Senate Standing Committee on Banking and Financial Institutions

The Senate Committee on Banking and Financial Institutions will come to order. We have nine bills on today's agenda, and we do not have a quorum as of yet. Therefore, we will start as a subcommittee. We do have authors present. Item Number 1, AB 801 by Assemblymember Bonta, is first on the agenda in file order.

So, we will go through file order. Assemblymember Bonta, you are welcomed to the podium, and you can present when you are ready.

Thank you so much, chair. Thank you, chair Grayson. I'm here to present AB 801. Great to see committee members, the California Fair Lending Examination Act.

You can just sit there

What the bill does. Following the new language of this bill, AB 801 requires the Department of the Department of Financial Protection and Innovation to examine every lender under its jurisdiction, state chartered banks, credit unions, and independent mortgage companies, for compliance with fair lending laws at least once every four years so that a recent federal retreat from fair lending enforcement does not translate into reduced accountability for California's lenders, particularly for communities of color who continue to face documented disparities in access to credit.

Home ownership is the primary vehicle for intergenerational wealth in this country. California's communities of color have been systematically cut out of its law cut out of that generational wealth, first by law, then lending practices that persisted long after the law changed. The California Task Force to Study and Develop Reparation Proposals has called on this legislature to take structural action to address the continuing economic harm of housing discrimination.

This is the part of that response that we can focus on today. Since 2015, the black and Latino borrowers have received conventional mortgage loan originations at roughly half the rate of white borrowers in California. No meaningful improvement year over year. The homeownership gap between black and white Americans today is approximately what it was before the Fair Housing Act passed in 1968.

In April of this year, the Consumer Financial Protection Bureau finalized a rewrite of regulation B that narrows and reduces accountability from the Equal Credit Opportunity Act for lenders.

Additionally, at HUD, the Office of Fair Housing and Equal Opportunity ejected 65% of its staff and will be down to six Fair Housing lawyers by fall. DOJ dropped pending prosecutions of all pending redlining lawsuits. The CFPB has foregone 22 enforcement actions, including a $2,000,000,000 case against Capital One, representing over $3,500,000,000 in alleged consumer harm. Federal enforcement has collapsed. While federal oversight previously covered these fair lending obligations under this administration, it clearly no longer does.

The agencies doing that work have been systematically dismantled. The argument that federal oversight is sufficient is an argument about a system that no longer exists. The state charter exists precisely so that California can set standards that reflect our values and the need for our communities, not simply track whatever the Federal Government does or doesn't do. Deferring to federal oversight is the ceiling, as the ceiling of our ambition would mean letting the administration decide California's fair lending policy.

That is not a choice this legislature has to make, and it is not one we should.

California retains independent authority under the UNRWA Civil Rights Act, including its disparate impact standard, which our law preserves even when federal law now eliminates it. But state authority without a structured examination mechanism is authority we cannot exercise. Right now, DFPI has no legal obligation to conduct fair lending examinations on any defined schedule. That matters because of who we who dominates the market right now.

Independent mortgage companies now originate the vast majority of government backed home loans in California, the loans to go that go to disproportionately to borrowers of color.

A Bloomberg News analysis of 38,000,000 mortgages found that controlling for income, loan size and creditworthiness, non bank borrowers paid roughly $300 more in upfront fees than comparable bank borrowers, with black borrowers paying $150 more and Latino borrowers $230 more than comparable white borrowers. These disparities were widest in California. AB 801 closes the structural gap by codifying a mandatory examination cycle. DFPI already has examination authority. This bill requires that it be exercised on a schedule for fair lending compliance.

The bill is carefully designed to minimize burden on compliant institutions. Findings are confidential, consistent with federal supervisory practice. Costs are borne by the institutions, not the public. What this bill does not do is create a new substantive liability, impose ratings, or require reinvestment. It requires examination.

That is all. That is in California's purview and allows for our California institutions to be covered by the law. That is the floor. And right now, California doesn't have it. Should this bill advance today, I'm committed to narrowing the bill to solely mortgage loans to tackle ensuring fair access to American dream, as well as aligning examination timelines and confidentiality standards with current standards to use to ease burden for institutions covered under this bill.

I thank the opposition for working so diligently with my team and look forward to continuing to collaborate with them, our departments, and community to achieve our shared goals. With me today to testify in support is Max Vargas, President and CEO of the Greenlining Institute.

You have two minutes.

Thank you. Thank you Assemblymember Bonta, Chair Grayson, and committee members. My name is Max Vargas, CEO of the Greenlining Institute for over thirty years. Greenlining has been focused on combating the impacts of redlining. This braces practice that denied communities of color access to capital opportunity and stability for generations.

As Assemblymember Montes noted, the legacy of that redlining still lives on today and who can access credit, who can become a homeowner, and who gets the opportunity to build wealth. Home ownership is notably one of the most powerful ways to building generational wealth, and year after year, we found that it remains inaccessible for California's communities of color.

At Greenlining, we've analyzed the home mortgage disclosure data for years and consistently see that communities of color access homeownership at, at lower rates than white borrowers, often paying significantly more to become homeowners as has been noted. An analysis, in fact, of 37,000,000 mortgage applications submitted between 2018 and 2024 showed that black borrowers were 78 more likely than white borrowers to be denied at the final underwriting stage. This is occurring at the same time.

Right? This is continuing at the same time that the Federal Government is rapidly gutting fair lending enforcement, leaving California borrowers unprotected and vulnerable to exploitation and discrimination. Just two months ago, the CFPB issued a final rule that significantly weakened the equal credit opportunity act regulation b, which had been one of our strongest tools to counter lending discrimination for decades. This rule eliminates findings for disparate impact testing as evidence for determining whether there has been lending discrimination.

This means that the federal standard for lending discrimination now requires proof of intent and ignores the actual impact of harm that our communities are continuing to feel.

Advocates know and communities know that unequal outcomes don't happen by accident. They're by design. They've been perpetuated. And when a lending practice consistently locks specific groups of people out of opportunity, California has a responsibility to act. The need for AB 801 is urgent.

It fills a federal gap by adding nondiscrimination chapters to three financial code divisions covering DFPI regulated lenders, establishes a mandatory 48 examination cycle expressly covering both intentional discrimination and lending practices with unjustified disparate impacts on protected classes, preserving California's own standard, even as federal protections have been on the back.

If you can wrap it up. You're past your two minutes.

As as no. We wanna affirm that this bill does not create new substantive obligation. It ensures existing fair lending laws are actually examined and enforced. And without an examination structure, California's fair lending protections exist on paper, but not in practice. Thank you.

Thank you so very much. And you're asking for an aye vote?

Yes. There you go. Very

good. Any members, know their lead witnesses? Any members of the public that would like to add on as a me too? Name, position, and or name who you're representing in position.

Mister chairman and members, Andrew Antwie with Shaw Yoder, Antwiesh, Melzer, and Lang here today on behalf of two clients in support of this measure. First, the San Francisco Board of Supervisors for the City and County of San Francisco and also for the Office of Kat Taylor. We support and thank the author.

Mr. Chair and members, Rand Martin on behalf of the AIDS Healthcare Foundation and its Housing as a Human Rights Division in support.

Thank you. Good afternoon, chair

and members. Karen Stout here on behalf of California YIMBY in support. Thank you.

Good afternoon, chair and members. Diego Samoyo, policy interim with Mesa Verde Group here on behalf of Consumer Federation of California in support.

Good afternoon, chair and members. Marissa Hagerman with Traton Price Consulting registering support on behalf of Center for Responsible Lending. We were a late add on, but appreciate the author.

Heidi Pickman with CAMION Network. We support this bill.

Thank you so much. Any other members of the public like to add on and support? Seeing none, we will now hear from lead witnesses in opposition. Two minutes each. Thank you so very much.

You can begin when you are ready.

Is this on? Yes, it is. Okay. Good afternoon, mister chair, committee members. Lindsay Gollenhorn on behalf of the California Community Banking Network.

We are respectfully opposed to AB801. Do appreciate the author's efforts to address concerns through the June 4 amendments and absolutely appreciate limiting the bill to mortgages. However, even as amended, AB801 creates a new layer of regulatory oversight that duplicates existing examination and enforcement frameworks. Banks are already subject to extensive state and federal fair lending laws and are routinely examined by regulators to ensure compliance.

Community banks operate with limited compliance resources Redirecting personnel and financial resources to overlapping examinations may reduce the capacity of community banks to focus on serving customers, expanding access to credit and investing in their local communities.

I want to note that we appreciate that the committee analysis recognizes many of our concerns, suggest reducing or exempting exams for smaller institutions and allowing institutions that demonstrate satisfactory compliance to undergo fewer examinations over time. We think those are thoughtful recommendations would help avoid unnecessary duplication and burden. So we are opposed to AB 801, but we hope to continue to continue conversations with the committee and the author. Thank you.

Thank you very much. Next witness.

Good afternoon, chairs and members of the committee. Rob Wilson with California's Credit Unions. I'd like to start my comments by, first thanking the author for the new direction of the bill, the chair and members of the committee, staff, and California Legislative Black Caucus as well. The bill is most certainly in a better place than it was last year from our perspective. Having said that, we do still have some concerns with the bill, which some of which, the assembly member just touched on.

Credit unions, first and foremost, strongly support fair lending laws and equal access to financial services. Discrimination in lending has no place in California, and credit unions remain committed to serving all eligible members fairly and equally. However, AB 801, creates a new regulatory framework that we believe is unnecessary and duplicative of existing oversight. We believe it may create some significant legal concerns, compliance, and most notably cost concerns for California state chartered credit unions.

Fair lending is already within the scope of current examinations from the state.

Examiners can and should be reviewing for potential fair lending concerns and can conduct a more extensive fair lending examination whenever risks or red flags are identified. As we call into question the need for an independent exam, which will prove to be costly for the state, that cost will then be passed on to its licensees, the credit unions in my instance, and those credit unions are not for profit member owned Cooperatives. So any cost to the credit unions would be felt by the members of the coop.

I think the committee analysis, as my colleague said, does a great excellent job of laying out some considerations moving forward that will be beneficial to all parties to make this more cost effective and efficient, some of which, once again, the assembly member touched on. Ours our letter discussed a few other points, including need of clarity around confidentiality, once again, touched on.

But one last point I would like to highlight, and, you know, there's nothing that can really be done about this, but it's the uneven application of this bill to state chartered credit unions. The last couple of years, we've seen more and more bills Kinda targeted at the state charter and understand that's the jurisdiction of the legislature, but we are seeing a decline in the in the number of state charter credit unions.

I make this argument much lighter than I would have prior to the the amendments a couple of weeks ago, But I do think it is important when we're talking about any bill that impacts state charters that the committee kinda takes that into consideration moving forward. We are seeing assets under management finally dropping down from the department, which is a concerning trend. Once again, much lighter touch on on that point than I would have made prior to these amendments.

We have a very promising conversation with the author's office. I really wanna thank these author author's office for that, and we look forward to continuing those conversations. For the reasons listed above, we are post AB 801 as it's in print today. Thank you.

Thank you so very much. Any members of the public that would like to add on an opposition simply come to the mic, name, who you're representing, and position.

Mister chair, Chris Schultz for the California Bankers Association. The bill provides that DFPI can bill licensees for the cost of the exams.

The name?

Sorry. Just wanna say, hopefully, the Appropriations Committee can get a a good fiscal on this bill. Thank you.

Thank you so very much. Very much appreciated. Any other members of the public? Seeing none, we will bring it to the committee for questions or comments. Seeing no questions or comments from the committee.

And, before the author closes, an assembly member and whom I have great respect for, Aye, I would like to acknowledge her willingness to listen to feedback from all sides and to find a path forward for this bill. I'm really encouraged, to hear your willingness to continue working with the committee staff, with DFPI, and the financial institutions to hone this bill in further. And, your thoughtful and reasonable approach gives me confidence that you will find a good landing spot.

Thank you so very much for your work and for industry as well, your outreach and working together. With that, to the author, would you like to close?

Well, thank you so much, chair. And I wanna, thank you for your incredible leadership, particularly ensuring that every Californian has the ability to achieve the American dream of homeownership and your leadership in that regard. I think this, piece of legislation allows for there to be equity in the way in which, people have the ability to do this. This is a Black Caucus priority for a reason.

It ensures that we have an opportunity to ensure every individual has the regulatory opportunity to understand that California is working on their behalf.

I think to the opposition's points, we've spent a lot of time working and reworking this bill. I believe that the amendments that we will take in the Future Committee will alleviate some of the conflict that we've already addressed in our opening.

At the end of the day, our state charter exists precisely to be able to embody what California reflects as our values, and I think a very narrowly tailored bill that provides transparency and oversight through DFPI, giving them the moving from not having a not only having authority, but also having legal obligation to do so, particularly for mortgage origination is a step in the right direction. And with that, I respectfully request your right vote.

Thank you, assembly member. We're still operating as a subcommittee, so we will receive a motion and vote at the appropriate time. Thank you again for your presentation.

Thank you.

We are now moving, on to item number two, AB 871. Assembly member Stephanie, you can begin to present when you are

ready.

Thank you very much. The podium is yours.

All right. Thank you, Chair and members. First of all, I would like to begin by thanking the Chair and staff for their work on this bill, and I will be accepting the committee amendments, so thank you for that, and I just wanted to touch on this bill and how it came about. This is about elder financial abuse, which is not new to any of us.

I think probably all of us have a story about someone we know that's been scammed or had attempts to be scammed ourselves. I get, like, six phone calls a day from some loan that I've never signed up for. So in last January, my mom, who lives in West Sacramento--and I was staying with her when I started this job--I came home and she started telling me a story about how she was on the phone with her bank.

And it was a 45 minute conversation, and she was consolidating this because she had to do this, and I said to her, mom, I don't think you were talking to your bank. And I said, you need to go there the next morning. And sure enough, she did, and had I not had that conversation with my mom, she would have been scammed out of a significant amount of money for someone who's on a fixed income. So that made me very motivated to look at elder financial abuse in a different way.

Obviously, I've cared about it before, but when it touches your own family and you see the damage that could be done and you hear the stories, something needs to be done. So AB 871 will strengthen protections against elder fraud and financial crimes by ensuring financial institutions have appropriate reporting processes and training for their employees in place to proactively prevent fraud.

This bill will require that annual mandated reporter trainings include clear guidance on reporting suspected financial abuse to the FBI's Internet Crime Complaint Center, known as IC3, a central repository of cybercrime data accessible to law enforcement pursuing relevant cases.

Importantly, it also requires a financial institution to share information about reporting to IC3 with clients, encouraging them to submit their own complaints and details about the suspected fraud. Timely notice to the FBI is critical. The FBI's Recovery Asset Team can assist in stopping or even reversing certain online transactions.

In 2025, this process had a nearly 50% success rate in recovering funds that otherwise would have been lost to these criminals. This is life-changing for a senior who often has no way to make up that lost income. Even for those transactions that can't be reversed, by requiring reporting of suspected fraud to appropriate federal entities, even smaller dollar scams can help reveal patterns that improve enforcement efforts across law enforcement jurisdictions and helps us catch the bad guys, so to speak.

Lastly, I will highlight that amendments to the bill-- we have been working with people who have been opposed to the bill to ensure that banks have time to update their policies and training and maintain flexibility to escalate transactions internally, basically letting them communicate with their client in their preferred format. With me to speak in support of the bill is Amanda Kirchner with the County Welfare Directors Association.

Thank you so very much. Two minutes.

Thank you. Good afternoon, Mr. Chair, Senators. Amanda Kirchner, on behalf of the County Welfare Directors Association. For 100 years, CWDA has represented county human services agencies, the programs they administer, and the clients that we serve. We are a proud sponsor of AB 871.

As part of our adult protective services, we often see seniors and vulnerable adults taken advantage of by financial scams, and these can be devastating. Losing your life savings to a financial scam isn't just about money. It is also about losing independence when the nest egg that you spent decades building is wiped out in a tech scam. Our victims are emotionally traumatized and feel shame for being taken advantage of by these scammers.

Limited APS and law enforcement resources mean it can be incredibly difficult to investigate these online crime rings, which are resource-intensive and often require computer knowledge and forensic accounting.

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

First, IC3 is the nationwide database, and it will help us with investigation pattern spotting, similar scams across the country, and also allow different jurisdictions to collaborate and hopefully pull resources for investigations. Second, if given enough time, IC3 has about a 48 to 72-hour window where certain financial transactions can be stopped and reversed.

This is why AB 871 can be a critical help for our clients who have been victimized because it requires financial institutions to provide suspected victims with IC3's information and encourage them to report as well. With information provided by the financial institution and victims, we are hopeful that a more robust investigation can be carried out and more of these harmful transactions can be stopped. By 2030, one in four Californians will be 60 and older.

The silver tsunami is rapidly approaching, and with it, potentially even more victims of financial abuse. AB 871 is a much-needed tool and we urge your aye vote. Thank you.

Very close. Thank you so very much for your testimony. Any other members of the public that would like to come forward in support, your name, who you're representing, and your position, please.

Kelly Brooks, here on behalf of the counties of Riverside and Ventura, in support.

Hi. Vanessa Flores, on behalf of the Alameda County Board of Supervisors, in support. Thank you.

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

Justin Garrett with the California State Association of Counties, in support.

Jeff Neal, representing the Board of Supervisors of Contra Costa County and Yolo County, both in support.

Mr. Chair and members, Andrew Antwih, here today on behalf of San Francisco County, Humboldt County, and Kern County, all in support, thanks to the author.

Thank you very much. Any other members in support from the public? Seeing none, we will now move to lead witnesses in opposition. Two minutes. Take your liberty for two minutes.

Members of the committee, I'm Jason Lane with California Bankers Association. Thanks for the opportunity to speak in our opposition of the bill. Really wanna thank the Assembly Member for her dedication to what is a very challenging issue. California leads the country in consumer fraud losses, and this is an issue where she has shown and demonstrated a ton of passion, and she has worked with us.

And we very much appreciate the amendment she's accepted that-- thank the <inaudible> full analysis and the Chair for over five years of leadership on this topic. Bill does three things at its core. It requires a second report. It amends the existing mandated reporting section of the Welfare and Institutions Code whereby an institution already has to produce a report to the local law enforcement or the adult protective services to now include a second report to the FBI's IC3.

The committee has acknowledged and the author has acknowledged that that's going to be a change of operations for hundreds of branches throughout California, and we will need time to implement those changes. The second thing the bill does is it requires that we provide notification to the customer that they have been-- that a report has been made on their behalf to the FBI.

That's K2, which is the last provision of the bill. That's the provision where, unfortunately, I think we're in a stalemate. We're opposed to the bill. We believe that K2 should be taken out of the bill. We think-- we know for a fact that when a report is filed, it doesn't necessarily mean that there's fraud on the account.

It just means that there is an out-of-pattern activity and there's a suspicion. And in many cases, I would say reports are filed when there's not fraud on the account because that's the mandate. We're alarming consumers potentially. When they get a notification from their bank that they've been reported to the FBI or that their account has been reported or the transaction has been reported to the FBI, seniors will panic.

They will call their bank, they will be frustrated, and we think that having that provision does not further the public policy in the other provisions of the bill, nor does it dilute the efficacy if we take them out. So for that, we highly recommend that we remove K2 from the bill, and we remain opposed unless amended. Thank you.

Thank you. Any members of the public that would like to add on in opposition, please come forward. Seeing no members of the public coming forward, we will move it to--thank you--to the witnesses for your testimony. We will move it back to committee for questions or comments. Vice Chair Niello, you're recognized.

Thank you, Mr. Chair. This is a really troubling issue in a broad sense, both the scamming that goes on--

Vice Chair, would you allow me to seize the moment to establish a quorum?

No. I will not yield back.

Thank you so very much.

Yes.

You know I've got control of this committee. All right. Here we go. Committee Assistant, would you please establish a quorum by calling roll?

[Roll call].

And we have established a quorum. Vice Chair Niello, the floor is yours once again.

Thank you very much. As I was saying before-- I was so rudely interrupted. I-- this is a troubling area both from the standpoint of scams that go on and, I'm on the Little Hoover Commission and we had a number of hearings about this, and there I opined if everybody would observe just a simple principle of practice, we probably would almost eliminate all that, and that is believe and trust absolutely nothing over the Internet, whether you initiate a contact or somebody initiates contact to you.

Unfortunately, it still happens. And with regard to financial institutions trying to guard against this, puts them in a very difficult situation where potentially they have to say to a customer, I'm sorry. I'm not gonna give you that money. Potentially.

And so these are uncomfortable things and I can understand the reticence of making a report to the FBI and then having a customer find out that my bank just reported me to the FBI. So this is-- this whole area is fraught with with troublesome aspects. But Assembly Member Stefani, would you address that particular issue? Do you understand how that would be difficult for them and do you have any flexibility on that?

Through the Chair, thank you, Senator Niello for that comment, and I do see where you're coming from and that is something that we have been talking with the Bankers Association. We do believe that the requirement to provide notice to the customer is essential. That timely notice is something that is beneficial to the IC3 based on our conversations with them to receive a complete picture by including the client perspective.

So we don't feel at this time that that is something we can remove based on the information and that we're trying to call. We're trying to get all the reports to the FBI of these scams, of these cyber crimes that are happening, and they've said even to committee staff that the more information they have, the better to shut these things down, to bring charges among the people that continue to wreak havoc, you know, on our loved ones.

So, we don't feel at this time that it's something that is that much of a burden for them. We even capitulated and said, you can communicate to your client in any way, in whatever way you feel is best. I don't know if Amanda has anything more to add to this, but we feel that it's not that much of a burden for them to reach out to the client and say more information needs to be reported to the FBI, to the IC3 so that they can have more information to shut down these cyber criminals.

Do you have anything more to add?

I would just add from what we've understood from the FBI and IC3, it's important that we get as much information from the victim side as possible so we know how they were approached. So the bank side may know the amount of the-- the date of transaction, the amount of the transaction, whether it took place within a branch or it was part of, like, a wire transfer or something else, but what the victim is going to know is how they were approached.

Was this a one-time tech scam? Were they constantly approached? Was there a person involved and then it turned into an online scam because they were referred to a certain website? Was it one of the tech support scams where their laptop was taken over? That's the other piece of the information that the bank may not have.

So that's why we feel like it's critical that when the bank recognizes that there has been a scam and they, in their own processes, have identified they think this is fraud and they're going to report it to IC3, that they also inform the victim if the victim is not already aware so that the victim can then say, okay, what else do I need to do?

How can I give the IC3 as much information as possible, potentially stop whatever transaction is left, but also provide the critical information that allows for an investigation?

And if I may add to that, just through the Chair, as a former prosecutor, you wanna talk to the witness. You wanna get that information directly from the person who has been scammed, and that is our understanding of why we want that interaction between the person who was scammed and IC3 to make sure that they are getting that best information.

In the case of my mom, you know, what my mom went through on the phone for 45 minutes was a series of someone telling her she needed a code or then sending a code. And having her repeat it to me and then repeat it to a bank and then that bank then repeat it to IC3, I think something gets lost in translation, and I just stand by the fact that if we're trying to shut down these criminals, that we need to give them the best information possible, and that comes from the witness and the person who's been scammed.

From the standpoint of the financial institution, if you were to contact the customer before the report is made and just say, we're concerned about this transaction and we wanna make sure that law enforcement knows about any improper activity that might be going on, and you let them know ahead of time before you make the report, would that help?

I don't think so. I mean, I think ultimately, what we've experienced is you have to make a report pretty quickly in order to be effective because there's a limited opportunity and a limited window of time in which law enforcement can do anything. I think IC3 has some capabilities to work with other banking regulators, and in some cases, they can do some things to stop some of these transactions from hitting the account if you catch it within a certain period of time.

So I don't know that that change necessarily helps. And again, it's not that it's a burden for the institution. It's more-- it's more the reaction that we think that the public will have, the account holder will have when they get this notification that their account has been referred to the FBI or the transaction's been referred to the FBI, so.

Do you challenge the value of the report going to law enforcement in that fas-- or not-- forget about the fashion, but going to appropriate law enforcement?

In our experience--and this is, you know, one where I think there's funding mechanisms and budget constraints--in our experience, the existing mandated report to the APS, we don't necessarily believe that those reports go anywhere or that they're investigated. They certainly-- there is no feedback loop to close the loop with the institution and notify the institution that, hey, you're on the right path. Really good job. We caught the perpetrator.

Keep identifying this type of transaction. Like, there's no feedback back to the institution. Once we make the report, in our view, it goes into a black hole and nobody does anything with it.

I appreciate that. And I've already expressed that I really sympathize with the position that financial institutions are in. The issue is a big enough of a problem, though, that I will be supporting the bill today. So I'm usually with you guys, but in this case, I'm gonna be supporting the bill.

And before we go to the next committee, member, I do wanna clarify that what's being reported to authorities is the transaction and not the account.

Okay. Just--

Correct.

It's what they will perceive. An older person gets it, they're, like, oh, my God. I'm being reported to the FBI, right?

Correct. Yeah. But just for the committee member's clarification, it is the transaction and not the actual account.

Yeah.

Senator Hurtado.

Thank you, Mr. Chair. I just wanna thank the author for putting together this bill. I know that it's-- it can be a little bit of a challenge, right, in terms of what is the right, you know, department or agency, whether it's state or the feds. I have a similar-- not similar legislation, but, you know, I do believe that intelligence sharing is very important, especially as you're seeing patterns. The question is, how do we best do that?

And I don't-- and there needs to be a larger conversation about how we do that because we haven't had one and it does require collaboration between the state, you know, local, and also the federal government to be protective of our communities. But I also know that at the federal level, there's, again, to the point of the arguments that the opposition made is that sometimes it seems like you may submit information but it goes-- who knows where it goes?

And so, you know, how do we we-- the goal is to be effective and to protect people, protect consumers, protect our older adults in the state of California and beyond, but there has to be an understanding of where information goes, when it goes to the feds, because I personally think that FinCEN could probably do a lot more.

They need to be a lot more proactive, and, you know, analyzing and figuring out patterns that they see in each state and across, you know, jurisdictions, it seems like there's some work already being done on that end.

Sometimes they send the information to the banking institutions, but the banking institutions don't let, you know, the states necessarily know everything that they have to now abide by, that the-- you know, that FinCEN is required and maybe the Treasury, also probably another area where information could be going too that could probably work more quickly in preventing and stopping a lot of this stuff from happening in the first place.

But then again, I think there needs to be a larger conversation about how do-- what's the best way to share intelligence, and when there's patterns or there's abuses, who do we share it to and how do we know that something's getting done? I think you're on the right path and I wanna support you and I actually wanna add on as a co-author if you're okay with that.

But again, I think that this does require a larger conversation about how do we best share intelligence information to protect Californians and also at the same time make sure that they don't feel like their privacy is being violated as well?

Through the Chair, thank you so much, Senator, for those comments, and I think you are touching on the exact reason why I'm bringing this bill forward is that frustration and even the opposition from the Bankers that it goes nowhere that nothing happens is exactly why I'm standing in front of you today because I'm trying to prevent that from happening.

This bill is about increasing collaboration from agencies so that in two years' time, no one is sitting here and saying, it goes nowhere, that we're trying to make sure that we have the collaboration in place so that we use all the resources and we use the data that is gathered to stop this. So, thank you. I do believe that we're on the right track.

Is this bill the perfect bill? No. It's very hard to get the perfect bill here on this subject, as you all know. You've been here longer than me. But I think this is a step in the right direction. It is a huge problem, as Senator Niello points out, and it's something that we need to do something about, and I respectfully ask for your aye vote because I do believe that we're on the right track with this.

Any other-- yes. Go ahead. Follow-up.

Yeah. What I just-- one more thing I wanted to add is that this should be something, you know, priority for your banking institutions as well because it does impact you guys, right, in one way or another, and it impacts us all. But, you know, the financial sector is part of the United States's critical infrastructure that if, you know, something goes bad within our critical infrastructure, you know, the country begins to fail in a way.

And so, this is a national security issue that we need to address in terms of protecting the financial sector, protecting consumers, and just wanted to add that note there as well.

Thank you so very much. Any other comments or questions from committee? Members, seeing none, I agree with my colleague here on the committee. This is very, very important in the sense that it's been three years of studies, sessions, and stakeholder meetings around other bills that were trying to address the same thing and which led to the Little Hoover Commission and the report, the study and report they just brought out.

So with that, I appreciate the approach that the author and sponsor have taken with this bill, and based on informational hearings on fraud and scams last year just alone, as well as the findings in the Little Hoover report released this spring, we know that something as fundamental as reporting the crime of fraud is a challenge for victims and law enforcement agencies to navigate. The IC3 database is a powerful tool in helping investigators across the country spot patterns and disrupt criminal schemes.

And even in some cases, law enforcement is given-- even successful in seizing money from these criminals and getting them back to their victims. Had it happen in my own district just recently. So with that, I acknowledge that setting up the systems and processes for reporting this information, it's not gonna be easy for financial institutions, but I do believe that it is a critical tool to help address the epidemic of scams that is plaguing our country. Assembly Member, I would love to be added on as a co-author to your bill and appreciate the efforts that you have taken with the banking industry to make the bill workable as it moves forward.

I do also believe that anything we can do to help assist in what kind of reaction--you can't predict it--the consumer's gonna have, the customer for the bank, whatever we can do to help work with them and be a partner to them and how we inform and also to clarify that it is a transaction and not the actual account. With that, author, would you like to close?

Thank you. I think that was a great close. I respectfully ask for an aye vote.

Thank you so very much. We do have-- or we have already established a quorum, and with that, Assistant, Committee Assistant, would you please call roll? Oh, I guess we need a motion. Senator-- who are you? Strickland. Senator Strickland has made the motion. So, Committee Assistant, will you call roll?

Assembly Bill 871: motion is do pass, but first amend and re-refer to the Committee on Judiciary. [Roll call]. We have four.

The bill has four and so we will hold it on call for absent members. We will also entertain a motion. We have four items on the consent calendar, AB 1278, Harabedian, AB 2028, Chen, AB 2425, Chen, and AB 2795, committee on banking and finance as well. So do I have a motion? Senator Strickland moves on the consent calendar. Committee assistant, please call roll.

[Roll Call]

And if we can move back to item one, AB 801 Bonta, and I need a motion for that as well on AB 801 Bonta. We have a motion. We have a motion from Senator Hurtado. Committee assistant, please call roll.

Assembly bill 801. Motion is do passed and we refer to the committee on judiciary. Senator Grayson? [Roll Call]

The bill has two votes. We'll put it on call for absent members. We are moving to item number four, AB 1842, Harabedian. And you can present when you are ready. Welcome to the podium, sir.

Thank you, mister chair. Thank you, committee members, for having me today. Mister chair, let me just start by thanking you personally and your staff for all the work on this bill. I know that, there was extensive negotiation and collaboration, not only from you, but from the opposition. I'd like to thank them as well for the continued conversations really over the last year and a half on this concept in this bill.

AB 1842 establishes a clear statewide framework to help homeowners who whose homes have become uninhabitable following a major disaster, access mortgage forbearance and avoid foreclosure while they recover and rebuild. The bill provides a streamlined process for obtaining temporary mortgage relief while ensuring borrowers remain protected from unnecessary penalties and harmful servicing practices.

This is really A Building block off of AB 238, which came through this committee last year, which was the forbearance bill that is currently in place for Palisades and Eaton fire victims. And really, we're trying to pay it forward. And in negotiating and implementing that bill, we were really doing it after, obviously, the disaster happened, which isn't ideal.

And so we're trying to set up a framework that works for everyone, homeowners that need it, the banks and servicers that would be implementing it, and the whole state. And so after extensive negotiations and opposition conversations with the opposition coalition facilitated by you, mister chair, and I I just wanna thank you again for everything and your committee staff. We'll be taking the following amendments. We are going to limit the bills trigger to federally declared major disasters. We are going to clarify the post forbearance repayment options.

We will remove the bar consent requirement from loan servicing transfers. We're going to clarify the provisions regarding cascading payment processing, and we're gonna remove the DFPI reporting requirements. And we wouldn't have gotten here without committee staff and the chair, but also the opposition for just being so open to discuss the bill over a long period of time. So with that, happy to take questions and obviously would love an aye vote at the proper time. So thank you.

Thank you so very much. And I don't believe we have registered lead witnesses, but anybody in support can step up to the microphone. Name who you represent and position, please.

Bless you, chair and members. Andrew Antwie here today on behalf of Los Angeles Mayor Karen Bass in support.

Good afternoon. Panarea Abdis on behalf of the California Community Foundation in support.

Good afternoon. Jessica Hay with AFSCME California in support.

Charles Contrebecki, Internet Stone Advocacy on behalf of Consumer Watchdog in support.

Any other members in support? Seeing none. Lead witnesses in opposition. I don't believe we have do we have

lead witnesses in opposition? No. Or just add ons? We're removing. I'm sorry? We're removing opposition.

Okay. Do you want to speak to it or do you wanna just Really quick. Can I just Yes?

Right? Thank you, mister chair and members. My name is Vanessa Lugo, and I'm here on behalf of the California Bankers Association. Based on the author accepting the committee amendments addressed in the analysis, we would like to respectfully remove our opposition to the bill. Thank you to the chair, author, and committee staff for showing leadership in addressing our concerns.

Thank you.

Indira McDonald on behalf of the California Mortgage Bankers Association. Here also to remove opposition, want to thank the chair and the author for all the work on this bill and taking the amendments. Thank you.

Thank you so much for remaining witnesses' name and who you represent in position.

Danny Kendall Kaiser here on behalf of the California Low Income Consumer Coalition in support.

Rob Wilson, California's Credit Union is removing our opposition. Thank you.

Gonzales on behalf of California's Business Roundtable, also removing our opposition. Thank you for the author.

Chris Anderson, California Chamber of Commerce removing opposition. Appreciate the work of the author and the chair. Thank you.

Thank you. Any other members of public like to add on? Seeing none, we will move it, bring it back to the committee for committee comments. Vice Chair Niilo.

VICE CHAIR Thank you, Mr. Chair. What a kumbaya moment. I wanna compliment the chair for working as diligently as as he did on this. I'm not quite ready on the next item but we'll talk about that then.

But it's this is the way processes like this should work. Getting to yes as a book was once written about this. So I'll be supporting this. Thank you.

Any other committee members? Questions of staff? Seeing none, Aye, I just wanna say thank you to the author, and your staff, for your tremendous work, your passion, your energy, It all it just exudes from you. It just comes out in your effort. And then I also wanna thank committee staff for just enduring and working incredibly hard with your staff as well as industry, for staying there at the table.

And, that's how we were able to get to a place where we could land. And with that, author, would you like to close and also just reaffirm you are taking committee amendments?

Yes. We are. Yes. Thank you, mister chair. We will be taking committee amendments.

Thank you again to you, mister Burdick, and to my staff, and and I appreciate the comments and the support. So respectfully ask for an aye vote.

Thank you so very much. Do I have a motion?

So moved.

Alright. We have a motion. Committee assistant, please call roll.

Assembly bill 1842. Motion is do passed, but first amend and re refer to the committee on judiciary. Senator Grayson?

Grayson, aye. Nilo?

Aye.

Aye.

Nilo, aye. Cervantes Hurtado Reyes Richardson Strickland? Aye. Strickland, aye.

The bill has three, so we will put it on call for absent members. We will move to your next bill, item five, AB 1847. Assembly member, you may present.

Thank you again, mister chair. And, again, thank you to your staff and you for your continued work and collaboration on this bill. AB 1847 extends the mortgage forbearance relief for survivors of the Eden Palisades fire. And what we're seeing is a lot of folks still displace less than 1% of homeowners in each of the fires have rebuilt, and this bill really just recognizes the extended timelines for recovery, unfortunately.

And, what what we've done here again is just extensive conversations and, hopefully, to mister vice chair, this might be helpful.

We we are going to be taking amendments here today, but then working on future amendments, which I've agreed to, and, Opposition Coalition has agreed to, and we're just really waiting to put pen to paper on a few of them. But what we will be, taking today are we're reducing the maximum extension from thirty six months to twenty four months. So it would be another year up to of forbearance. So a total of two years.

And really what that just means is AB 238 was one year.

This would be an additional year. And we're also requiring borrowers who are seeking the extension to attest under penalty of perjury that the property remains uninhabitable. That wasn't part of the first bill. There's gonna be more stringent requirements here.

And to that point, we've also committed to working with the Senate Banking and Senate Judiciary committees to address the remaining issue of whether in circumstances where the investor of a loan requires servicers or themselves, if it's a portfolio loan to obtain documentation in writing servicers and obviously, a portfolio owner of a mortgage would be able to obtain that documentation from bars.

And so we we wanna make sure that there's going to be conversations that need to be had when this extension is being contemplated. I understand that issue remains unresolved technically. And because of that, I I I understand the opposition coalition, I think technically remains in opposition, but has committed to continuing to work with us to move this bill forward, which I appreciate. Wanna thank the sponsors of the bill including mayor Karen Bass and supervisor Catherine Barter.

And I on behalf of the city of Los Angeles is Andrew Antwee, who is here, who I believe would like to say a few words.

So at the appropriate time, I would respectfully ask for an aye vote. Thank you.

Thank you so very much, Assemblymember. To the first witness, two minutes.

Thank you, Mr. Chair, members, and and thanks to the author for working on this bill and for the landmark measure AB 238, which we supported.

Mayor Bass, on behalf of the city of Los Angeles, working with a network of survivors who lost their homes during the Pacific Palisades and has been providing real time, support and feedback for, beta bills, in Sacramento that hope to offer relief, for folks that are continuing to struggle through, the crisis of rebuilding and having relief to put the pieces of their lives back together. We think, AB 1847, Harabedian, is part of that package, and we support this measure.

I won't go through our entire prepared remarks here, but I'll say that twenty twenty five January, wildfires devastated neighborhoods across Los Angeles, of course, including the Palisades.

Thousands of families were displaced from their homes and they still cannot safe safely occupy those edifices if they're still standing. And for many survivors, recovery was not something that was constrained to twelve months.

And so the relief that this measure offers for folks who are trying to navigate, that, arduous process to, come back to some semblance of normalcy, some predictability about the resources that they need in order to work on rebuilding edifices and rebuilding their lives is very important policy, one that this committee, I believe, will further if they advance this measure.

We thank the author for his flexibility in continuing to negotiate this, but it is real life, real consequence assistance that property owners need, in the most populous city in the state of California and other areas that have been damaged as well. For those reasons, we support this measure.

Thank you so very much. Additional witnesses in the public that would like to add on, name who you're representing in position.

Good afternoon. Jessica Hay with AFSPE California in support.

Good afternoon. Andy Levenbaum, County Of Los Angeles in strong support.

Dani Canda Cosser on behalf of the California Low Income Consumer Coalition in support.

Panorea Avdis on behalf of the California Community Foundation in support.

Charles Contrebecki, Internstone Advocacy on behalf of Consumer Watchdog in support.

Good afternoon. Marissa Hagerman with Traton Price Consulting registering support on behalf of Center for Responsible Lending. We are a late add on, but we appreciate the author. Thank you.

Good afternoon, mister chairman and members. Robert Harrell, executive director of Consumer Federation of California in support.

Thank you so very much. Any other members of the public like to add on seeing no one moving forward? Members in opposition or lead witnesses in opposition, if you would come forward and you will have two minutes each. You may begin when you are ready.

Mr. Chair and members, Indira McDonald on behalf of the California Mortgage Bankers Association. In opposition to the current version of the bill in print, however, we appreciate the amendments accepted in committee today, which do help to address our opposition and thank the author and chair and committee staff for the positive dialogue and for continuing the conversation to find a solution on outstanding issues.

Moving forward, we hope to address remaining implementation concerns to allow mortgage servicers to comply with the terms of their servicing contracts with with institutional investors such as Fannie Mae and Freddie Mac because any offer of forbearance beyond twelve months must be approved by the institutional investor who owns the loan, we seek additional language to allow the servicer some flexibility to seek supporting documents from the borrower regarding financial hardship and their rebuilding efforts. Only if that information is required by the institution to grant approval on the forbearance extension request. Thank you again to the author and your willingness to work on these issues as we move forward.

My name is Vanessa Lugo and I'm here on behalf of the California Bankers Association. We appreciate the chair and the author for their commit continued engagement and willingness to work with stakeholders to address the concerns we have raised regarding AB 1847. Based on the committee amendments outlined in the analysis, we recognize and appreciate the good faith effort to work toward a compromise and framework for which we discussed in a meeting yesterday.

Thanks, witness.

We look forward to continuing those conversations and finalizing the details before the bill is heard in Senate Judiciary Committee. Unfortunately, we remain opposed today, but we look forward to finalizing the details of our discussion to reach a compromise that allows us to remove that opposition. Thank you again to the chair, author, and committee staff to for their collaboration and commitment to working through these issues.

Thank you so very much for your testimony. Those in the public wish to add on an opposition, name who you're representing in position.

Thank you.

Mike Belote for the California Mortgage Association. Currently opposed. Look forward to working on it.

Thank you.

Chris Anderson, California Chamber of Commerce in opposition. But align our comments with, those of the witnesses, and appreciate the work of the author. Thank you. Thank you.

Rob Wilson, California's Credit Unions currently opposed the bill, but look forward to removing that opposition. Thank you.

Horacio Gonzalez on behalf of California's Business Roundtable and the California Business Properties Association. Respectfully opposed, but looking forward to working with the author to land the plane. Thank you.

Thank you so very much. Any additional members of the public that would like to add on? Seeing none. As we move it back to committee, I know there'll be some comments to be made. I am I struggle to come up with the right words to articulate, to appropriately articulate how to address the pains that have come with such terrific loss for those that were victims of the wildfire.

And if only we could just point fig two fingers and say you're liable, you're liable, you're liable, or you need to bear, or you need to it's that would produce very little for the actual victim. So I I just wanna say I commend the author here for the passion you have for your constituents and for all those that went through that tremendous loss. They lost more than a structure. They lost life. So,

I I I appreciate what you're doing. It it means a lot. And I wanna express the same appreciation to industry who, by all rights, have all of their policies. They have everything all lined up. They know what they're supposed to do.

And for them to stretch the way they've been able to stretch shows that they share your passion. And that really when it comes down to it at the end of the day, we all just wanna help each other.

And so with that, to the author and your staff, thank you so very much for stretching like you have to really pay attention to not just the crisis that is at hand for those that went through loss, but also trying your absolute best to understand the the consequences of this bill and what it may have on industry and how they have to handle their daily business and be accountable as good stewards.

And so thank you to the industry as well for going above and beyond and having conversations even all the way up to the last minute. And so I really greatly appreciate that as well.

Having said that, a lot of work has gone into this. More work to be done in the next committee. Thank you for committing to amendments here and also committing to, the amendments to come. With that, I'd like to open it up to the committee. Vice chair Needle.

Thank you, mister chair. I guess it's not quite kumbaya yet. But you, mister chair, really expressed the issue. Well, I have had a house fire just about a complete loss by the time they got tearing everything down. The and and I will tell you it is a emotional and it's an emotional experience that is very difficult to explain and and fully understand unless it happens to you.

I remember standing up on the street and watching the flames come out of the roof of my house and saying to myself, this is something that happens to other people not me. But it did. So, I certainly I am empathetic. And, again really appreciate the work of the author and the, and the chair in getting to yes. And that by the way is the title of a book.

You may or may not be familiar with it written by a couple of I think Harvard professors about a process called interest based negotiation which is really what you folks are doing. And that's what gets to solutions on difficult questions legislatively. So looks like we'll still be working on getting to yes. I get another bite at this because I'm on the Judiciary Committee. So I'm gonna lay off and continue to watch what you're doing.

And I'll see you at the Judiciary Committee. I don't know if it's next week or the week after, but it's one of our marathon sessions. Perhaps I'll see you at midnight. Who knows?

I hear the optimism. Any other members of Senator Richardson, you are recognized.

Thank you, mister chair. For those of you who, you know, sometimes people look at us and they, you know, they think legislators, you know, we're just here, the chicken dinners, you know, all of that. And they forget that we're real people who care about what we do is which is why we're here. And frankly, I think you just got one of the highest compliments you'll probably have maybe in your career from our chairman.

Given his background and given his history, which I won't say that's for him to say, to the public.

But, let me say I concur with the chair's comments. A lot of us have experiences issues that we face in our district, but just in my, last couple weeks here between insurance and banking, I mean, man, you've been you've been hitting at us, with these bills. So I think it really speaks to your commitment to understand the problem, to try to figure out ways, to be helpful. And, you know, for that, we always, you have our, certainly, our respect.

Regarding the bill, it'S, 1 more, compliment I would like to extend, though, to the chairman.

As a member, when we, see bills and there might be issues and problems, it's easy just to kind of pass the buck and, you know, we struggle vote yay or nay. But the fact, mister chairman, that you took the time to work with the author, work with the industry to find something that we could work with as opposed to, you know, you know, another bill maybe that, you know, just really didn't quite hit the mark.

So, cahoots to you and your staff for working so hard to get us to the point that we could agree, because that doesn't happen all the time. The last thing I would just say is what I was particularly glad that I saw in what was agreed to was looking at the twenty four months versus thirty six.

Thirty six is a lot, because then for a person to have to catch back up at some point, that's a long time to spend, you know, either having a reduced payment or not a payment.

And then all of a sudden now three three years later, you're kicking in. It almost, it's it can be on the flip side hard for that person to now be able to step into this new payment. Even though the forbearance is normally deferred, and added on to their actual mortgage, it's still, you know, that shock of getting back into it. But I think, you know, what your objectives were were certainly commendable. I'm gonna be supporting the bill because I do like, the reducing of the time.

I'm still, I think there's work to do with the industry, and I hope that you'll take them up on it and be serious and and try to make this bill even better than what you've been successful so far. So with that, I move the bill.

Thank you very much. We do have a motion to move bill. Any other members of the committee wanna speak, ask questions? Seeing none, to the author, would you like to close?

Yes. Thank you, mister chair. It's been really a a privilege working with you and your staff, and and I appreciate all the all the comments, all the efforts, and and really wouldn't have been done without you and mister Burdick, and thank my staff as well, and thank the opposition again. I think that I think we're here. I think but for time, and, you know, having a meeting that was a little bit earlier, all these amendments would be done.

But I'm very, very hopeful and and very confident that in the next committee, this this will be a done deal and we will be at Kumbaya. And so appreciate everything this committee has done and and and we won't let you down.

And so with that, I will respectfully ask for an aye vote.

Thank you so very much. You and your staff are to be commended. With that, we do have a motion from Senator Richardson, committee assistant. Please call roll.

Assembly bill 1847. Motion is do passed, but first amendment re refer to the committee on judiciary. Senator Grayson?

Grayson, aye. Nilo?

Aye.

Not voting.

Cervantes, Hurtado? Reyes? Richardson? Aye. Richardson, aye.

Strickland?

Not voting.

We have two. Gabriel has

two votes. We will put it on call for remaining absent members. Moving on to our final bill of the day, item number eight AB 2116. Assembly member, Shavo, you are welcome to the podium.

Thank you. You may start when you are ready.

Thank you. Thank you. Good to see Senator Strickland multiple times in multiple committees today. So thank you so much. Really appreciate the opportunity to present AB 2116, as especially I know folks on this committee and the Chair knows that small businesses are really the backbone of our economy, creating jobs, driving innovation, sustaining our communities.

And when they seek capital to grow or survive difficult times, they deserve a marketplace that's fair, transparent, and accountable. Before coming to the legislature, I also was a small business owner. I grew up in a family with a small business where my dad and mom worked seven days a week.

And so I really understand how much time and risk and capital it takes to keep a business afloat, especially in uncertain economic times and when small businesses feel the pressure first and hardest. AB 2016 does not eliminate access to capital, and it does not ban merchant cash advances.

What it does is allows businesses to make informed decisions about the rates at which they're expected to pay and if they decide to use a merchant cash advance product. It has prohibitions against confessions of judgment and restrictive nondisclosure agreements or NDAs.

And it prevents providers and brokers from garnishing bank accounts, codifying regulations related to unfair, deceptive, and abusive practices into the CFL. So and just to be clear, this bill, again, does not restrict capital. It ensures that access to capital is fair and transparent and responsible.

At its core, AB 2116 is about accountability and oversight under the Department of Financial Protection and Innovation or DFPI. This measure has had bipartisan support in the Assembly policy committees, and I have been openly engaging with opposition to address many, many of their concerns and amendments, which are highlighted in the great committee analysis.

Thank you so much for that. And I want to thank the committee and the Chair for all of your hard work with our sponsors in the industry on the bill. We are continuing conversations about a few outstanding things, and I, you know, think we're going to get to a good place.

My staff has been incredibly engaged and hardworking on this bill. And today I also have witnesses, Louis Peck Caditz from the Responsible Business Lending Coalition and Heidi Pickman with CAMEO representing small businesses throughout California to provide testimony on behalf of the bill.

Thank you so very much. If the lead witnesses will come to the center table here. You have two minutes each, and you can choose which one goes first. And you may begin when you are ready.

Great. Honorable Members, my name is Louis Caditz-Peck. I'm the Executive Director of the Responsible Business Lending Coalition. We represent over a thousand organizations nationwide that are small business groups, for profit lenders to small businesses, and also nonprofits that work with small businesses. And we respectfully request your aye vote.

To summarize why, I'm going to quote a newspaper story from the trade press of the financing companies that would be covered by this bill explaining what it does. Here's the kicker, the newspaper wrote. If this bill becomes law, providers and brokers of merchant cash advances, factoring, and lease financing will have to register with the FPI.

That's right. No more flying under the radar, is what the trade press said. So what's flying under the radar today? A fast growing industry of financing companies and brokers selling what the Federal Reserve calls higher cost, less transparent credit products.

The legislature has passed six bills establishing small business financial protections. Most of them earning the votes of everyone on the committee. But those laws are not being enforced well today because these non loans can evade them and fly under the radar.

Lenders and brokers of small business loans are required to get a license under the CFL. These other products that consider themselves not to be loans are not required to get that license. And so that's how they're able to fly under the radar.

And if they mistreat a small business owner, the state doesn't really have the ability to effectively prevent that and and know that it's happening. So creating a level playing field and closing that regulatory gap is good for small businesses. It's good for the economy.

And it's good for financing companies that wanna be on a level playing field and wanna see the industry cleaned up. I'd like to thank the committee for voting forward earlier versions of this bill three times. And thank Assemblywoman Schiavo for amazing leadership on this bill and her deep passion for small businesses which she comes to personally. And thank you for your time.

Thank you so very much. Right on two minutes. Next witness.

Chair Grayson, Vice Chair Niello, and Members of the Committee. I'm Heidi Pickman with CAMEO Network, an association of more than 400 business coaching organizations and community lenders, and a proud sponsor of AB 2116.

We've been here several times before, and we wanna thank this committee and the Chair's leadership around responsible small business lending. This past year, when we have met with our business coaches and lenders and access to capital becomes a topic, they bring up merchant cash, not me.

They bring up merchant cash advances unprompted. Examples are becoming all too common. The time for this bill is now. From one lender based in SoCal who said, unfortunately, MCAs are so prevalent. We have many borrowers that have fallen prey to MCAs.

Including a recent 180,000 loan we issued to refinance three MCAs that are bleeding a Thai restaurant on Hollywood Boulevard of more than $50,000 per month. We could easily find you 10 plus fairly recent examples of other MCA refinances.

Another lender told me they refinanced two Shopify loans for a retailer in North Cal's East Bay totaling approximately 55,000. Original payments were over 7,000 per month. The refinancing saved them almost that entire amount, $6,500.

So I think it was like a 75, went from $7,000 to $750, $7,000 to $750 per month, which greatly obviously improves cash flow. From a business coach, a recycling company located in Lake Forest took out a 35,000 MCA loan with a 238% rate and a monthly payment of 10,000 plus.

They helped that business refinance for 2,500 per month for seven years for a larger amount to cover the loan and provide some working capital. The predatory behavior has become so bad that we here, we understand that former industry opposition to this bill have arrived at a support position. Thank you, and I respectfully ask for your aye vote.

Wonderful. With that, any members of the public that would like to add on in support? Name, who you're representing, and position.

Good afternoon, Mr. Chair and Members. Robert Herrell, Executive Director of the Consumer Federation of California, in support of the bill and in coalition with our small business allies. Thank you.

Good afternoon, Chair and Members. Rafael Aguilera with the Greenlining Institute in strong support. Thanks.

Good afternoon, Chair and Members. Rachel Mueller on behalf of the California Coalition for Community Investment in strong support. Thank you so much.

Good afternoon. Dani Kando-Kaiser here on behalf of proud co-sponsors, the California Low Income Consumer Coalition.

Matty Hyatt, Capital Business Alliance, changing from opposed to support. We had some concerns that small business advisors might be swept into the definitions, but we met with the committee staff. And after speaking with Ravi, we're satisfied with change to support.

Good afternoon, Chair and Members. Marissa Hagerman with TrattenPrice Consulting registering strong support on behalf of Center for Responsible Lending. Thank you.

Hi. Good afternoon, Chair and Members. Suli Kenyatta with Small Business Majority, co-sponsor of AB 2116 registering very strong support.

Mr. Chair and Members. Kris Rosa on behalf of two commercial financing providers, Rapid Finance and Kapitus. Just wanted to let you know that we are moving from support if amended to full support. So thank you very much for your work and for the amendments. Thank you.

Thank you so very much. Any other members of the public like to add on in support? Seeing none. Any members in opposition? Lead opposition, please come forward. Two minutes. And welcome to the desk. And you may begin when you are ready.

Thank you, Chair Grayson, Vice Chair Niello, and Members of the Committee. Thank you for this opportunity to testify. My name is Carolyn Veal-Hunter of Sloat Higgins Jensen and Associates on behalf of the Revenue Based Finance Coalition, an organization of responsible providers of revenue based financing to small and medium sized businesses.

Our mission is to promote industry best practices and practical and effective legislation that ensures businesses have access to fair and ethical services and capital. First, I want to thank the committee and the author.

The proposed amendments address many of the concerns we've raised in our June 10 letter. We appreciate the progress and believe this bill is much closer to a workable framework. I will focus on two remaining issues, however. First, section 22163 with respect to disclosure requirements. We strongly support clear transparent disclosures.

However, this section gives the commission broad authority to require rates and charges to be stated in any manner deemed necessary. This provision introduces uncertainty, potential duplication of conflict with existing disclosure regulations, and operational risk for providers trying to comply in good faith.

Our request is simple. Clarify that this section aligns with existing commercial disclosure law or exclude it from applying to commercial financing. Second, the unconscionability provision. This bill provides that any transaction found unconscionable is automatically a violation of the CFL.

We agree bad actors should be held accountable, but unconscionability is a subjective after the fact standard that creates significant uncertainty and even for responsible providers acting in good faith.

We ask for clear guardrails so this provision targets only truly abusive conduct without chilling access to capital. In closing, we appreciate the committee's work and the progress made. With these targeted fixes, we believe this bill can protect small businesses while preserving access to financing. Thank you.

Thank you so very much. Any other members of the public that would like to add on in opposition? Seeing no one moving. Alright. We will bring it to committee for Committee Members' questions and comments. Senator Richardson, you are recognized.

Thank you, Mr. Chairman. The author, do you have any response to the comments that were made of the remaining issues from the opposition? Wanted to give you an opportunity.

Thank you. Yeah. No. We had a very productive meeting yesterday with some clients and lenders, and I think that there's a lot of agreement in some of the concerns that were raised. Not total agreement.

One of the things they wanna be exempted from has to do with the transparency that we're trying to get in this bill. And so it would kind of undermine the whole purpose of it. But otherwise, you know, I think there's other ways, other areas in which we can get to more agreement on.

So since you're on the tail end of the legislative process

It's double referred. It's double referred. So we're still going to Judiciary. So we have a little bit more time. Yeah. So that's, we're working in between.

Okay. Hopefully you guys can come to agreement on those remaining issues. And with that, I'll move the bill.

Thank you. So we have a motion on the bill. Vice Chair Niello.

Thank you, Mr. Chair. I had same question as Senator Richardson. This is very similar to a bill by my good friend and former Senator Glazer of two years ago. And he brought me along on that and I voted in favor of his bill. But it was held up I believe in Appropriations. So how is this different so that that wouldn't happen?

Well, I mean, we are building a very big coalition. We have bipartisan support for this. And I think that now is a little bit of a different moment because so many of the other bills before us, including Glazer's bill, around trust in... What is it called? Trust truth in lending bill. You know, some of these have now been in place.

And the biggest challenge that we have is that we're, it's very, it's impossible. There's been, like, zero enforcement. Right? Because we don't know who they are. There's no real structure for DFPI to actually hold people accountable.

So, you know, I think that there is much more of a case now today for why this bill is important and will make a difference to actually allow us to enforce the laws that we've already passed, that this committee has already passed to make sure that we're protecting small businesses and unfair lending.

So I think, you know, that hopefully changes the moment, and we've also changed changed it over to the CFL under DFPI and so we're hoping that some of these changes will make a difference.

Again, I'm on the Judiciary Committee. So I'll see this bill again and encourage you to work with the concerns, particularly with regard to the subjective nature that was pointed out. So I won't oppose the bill, but I will lay off and come to a final decision in Judiciary.

Okay. We're gonna be eternally optimistic here. We're gonna be eternally optimistic. You know? It's fourth time's the charm.

Alright. With optimism. Any other comments from Committee Members or questions? Seeing none. I do wanna say that this is the fourth bill since 2023 on this topic, and folks on all sides have come really a long way. I applaud the Assembly Member and the bill sponsors for finding so much agreement with the industry.

And but that said, I think there are some remaining items that deserve continued work, as you already mentioned, author. It is double referred. It is going to Judic from here. So I know that this bill has another stop in that committee after which it will be heard in Approps, a committee that I happen to serve on as well.

So the industry made a few points today about some additional items. Thank you very much. And issues on that. So such as the bill's reference to a civil code section that that really needs to be ironed out. So I encourage continued dialogue.

And I know that the committee consultant stands ready to work with you on any of these outstanding issues. So thank you very much already for your work ability and for moving forward. With that, we do have a motion from Senator Richardson. Committee Assistant, please call roll.

Assembly Bill 2116, motion is do pass but first amendment re-refer to the Committee on Judiciary. [Roll Call]

That bill has four votes. We'll put it on call for absent Members. And I'm going to turn the gavel over to our Vice Chair.

The chair must go on to other duties and he has completely cast caution to the wind and left me in charge. We will do we have everybody here who has not voted? Okay. So we will, we'll go through the role starting with consent. Okay.

Consent calendar. Chair voting, aye. Senator Cervantes? Aye. Cervantes, Aye. Reyes Richardson? Aye. Richardson, aye.

That, excuse me, consent will remain on call. Now, item number one, AB 801.

Assembly bill 801, motion is do passed and we refer to the committee on judiciary. Chair voting aye. Senator Cervantes? Aye. Aye. Cervantes, aye. Reyes Richardson? Aye. Richardson, aye. That

Bill is still on call. Now, item number two, AB 871.

Assembly bill 871, motion is do passed but first amendment re referred to the committee on judiciary. Chair voting aye. Senator Cervantes? Aye. Cervantes, aye. Reyes Richardson? Aye. Richardson, aye.

And a six. Okay. 60? Yes. Is that 6 six that bill is also still on call.

I now item number three, AB 1278. Oh, excuse me. That's a consent bill. Item four, AB 1842.

Assembly Bill 1842. Motion is do passed, but first amendment re refer to the committee on judiciary. Chair voting aye. Senator Cervantes? Aye. Cervantes, aye. Hurtado Reyes Richardson? Aye. Richardson, aye. We now have five.

So we're waiting for two people to come back. Okay. So moving now to item number five, AB 1847.

Assembly bill 1847. Motion is do passed, but first amendment re referred to the committee on judiciary. Chair voting aye. Senator Cervantes? Aye. Cervantes, aye. Hurtado Reyes? And that's it.

So that bill, will remain on call as will number four. I don't think I said that after we took that last vote. Now moving on to number item number eight, AB 2116.

Assembly bill 2116. Motion is do passed, but first amendment re refer to the committee on judiciary. Chair voting aye. Senator Hurtado Reyes?

That's it. That's it. That bill will remain on call. Now, we are waiting for two members to return for to make up the rest of the votes. Anywhere that they are, if they get here as quickly as possible, We sitting here would very much appreciate that.

Okay. I think we now have a full compliment. So, we will go through the rule again. Start again with the consent items. Please call the roll.

Consent calendar. Chair voting aye. Senator Reyes? Aye. Reyes, aye. That is seven. Seven.

That is 7-0. That, the consent items are out now. Item number one, AB 801.

Assembly bill 801. Motion is do passed but we refer to the committee on judiciary. Chair voting aye. Senator Reyes? Aye. Reyes, aye. Five to two.

That is, five to two. That bill is out. Now, item number two, AB 871.

Assembly bill 871. Motion is due to have, but first amend and we refer to committee on judiciary. Chair voting aye. Senator Reyes? Aye. Reyes, aye.

That's seven zero. That bill is out. And now, item number four, AB 1842.

Assembly bill 1842. Motion is do passed, but first amend and we refer to the committee on judiciary. Senator Grayson voting aye. Senator Hurtado? Aye. Hurtado, aye. Reyes? Aye. Reyes, aye. We have seven. Seven zero. Correct.

That's seven zero. That bill is out. Now, item number five, AB 1847.

Assembly Bill 1847, motion is do passed but first amend and we refer to the committee on judiciary, chair voting aye. Assembly or I'm sorry. Senator Hurtado? Aye. Hurtado, aye. Senator Reyes? Aye. Reyes, aye. 50. Oh. No. No. 50. Right. 550.

That's, 50. That bill is out. And now, going to item eight. The last item that is AB 2116.

Assembly bill 2116. Motion is do passed, but first amend and re referred to the committee on judiciary. Chair voting, aye. Senator Hurtado? Aye. Hurtado, aye. Reyes? Aye. Reyes, aye. We have six.

That's, 60. That bill is out. That completes our items. Our work is done here. This committee meeting is adjourned.