Assembly Standing Committee on Banking and Finance

Good afternoon. The Committee on Banking and Finance is called to order. Sergeants, please call the absent Members. Madam Secretary, can you please call the roll?

[Roll call]

Since we do not have a quorum, we will start as a Subcommitee. Written testimony can be submitted via the position letter portal on the committee's website to ensure we hear from as many people as possible. Disruptive conduct, including behavior that incites or threatens violence, will not be tolerated in this Commission room.

Primary witnesses must be those accompanying the author or those who have officially registered their stance with the Committee. Others may state their name, affiliation, and position at the mic when called upon. Since we don't have a quorum, we'll be starting as a Subcommitee.

But before we do that and get into the bills, we will be moving on the consent calendar. We have three Rebills on consent. File item one, AB 501. File item two, AB 683, and file item four, AB 1278. They're all due. Pass as amended, to appropriations. Do I have a motion on the consent calendar? So move. Awesome.

Since we have a quorum.

Crow.

Awesome. We have a first and a second, and. Madam Secretary, please call the roll.

On the consent calendar. File item 1, AB501. Papan. The motion is due. Pass to the Committee on Judiciary. File Item 2. AB683. Davies, the motion is due. Pass as amended, to the Committee on Appropriations. File Item 4, AB 1278. Harabedian. The motion is due. Pass as amended, to the Committee on Appropriations. Valencia.

Yes.

[Roll call]

The consent calendar is out. We will hold that until other members join. We will now move on to bill presentations. AB 871, Assemblymember Stefani. The recommendation is do pass to the Judiciary Committee with the understanding that it will be as do pass, as amended, after the committee's hearing. Assemblymember, when ready, please start.

Thank you, Chair Valencia, and thank you, members. It's a pleasure to be here with you today and I would like to begin by thanking the Chair and his staff for the amendments that have been suggested. I will be accepting those, and I understand they will be processed in the Judiciary Committee.

Colleagues, this is about financial elder abuse, and I think we all have a story or we know people who have been victim of that. For me, it's personal.

My mom—last year, I came home from a day of work here, went home and told me how she was on the phone with her bank for 45 minutes and she consolidated all these accounts, and she went on and on and on about how nice they were.

And I told her, mom, I don't think you were talking to your bank. And the next day, sure enough, she went to her bank when they opened and thousands of dollars were set to be wired to God knows where and they were able to stop it. This is a story we hear over and over again.

I had two senior scam stopper events over the interim recess in my district and there were hundreds of elders there, hundreds of people telling us stories of how they were tried—how people tried to scam them out of their money.

So, AB 71 is an answer to that, or at least attempting to help with that problem that we all know too well. It will strengthen protections against elder fraud and financial crimes by ensuring financial institutions have appropriate reporting processes and training for the employees in place to proactively prevent fraud.

And as proposed to be amended, this bill requires that annual mandated reporter trainings include clear guidance on reporting suspected financial abuse not only to adult protective services, as they do now, or local law enforcement, but also to include the FBI's Internet Crime Complaint Center and the Federal Trade Commission.

We think this will help consolidate information, pull more resources together, so we can stop those sometimes low dollar crimes that are harder for local law enforcement to prosecute.

But when you have more agencies on it and they're collecting more information, they're going to have an easier time going after the people who are trying to scam our loved ones.

So, importantly, it also requires a financial institution to share information about this reporting with clients upon discovering suspected abuse and requires the financial institution to encourage clients to submit their complaints within 24 to 48 hours. By requiring reporting of suspected financial abuse and fraud to appropriate federal entities and dedicated to combating cyber related crimes, even smaller dollar scams can be aggregated and shared across law enforcement jurisdictions to identify the trends in the scams and better prosecute these cases.

And with me to speak in support of this bill is Amanda Kirchner with the California Welfare Directors Association.

Good afternoon, Mr. Chair and members. My name is Amanda Kirchner with CWDA. For 100 years, CWDA has represented county human services agencies, the programs that we administer and the people that we serve. One of those populations is our Adult Protective Services.

As part of our APS, we often see seniors and vulnerable adults who have been taken advantage of through these financial scams. Losing your life savings is hard enough, but when that nest egg is wiped out, it also implicates your independence as an older adult, and it's not easily replaced.

Our victims are emotionally traumatized and often feel shame for being taken advantage of by scammers. And unfortunately, limited APS and local law enforcement resources mean it can be very difficult to go after these crimes, especially when they are Internet based. They need forensic accounting or other types of technical support to unwind what has happened.

While financial institutions are mandated reporters for suspected elder financial abuse, building a case across jurisdictions can be very difficult. AB 871 helps our victims and law enforcement by requiring additional reporting to the FBI's Internet Crimes Complaint Center, known as IC3. This helps in two ways.

First, IC3, as the Assembly Member mentioned, is a nationwide database and can be used to pattern spot, so, if you have something that's happening in California in a small jurisdiction, they can look on IC3 and see if the sort of limitations of the scam are happening in other jurisdictions, reach out, and create a case or a task force together.

Second, if given enough information, IC3 actually has the ability, within about a 48 to 72 hour window, to stop those transactions. And I was just looking at the most recent data. They have about a 56% success rate when they've been given enough information to do so.

This is why AB 871 is going to be critical help for our clients who have been victimized because it requires the financial institutions to provide the suspected victims with IC3's information.

That way, we're getting both the information from the bank but also from the victim so that we get a complete picture and hopefully they'll be able to stop those transactions while they're moving forward. By 2030, one in four Californians is going to be over the age of 60.

The silver tsunami is here, and we are not prepared for the influx of potential victims for these scams. So, this is just one more tool to help us stop this and potentially protect our older seniors and adults. Thank you.

Thank you. Since there is no registered opposition, we will move on to additional support in the room. Please state your name, position, and entity.

Clifton Wilson, on behalf of the Board of Supervisors for the Counties of Kern and Humboldt and also on behalf of the City and County of San Francisco. All in support. Thank you.

Thank you.

Good afternoon. Jeff Neal representing the Counties of Yolo and Contra Costa, also in support.

Andrew Mendoza on behalf of the Alzheimer's Association, in support.

Thank you. Any opposition that would like to state?

Thank you, Mr. Chair, members of the Committee. Jason Lane with California Bankers Association. Not opposed to the bill, just have concerns. The author, her staff, the sponsors have been gracious. They are continuing to talk with us about some of those concerns.

And I want to thank the Committee consultants for recommending Committee amendments, we and the author for accepting those Committee amendments. I'm encouraged by the conversations, and I think we will continue to be able to work on this as the bill moves through the legislative process. Just two observations that we would make.

First, we agree that law enforcement needs more resources; they need more data to be able to prosecute and investigate, investigate fraud. I'm just not—we're not 100% sure that IC3 is the appropriate body and reporting to IC3 makes sense 100% of the time, and here's why.

We understand from talking to some of our DC colleagues last week that IC3 receives about 3,000 reports per day and they only investigate or refer up to—refer out for—investigation very, very high dollar amounts.

So, we question whether or not it makes sense for an institution to make a report for every single instance where there's a suspicion of fraud. Should there be a dollar threshold that triggers reporting? That's the question that we have. We just want to—we don't want to make a report for the sake of just making a report.

We want it to be efficacious. We want it to do what it's supposed to do. So, we have some concerns there. The other is in K2 of the bill, I believe, which requires that the institution provide the, the customer with resources in how they too can make the report to the Federal Government.

I think that works really well in instances where a teller is spotting fraud and the customer is in front of him and the teller says, you know what, this seems suspicious. Here's a pamphlet for you and a phone number to call so that you can report. But it's not how fraud is operational. Fraud investigations are operationalized in many institutions.

A lot of institutions will have the teller note the account and then the account gets reviewed by a fraud team that's in a centralized location that's often not anywhere near the branch.

And that team then makes a determination by looking at the pattern of activity, maybe using AI, ADS, to sort of determine whether or not it is or isn't fraud. And then, they will do what they do with the transaction. By that time, the customer's long gone and they're no longer in the branch.

I don't know how we operationalize the requirement that we provide resources to the customer when the customer might not even be present by the time the bank actually believes that there was fraud on the account. We're a compliance driven organization. I just don't know about compliance with this particular provision of the bill.

So, we'll continue talking to the author and we feel pretty optimistic that these are not unresolvable concerns.

Thank you for that. I am confident that the author will continue dialogue and continue working on the bill as well. Let's bring it back to the Committee. Are there any questions from Committee Members? Assemblymember Dixon.

Thank you, Mr. Chair. I support the bill, and this has been a long time in coming. I know in the last couple years there have been other attempts to try to get at this.

We've all, as the Assembly woman says, we've all had experience with our scam town halls and it's just heartbreaking, frankly, to see what our elders and others don't—all of us are susceptible.

There was a prior bill a year or so ago, before the same Committee, and it was—and I'm glad there are no civil penalties associated with this because it was putting the onus on the banking institute, the financial institution, for not arresting or not correcting or identifying the fraud that was happening at the teller stand. Are we—I'm hopeful that—and I voted no on that bill because of that reason, the liability imposed on the banking and financial institutions.

So, are we—we've moved away from that. And I think your remedy is subject to working with the Bankers Association to address that.

So, we get at this one way or the other without encumbering the financial institutions with the onerous potential liabilities. That's what I'm concerned about.

Yes. Our intent is to work on a bill that is actually going to pass and that will actually do what we need it to do, which is protect as many people as possible, and we think we've landed on that bill. As you know, although concerns were expressed by the bankers, they are not in opposition.

So, I think your concerns have been met.

Thank you.

Assemblymember Schiavo.

Thank you. I want to, you know, say thank you to Assemblymember Stephanie. I know she's been working on this for a little while and been patient and diligent. And it's really such an important issue. I mean, I know we all have heard the stories.

I just heard another story today from actually a colleague who someone in his district who works for the FBI was almost scammed. I mean, it just speaks to how sophisticated and complicated these, you know, scamming attacks are.

And with AI, we know that it's, you know, it's just really being magnified. We have a senior fair every year in our district, and the Senior Scam workshop is by far the one that is overflowing with people in there trying to make sure that they are not being scammed.

I think, you know, people are really trying to get the information to prevent it, but you can't always do that. And we need to make sure that we're taking real actions to hold these folks accountable. So, would love to be added as a coauthor and really appreciate your leadership on this.

Thank you.

Appreciate that. Assemblymember Stepfani, would you like to close?

I respectfully ask for your aye vote.

Thank you. As—motion and second, wonderful. As it's been expressed by colleagues, wanna also thank the Assemblymember for her patience and diligence on this issue. It is extremely complicated and difficult to try and capture the types of fraud that are taking place as we speak.

With the advancements in technology, it almost feels like we're always a step behind. We figure out one scheme and then the perpetrators are moving on to another, which is the biggest challenge in addressing these issues.

But I am confident that with the collective mind of this Committee, we will continue to put forth policy that will address this in the best capacity that we can, specifically for our elders. I look forward to this bill passing out of our house and hopefully being signed by the Governor as well.

With that, we have a motion and a second. Please, Madam Secretary, call the roll.

[Roll Call]

The bill passes. Congratulations. And we will leave the roll open for absent. We have completed the agenda and we'll leave the role open for a few minutes for Members to add on. Madam Secretary, please call the absent Members for bills that are on call and or that need Members to be added on.

On the consent calendar. File item 1. AB501. Papan. The motion is do pass to the Committee on Judiciary. File Item 2. AB683. Davies. The motion is do pass as amended to the Committee on Appropriations. File Item 4 AB 1278. Harabedian. The motion is do pass as amended to the Committee on Appropriations. Chavo. Chavo. Aye. Soria. Soria.

[Roll call]

With that we will conclude the Assembly Banking Finance Committee. The meeting is adjourned.