flares.

As far as we know, there are only three facilities in the country that currently accept flares for disposal. None of them are in California. Boaters and coastal communities across the state are frustrated by the lack of disposal options. People stockpile them. They illegally dispose of them in trash or in the ocean.

Expired flares have also been abandoned in front of local government buildings such as police and fire stations, or left on docks. Local governments then become responsible for arranging for their disposal. These costs can be as high as $185 per flare because of a relatively few number of flares needing disposal and very high fixed transportation costs.

What this Bill does, SB561, is it shifts responsibility for those costs to manufacturers and the boaters who use them. This is an extended producer responsibility. A strategic collection program under SB561 would take advantage of economies of scale and significantly reduce the disposal cost per flare.

In 2019, a collection event saw costs of less than $13 per flare, roughly the price of a new flare. Given that boaters need three new flares every three years, the additional cost of $13 seems acceptable. SB561 creates a more comprehensive program scope and ensures that DTSC can fully enforce this legislation.

We are committed to continuing to work with the manufacturer Orion to ensure program requirements are fair while maintaining adequate oversight and accountability. This Bill is supported by a broad coalition of stakeholders, including local governments, California professional firefighters, waste haulers, the environmental and public health organizations as well.

With me today, I have Heidi Sanborn. I see her there.Thank you for coming. On behalf of National Stewardship Action Council as a co-sponsor of this Bill.

Thank you very much. Floor is yours.

Thank you. Happy Earth Day and thank you to the chair, Senator Blakespear, and Members. Again, I'm Heidi Sanborn with the National Stewardship Action Council, a nonprofit organization that advocates for a responsible circular economy.

And we are proud to co sponsor SB561 with Zero Waste Sonoma to finally address the lack of marine flare disposal options available for California's coast ocean boaters and wilderness enthusiasts. I've been hearing about the lack of distress flare signal disposal options literally for the 25 years I have been working with hazardous waste facilities.

It's time to right the ship. Improper disposal of these flares can cause danger for our sanitation workers. In a video I'm happy to share, a marine flare goes off in the hands of one of our waste workers as he was hand sorting recyclables and it barely missed his head.

Alameda is literally the only county in California with a permanent marine flare collection due to the installing of the necessary but costly equipment to safely collect and store the flares.

Due to the lack of infrastructure, household hazardous waste facilities, the Coast Guard offices, police and fire departments across the state must turn away residents trying to do the right thing by bringing their unused flares to them. We've seen them literally dropped off in front of fire departments in boxes.

Left with no solution, they resolve to dissolving them in buckets of water and throwing them in the trash. We have that in writing. Setting them off during the Fourth of July and storing them on their boats or in their garages. And these are all stories we've documented.

I was even told by a marine safety officer in Santa Barbara that boaters give him the flares. He stores them even though he's not supposed to, and gives them to the fireworks company that comes every 4th of July to set them off.

And he doesn't know what he'll do with them if they don't take them in the future. Local jurisdictions have held at least nine pilot marine flare collection events, most funded by the state household hazardous waste grants, well over $1,000,000 worth. And the data is publicly available and has been provided to Orion through these projects.

The lowest cost was $10.55 per flare in Alameda County. The statewide program will result in greater efficiencies of scale and significantly reduced transportation costs that cannot be realized within individual jurisdictions programs.

All right, thank you very much.

All right. Others in support of SB561.

Thank you.

Nicole Wordelman on behalf of the Orange County Board of Supervisors in support.

Thank you.

Lindsay Gullahorn with the Resource Recovery Coalition of California in support.

Thank you.

Jason Schmelzer on behalf of the California Product Stewardship Council, SWANA and Alameda Stop Waste. And strong support, thank you.

Chris Grogan Kapilavsky, on behalf of Republic Services in support.

Melissa Sparks-Kranz with the League of California Cities in support.

Jordan Wells on behalf of the California State Association of Counties and support. Thank you.

John Kennedy, Rural County Representatives of California and support thank you.

Matt Broad for the Teamsters and support thank you.

Caitlin Johnson with Political Solutions on behalf of San Mateo County and support. Thank you.

Keely Morris with Edelstein Gilbert Robson and Smith on behalf of the Los Angeles County Sanitation Districts in support.

John Moffatt for Waste Management in support.

Thank you. Others in support please approach. Seeing no one else approaching, let's turn to the opposition. If you're opposed to SB4, excuse me, 561, please approach the microphone. Seeing no one. Maybe one. Yes opposition.

Thank you Chair Umberg and Members. My name is Clay Crabtree. I'm the Senior Director of Public Policy for the National Marine Manufacturers. We're the trade association for the North American recreational boating industry, which has about a $17 billion impact in California.

NMMA remains in respectful opposition to SB561. As marine flares play a critical role in boat safety by providing a visible means of signal distress, aiding in locationing and positioning, and ensuring that vessels comply with Coast Guard's safety regulations. Flares are an essential safety component and can significantly increase the chances of a successful rescue operation in emergencies.

SB561 creates an extended producer responsibility plan for pyrotechnic marine flares, including smoke flares and hand flares. And unlike most other EPR programs, marine flares are nearly all produced by one manufacturer, which means that the cost burden of implementing this program is going to fall on one company.

This will directly drive up costs for consumers on the types of flares that are shown to be among the most highly visible distress signals.

2019 study by the U.S. Coast Guard evaluated the daytime distress signal effectiveness and found that there are substantial visibility differences in the various signals available to boaters, with smoke signals easily being the easiest to observe across more than 700 human subject observations. In fact, the alternative battery powered marine flares are not approved by the Coast Guard for daytime use by themselves.

Considering these facts, NMMA supports keeping an array of affordable marine flare options available to California boaters across the country. 61% of all boat owners have an annual household income of $75,000 or less and this Bill is inevitably going to increase boaters access to pyrotechnic marine flares.

NMMA is committed to ensuring that all boaters have the most effective safety equipment on the market and remains concerned that SB561 will make a critical safety product less accessible to Californians.

Thank you very much.

Thank you.

You're opposed, right?

Yes.

Okay.

Good morning. Jim Leitz, on behalf of Orion Safety Products, the sole manufacturer of marine flares in the United States. We continue to exceed, extend our offer to the author to work with her to come up with a program that is appropriate for a single manufacturer of a product rather than the typical EPR model. We are opposed. Thank you.

Thank you. All right.

Sort of a tweener chair, Jerry Desmond with Recreational Boaters of California working with both sides to try to ensure that whatever end of life take back program there is is tailored to there being one manufacturer and one program so that it's cost effective to the boaters when they purchase the flares. Thank you.

Thank you very much. Others in opposition? Seeing no one else approach the microphone let's bring it back to the Committee for questions. Questions by Committee Members? seeing none. Senator Blakespear, would you like to close?

Yes, thank you. I think the one point I'd like to make in closing is that there are bills like SB54 that are extended producer responsibility that are criticized for having too many participants and it being too unwieldy. And then there's a Bill like this with one manufacturer at the moment. Who knows when there will be more.

But there's also concern that it's unworkable because there's only one. So it's extended producer responsibility really is the answer. We need to have the products managed by those who make them at their end of life and not have the cost externalized to the public and to our environment and all the others that bear the responsibilities.

So I do continue to believe that this is really important and that we deal with this source of hazardous waste by having these extender producer responsibility program for it. And with that, I respectfully ask for your aye vote.

Thank you very much. All right. At the appropriate time, I expect there'll be a motion. Thank you Senator Blakespear.

I see no other authors present, so I'm going to. Senator Allen, Senator Laird, would you like to arm wrestle for whoever would like to present a Bill?

Okay. Senator Laird says he'll be quick. It's the first time I've ever heard that, so. Right. All right, Senator Laird, what Bill are you presenting?

Senate Bill 697.

Senate Bill—File Item Number 38—Senate Bill 697. Senator Laird, the floor is yours.

Basically, the State Water Board System for conducting investigations hasn't kept up with technology. What this would do is basically say that there are certain electronic ways you might be able to do some of the surveys, without having to visit every single site individually. It would allow managers to utilize enriched, real-time data.

My staff has engaged with water agencies and agricultural stakeholders to align information order requirements with existing law, and we plan to make amendments in the next Committee, to address the concerns that were expressed. As a result, there's no opposition, at this point. I would respectfully request an "Aye" vote.

All right, thank you very much, but let's see if there's any opposition or support for SB 697. If you're in support of SB 697, please approach the microphone. Seeing no one approaching. If you're in opposition to SB 697, please approach the microphone. Seeing no one approaching. All right. I think you've already closed, is that correct?

That was as brief as I could be.

All right, thank you, Senator Laird. Okay, bring it back. Wait a minute, one second. Bring it back to the Committee for questions, comments. Seeing none. Okay, thank you very much. Appropriate time, I expect there'll be a motion. Okay. I see Senator Rubio and I also saw that Senator Allen was almost out of his seat.

So, we'll take Senator Rubio and then perhaps Senator Allen. So, Senator Rubio.

Thank you.

Senator Rubio, is this File Number 27, SB 841?

Correct.

Okay. Go ahead. Floor is yours.

Thank you. Chair and Members of the Committee, today I'm proud to present SB841. This is an important Bill that will make it clear that domestic violence shelters and other sensitive locations are safe spaces for all vulnerable people who need their services.

As a victims advocate for many years, I know how important domestic violence shelters, human trafficking shelters, rape crisis cent and homeless shelters are to those seeking help. These locations are meant to be places of healing and recovery for these families and individuals who are attacked in a particularly vulnerable state.

But if fear keeps someone from walking through the doors of these spaces to get services, and we have failed them, SB841 will protect these four critical locations so that the people who need to access these locations don't need to fear the trauma of unwarranted immigration.

And at those locations, immigration survivors of domestic violence already face so many barriers to leaving families that are harmful circumstances that are hurting themselves or their children. So you want to make sure that they feel confident that if they go seek help that they're not going to be harassed.

Their immigration status and the threat of deportation can be used as a tool of coercive control by their abusers. And that's the number one reason why so many undocumented victims don't leave and continue to enjoy the harm because of that fear. And so this fear is already real and it traps these victims into these abusive relationships.

So we cannot let the government become part of that abuse and further traumatize the victims and not allow them to leave. SB841 will address these by requiring employees at the four critical locations covered by this Bill to refuse access to non public areas for immigration enforcement activity unless they are presented with the following.

They need to have these three present valid identification, a written statement of purpose, and a valid judicial warrant or court order to enter these places.

For these reasons, SB841 is supported by a broad and diverse coalition of over two dozen organizations, including the California Partnership End Domestic Violence, the Coalition to Abolish Slavery and Trafficking, the Coalition for Human Immigration Rights and Valor. Today with me, we have a few witnesses.

Leigh LaChapelle, the Associate Director of Survivors Advocacy at Cal, the Coalition to Abolish Slavery and Trafficking. They're here to present.

I understand there's no opposition in this Bill, is that correct?

I believe so at this time.

Alrighty. Thank you. Floor is yours.

Thank you so much. Good afternoon, Chair Umberg and Members of the Committee. My name is Leigh LaChapelle. I'm the Associate Director of Survivor Advocates with the Coalition Abolish Slavery and Trafficking.

As the nation's largest comprehensive service provider for survivors of human trafficking, we know that immigrant communities are disproportionately vulnerable to exploitation due to language barriers, lack of formal work authorization, isolation from family or support networks, and fear of interacting with government systems. We see every day firsthand how traffickers weaponize the criminal legal system to control their victims.

They threaten survivors. They tell them if you go to a shelter, if you speak with the police, you will be separated from your children and deported.

We have stood beside these survivors and watched as federal immigration policies like sensitive locations, proactive victim identification and expedited adjudication have been rescinded, confirming our clients worst fears that their traffickers are right. Survivors often arrive at our shelter with nothing. They have. The traffickers have taken their documents, isolated them, made them afraid to seek help.

They often arrive with lengthy criminal records, often forced to commit crimes as a part of their trafficking. And even a single charge of prostitution can result in an automatic deportation for somebody who should, under federal law, be extended the rights of a victim of a crime.

There are legal remedies available like vacature or T visas, but they can take several years to come to completion and we cannot do this work if Our clients are deported and taken from us before we are able to secure these protections for them.

Safe spaces like shelters and drop in centers are often the first and only place where a survivor can begin to imagine a life free from harm. But that kind of healing is only possible if the threat of unjust detention and deportation is not hanging over their heads.

SB841 ensures that these programs remain protected, off limits to immigration enforcement without a judicial warrant. It's trauma informed, legally sound, and this Bill restores trust, respects due process and protects lives. We urge your strong support. Thank you. I'm sorry.

Oh, I also have Perla Flores. We're going to give her a very few seconds to just state her support. Thank you.

Good morning. Perla Flores, I've worked with immigration immigrant survivors for over 20 years. I'm also immigration attorney and urge your strong support for this Bill. It's really necessary in this current climate. Thank you.

Thank you. Thank you. All right. Other than support of SB841, please approach the microphone. Give us your name, your affiliation and your position on the Bill.

Good morning. Louisa Velasquez, advocate for Community Solutions, a domestic violence, sexual assault and human trafficking provider, in support of SB841. Thank you.

Good morning. Grace Glaser, on behalf of Valor US Proud, co sponsor and in support of this Bill. Thank you.

Thank you. Good morning. Chris Martin, on behalf of Housing California in support.

Thank you. Others in support of SB841, please approach. Seeing no one else, let's turn to the opposition. If you're opposed to SB 841, this is your opportunity to testify. Seeing no one approaches the microphone, let's bring it back to the Committee for questions. Questions by Committee Members. Senator Niello.

One very quick question. The focus of responsibility is on employees, not on the organization. And I'm wondering why that's the case.

It's really about the entire organization, the employees that work in these centers. It really is just from preventing people from coming in without having the proper documentation. So it's the organization as a whole.

Thank you. Seeing no other questions. Senator Rubio, would you like to close?

I don't know. Just thank you for. For hearing this Bill. And again, this is for about not protecting criminals. This is about protecting the victims. And with that, I respectfully ask for an aye vote. Thank you.

Thank you. Appropriate time. I expect to be a motion seeing no other authors here. Senator Allen, would you like to go? This is File item number 31, SB501, by Senator Allen.

Well, thank you so much, Mr. Chair.

Senator Allen, before you go. So we have Senator Allen, we have no other authors who are here present in the Committee hearing room. So if you come down and you are the first person in the room, you will be able to go right up to the podium after Senator Allen concludes. So, Senator Allen, the floor is yours.

Thank you, Mr. Chair. We just heard a previous Bill from Senator Blake Spear about extended producer responsibility. We're trying to set up a program, an EPR program for household hazardous waste, specified products.

Under SB501, there are thousands of everyday products that are classified as household hazardous waste because they pose threats to human health, animals, the environment, if improperly managed, both during and at the end of life.

But while these products are often ubiquitous in our homes, most people don't know what's actually considered hazardous, what's not, nor do folks know how to manage a dangerous product at the end of its life.

And even if a person knows that a product is toxic and can't simply be thrown away in the trash, many communities simply lack a convenient system for safely collecting the waste, as local HHW household hazardous waste facilities may be located far away or have limited open hours due to budgetary pressures.

Now, as collection and disposal costs increase, cities and counties either raise rates to cover the costs or they have to reduce services, which further reduces convenience for local residents.

So to address the crushing costs of managing household hazardous waste and the lack of convenient access to a proper disposal system, SB501 requires producers of specified hazardous consumer products to form producer responsibility organizations that will be tasked with enhancing accessibility and fully funding the safe collection, transportation and disposal of this waste.

It also requires robust education and outreach to ensure that customers and consumers know which products are hazardous and how to handle them properly. And it also encourage product redesign to reduce waste generation and hazard level through financial incentives in the funding of the program.

Under our current system, producers simply don't have to consider the end of life costs when formulating their products. Those costs don't appear on their balance sheets, and indeed, instead, they're on our balance sheets, on the balance sheets of ratepayers, of residents, of local governments, and of taxpayers.

So by requiring producers to cover the costs and help us create a system for the safe disposal of harmful products, producers will have some skin in the game. Now, I recognize that industry folks have some concerns with a proposal for a broad EPR program.

I'm committed to continuing to engage with impacted stakeholders on the Bill to find a solution that ensures that we make progress on reducing improper disposal, generation of hazardous waste and the cost borne by local governments and ratepayers who are represented here, while ensuring safe, convenient, proper management of the waste that is generated.

I greatly appreciate the collaboration thus far. I look forward to continued conversations this year. But at the end of the day, it's really important that we get to a framework that addresses this growing waste problem. And I have here today to speak in support of the Bill.

Heidi Sanborn from the National Stewardship Action Council and John Kennedy with the Rural County Representatives of California to speak in support of the Bill.

All right, welcome back, Ms. Sanborn. Go ahead.

Thank you. Happy birthday again. We are proud to be a co sponsor of SB501 along with Rural County Representatives of California and the Resource Recovery Coalition of California, which will require the producers of household hazardous waste to Fund the convenient collection system for the most toxic products sold into the market.

I've been working on EPR since 2006 as a consultant when I delivered a report to the then Waste Management Board that on the End of Life Framework analyzing household hazardous waste policy approaches around the world. I analyzed over 70 programs worldwide and came to this conclusion that we needed to address hazardous products first. But we didn't.

In 2009, Assemblymember West Chesbrough introduced AB283, which would have created the California Stewardship act and established a framework for producer responsibility for hazardous products. Unfortunately, AB283 failed to pass and the Legislature subsequently pursued a product by product approach that resulted in a patchwork of policies and programs for household hazardous wastes.

In 2020, I was appointed to the California State Commission on Recycling Markets and Curbside Recycling and was voted chair by my 16 fellow commissioners. We developed over 34 policy recommendations and the very first one was on household hazardous waste epr.

The Commission's final report stated that swift legislative action is needed to clearly extend producer responsibilities for the end of life management of products that are hazardous or have been implicated in causing fires.

In February of 2024, we participated in a tour to the Cow Waste Recovery Facility in Galt and they had collected 183,000 pounds of household hazardous waste off a clean recycling sort line and cost them 150,000 a year to manage, which is concerning because these toxic products are commingled with food grade material.

So I will just say that in closing, you know, we really need to stop externalizing these costs onto taxpayers and ratepayers and internalize these costs. That is the true conservative way economically to manage them. Thank you so much.

Thank you very much. Good morning John Kennedy with RCRC. We're pleased to co sponsor SB501 today we represent 40 of the state's 58 counties from tiny Alpine with about 1200 residents to Sonoma, about 500,000. As local governments, we're responsible for solid waste management and a core component of that is management of household hazardous waste.

We like to offer free HHW drop off for residents and try to keep those programs free to avoid illegal disposal and illegal dumping. Collectively, local governments offer about 185 HHW collection facilities across the state. But that's supplemented by a lot of curbside collection programs that we have with our franchisees and on demand services as well.

HHWs include pesticides, oxidizers, pool chemicals, compressed gas cylinders, batteries, vapes, so many other things. And HHW from our perspective, can be incredibly expensive to manage and dispose of. Many items have to be trucked across state lines, trucked across the country for proper disposal. Disposal costs can approach or exceed the cost to consumers at the point of sale.

Flavored Nox cylinders are a good example. There's little to no productive use for them other than as recreational inhalants. Yet they cost about $70 per canister for us to dispose of when they consumers about 30 to $40 on Amazon gas cylinders, $30 each.

Vapes $365 for a five gallon bucket of vapes for disposal poisons, $300 for a 55 gallon drum. So these are really expensive costs when we're trying to maintain free programs for residents to bring things in. We have no control as local governments of what's introduced into the marketplace, into the stream of commerce.

And so we like proposals like 501, like the authors update 54 because it brings manufacturers to the table so they can redesign products, introduce safer products into the marketplace so we as local governments, as ratepayers can avoid a lot of these costs.

Happy to support and urge your aye vote today on this Bill and look forward to further collaboration with the opponents and the author's office. Thank you.

Thank you very much. Others in support of SB501, please approach.

Good morning. Lindsey Gorn on behalf of the Resource Recovery Coalition of California, please to co sponsor the Bill.

Thank you very much.

Thank you.

Chris Groggin with Capital Advocacy on behalf of Republic Services and support.

Melissa Sparks-Kranz with the League of California Cities in support.

Thank you.

Sarah Starr with the City of Roseville in support.

Thank you.

Jordan Wells on behalf of the California State Association of Counties in support. Thank you.

Andi Liebenbaum County of Los Angeles in support.

Matt Brody for the Teamsters and support.

Thank you. If you're opposed seeing no one else approaching except one. No, no opposed. Okay, good. Good work. Coming up quickly. Try to be on time.

Thank you Mr. Chair, Members. Dawn Koepke on behalf of the California Manufacturers and Technology Association, Chemical Industry Council of California and was also requested to convey the position of the household and Commercial Products Association and respectful opposed unless amended position to SB501.

We've appreciated the author and their sponsors time that they've taken in diligent productive conversations around the Bill and certainly we intend to continue those discussions notably across each of these associations, you know, wide array of different products that would be covered under this particular measure.

Everything from pesticides and disinfectants to pool treatment, chemicals, aerosol products, automotive products and more. While we may disagree on an extended producer responsibility approach for these products, we have and are committed to finding a solution for the issue at hand and the concerns of the proponents and author.

Notably from our folks perspective, extended producer responsibility is an overly complicated and very costly approach to managing products at end of life. And we would also note very different in terms of this product sector versus others that can be put into more of a circular economy, a circular approach.

These products in many cases are destined not only for the products but also their packaging for actual disposal versus a more circular recyclability, compostability type of approach. As such, many companies also are also under coverage under SB54. The authors previously passed and enacted SB54 that's related to single use packaging and plastics.

Many of these same companies are covered under that program as well. And just as that's getting implemented to establish an entirely new EPR program for these products and packaging that is destined for disposal we think perhaps is not necessary.

However, instead industry has come to the table meeting with the authors and proponents on a fee based approach to helping to manage and address the gap in funding for covering these particular products. And we look forward to furthering those discussions in an effort to try to meet in the middle on this.

So for those reasons we do remain in an opposed unless amended position. But do again appreciate the author and sponsors and look forward to continuing the conversation. Thank you.

Alrighty, thank you very much. Anyone else opposed SB501, please approach.

Hello, Ryan Allain. On behalf of the California Retailers Association, I land our comments just was said and posed less amended. Thank you.

Thank you Mr. Chair, Carlos Guterres here on behalf of the Western Plant Health Association, CropLife America and Rise. For reasons previously Stated amended.

Good afternoon, chair and Members Adam Regele on behalf of the California Chamber of Commerce in a respectful opposing unless amended. Thank you.

Dennis Albiani on behalf of Consumer Brands Association. We also oppose unless amended. Thank you.

Good morning, Mr. Chair. Members Tim Shestek with the American Chemistry Council, also opposed unless amended. Thank you.

Thank you very much. Anyone else opposed? SB501, please approach microphone. Seeing no one else approaching, let's bring it back to the Committee to see if Senator Niello has a question. He does not. All right, Senator Allen, you have any questions? So you do not. All right.

I've got so many questions.

Ask yourself a question.

Would you like to close?

I appreciate all the comments, including from the folks in the opposition. We're gonna. We're gonna work together, see what we can get landed. But I respectfully ask for an aye vote today.

Thank you, Senator Allen. All right. Appropriate time, there'll be a motion, I expect. All right. And I see Senator Padilla has taken advantage of our one time early offer and has come to the Committee to present SB728, phylum number 22. Is that correct?

Yes, Senator Padilla.

All right, before you begin, let me ask for the sergeants to contact all the Committee Members to see if we can get the Committee here so we can form a quorum before we have to break. So we can go through the business that's already been conducted today thus far.

So maybe nobody's gotten out of bed yet.

Well, I'm hoping they're awake. Yes. Okay. One second, Senator Padilla. So again, if you're within earshot or if you're a staff Member of any Committee Member, if you could do your part to go ahead and bring your Committee Member down here to the Committee hearing room so we can get much of our business conducted before we have to break at 11:45. So. All right. With that, Senator Padilla.

Mr. Chairman, thank you. Offer acceptance, and I hope due consideration. We'll see. I'm pleased to present SB728, which, first, I'd like to state, we're accepting Committee amends. SB728 would require non-loan commercial financing companies to register with the DFPI under the California Consumer Financial Protection Law, which was designed to provide oversight of non-loan types of financing.

Small businesses are struggling to access the responsible capital that they need to grow, especially in the post Covid period.

Small business owners are heavily marketed to by alternative financing products that may not be loans, including merchant cash advances and factoring, which Federal Reserve research refer to specifically as, and I quote, "potentially higher cost and less transparent credit products." California's Department of Financial Protection and Innovation has oversight over small business loans.

Currently, there is no oversight of these non-loan types of commercial financing. The need for this oversight can be illustrated by merchant cash advances, an increasingly common form of financing, where a business receives an upfront sum of money in exchange for a percentage of future credit card sales or daily bank deposits.

MCAs often operate with terms that may drive small business owners into further debt cycles because of unmanageable repayment terms. A study of California businesses found the average small business using these unregulated loan products is being charged payments of up to 178% of their net income.

In other words, they cost nearly double what the business owner could pay, driving businesses from profitability to unprofitability. Worse, Latino small business owners, for example, were being charged four times what they could afford to pay.

Federal Reserve research also finds Black and Latino-owned businesses twice as likely to be affected by these potentially high-cost and less transparent credit products. Report by the Federal Reserve of New York and the Stanford Graduate School of Business also found that Latino business owners are more likely to use factoring and merchant cash advances.

This unregulated market is not small. For example, the volume of merchant cash advance financing alone was more than six times that of SBA loans below a quarter-$1.0 million, as of 2019.

SB 728 can improve access to capital and innovation in small business financing by establishing a level playing field of competition and transparency for both loan and non-loan commercial financing. We can also protect borrowers from predatory lending practices that are harming businesses, families, and communities.

With me today is Antonio Aguilar representing Small Business Majority and Louis Karispec with Responsible Business Lending Coalition.

Thank you. Floor is yours.

Thank you, Mr. Chair, Members of the Committee. My name is Antonio Aguilar, Central Outreach Manager for Small Business Majority, an organization dedicated to supporting California's diverse and small business owners.

I'm here today to show strong support for SB728, which would require merchant cash advance (MCA) companies and brokers to register with the Department of Financial Protections and Innovation (DFPI) under the California Consumer Financial Protection Law (CCFPL), instead of the current law. Small business owners, particularly those from BIPOC and immigrant communities, are often barred from traditional lending institutions or lack banking relationships, leaving them vulnerable to predatory lenders when they need important capital.

MCAs can devastate a small business. In my work, I've heard countless stories from business owners who have taken out an MCA without understanding the full cost and implications of the loan terms and end up losing their business. As you can see, we desperately need better oversight of these lending products.

And the CCFPL gives DFPI stronger tools to enforce rules and protect small business owners. SB728 empowers small business owners to make informed decisions and report bad actors. Some companies have pointed out that the bill's registration requirement might not apply to all lenders, specifically those that partner with banks to issue loans.

However, this is a problem because these companies still offer financing directly to small businesses and should be held to the same standards. We believe this bill should use the same broad definition of commercial financing provider as in SB1235.

That would help ensure all companies offering financing, even through a bank partner, are required to register and follow the rules. We urge you to pass SB728 and prevent bad actor financing companies from taking unfair advantage of small business owners. Thank you.

Thank you very much. Others in support SB728.

I have one additional principal witness. Mr. Chairman.

Go ahead.

Thank you, Chair. Honorable Senators, my name is Louis Caditz-Peck, Executive Director of the Responsible Business Lending Coalition. We represent over a thousand for-profit lenders to small businesses, small business groups, and non-profits that serve them.