ISHE THE SENATE BANKING ON
FINANCIAL INSTITUTIONS WILL COME
TO ORDER GOOD AFTERNOON THE
SENATE CONTINUES TO WELCOME THE
PUBLIC IN PERSON AND VIA
TELECONFERENCE SERVICES FOR
INDIVIDUALS WISHING TO PROVIDE
PUBLIC COMMENT COULD PUBLIC
COMMENT TODAY'S PARTICIPANT
NUMBER IS. 877-226-8216 AND THE
ACCESS CODE IS SIX TWO ONE SEVEN
ONE SIX ONE WE ARE HOLDING OUR
COMMITTEE HEARINGS HERE IN THE-
STREET BUILDING. AND WE'RE
ASKING ALL COMMITTEE MEMBERS TO
BE PRESENT IN ROOM TWENTY ONE
HUNDRED SO WE CAN ESTABLISH OUR
QUORUM WHICH WE'VE JUST HAVE TO
DE WE DO HAVE FOR BILLS ON THE
AGENDA BUT BEFORE WE HEAR
PRESENTATION ON THE BILLS- I'D
LIKE TO ESTABLISH QUORUM AMIT
CAN WE PLEASE CALL THE ROLL.
SENATOR LIMÓN HERE LIMÓN HERE
MEELO HERE HERE HERE BRADFORD
BRADFORD HERE CABALLERO.
AVAILABLE HERE MAN. MAN HERE
WHEN. PORTANTINO. R. EIGHT FIVE
WE DO WE HAVE ESTABLISH QUORUM
AT OUR FIRST S. SINCE THIS IS
OUR FIRST BILL HEARING OF THE
NEW SESSION WE WILL START BY
ADOPTING THE COMMITTEE RULES DO
WE HAVE A MOTION TO ADOPT THE
RULES WE HAVE A MOTION BY
SENATOR BRADFORD CAN WE PLEASE
CALL THE ROLL ON THE RULES.
SENATOR LIMÓN I THE MOMENT I
KNEW LOW HI NEIL I BRADFORD
BRADFORD HI CABALLERO. AYE MAN
MAN I WENT. PORTANTINO I HAVE.
IRATE WE WILL. LEAVE THAT OPEN
BUT THOSE RULES HAVE BEEN
ADOPTED AND NOW WE WILL MOVE TO
THE CONSENT CALENDAR WE HAVE TWO
BILLS IN THE CONSENT CALENDAR SB
FOUR FOUR SIX- BY WILK AND ALSO
S. FOUR EIGHT FOUR BY NEWMAN. DO
WE HAVE A MOTION FOR CONSENT WE
HAVE A MOTIONS BEEN MADE FOR THE
KID TO APPROVE THE CAN ADOPT THE
CONSENT CALENDAR AND THAT'S BEEN
MADE BY SENATOR BRADFORD. CAN WE
PLEASE CALL THE ROLL FOR THE
CONSENT. CENTER LIMÓN I LIMON I
HELLO HI ZERO I BRADFORD.
BRADFORD AYE CARREIRO. I MAN MAN
I WENT. PORTANTINO WE HAVE.
GREAT WE WILL GO AHEAD AND LEAVE
THE ROLE OPEN AND NOW- WE DO
HAVE OUR FIRST AUTHOR HERE WE'RE
GOING TO WALK THEM SENATOR
GLAZER WHO WILL BE PRESENTING ON
SB. THREE THREE. GREAT THANK YOU
CHAIR. GOOD AFTERNOON EVERYONE.
FIRST LET ME- THANK THAT THE
STAFF FOR DOING A TERRIFIC
ANALYSIS ON THE BILL- SB THIRTY
THREE TODAY- IN TWO THOUSAND
EIGHTEEN MEMBERS THE LEGISLATURE
PASSED SB TWELVE THIRTY FIVE
BILL OF MINE TO. REQUIRE
FINANCIAL PROVIDERS TO GIVE
SMALL BUSINESS TRUTH IN LENDING
DISCLOSURES WHICH INCLUDED
EXPRESSING TOTAL COST OF
FINANCING AT AN ANNUALIZED RATE
. RECOGNIZING THEIR EXPERTISE
THE DEPARTMENT OF FINANCIAL
PROTECTION INNOVATION WAS GIVEN
THE AUTHORITIES DECIDE THE EXACT
METRIC FINANCIAL PROVIDERS
WOULD. WOULD USE. SO THEY WENT
THROUGH THEIR REGULATION PROCESS
THE RULE MAKING PROCESS THEY
HELD THREE INFORMAL
CONSULTATIONS. THEY ALSO HELD
SIX FORMAL COMMENT PERIODS AND
THE DEPARTMENT AT THE CONCLUSION
OF THAT SHOWS THE TIME TESTED
ANNUAL PERCENTAGE RATE APR. AND
RELEASED GUIDELINES ON HOW
FINANCIAL PROVIDERS COULD COMPLY
WITH THE DISCLOSURE. AT THOSE
GUIDELINES WERE FORTY EIGHT
DETAILED PAGES EXACTLY HOW TO
FOLLOW THE LAW. WE KNOW FROM THE
FEDERAL RESERVE DID RESEARCH- ON
CONSUMER. FINANCIAL LITERACY AND
THE LIKE THEY FOUND- IN THEIR
WORK THAT APR- IT IS SOMETHING
THAT THE CONSUMERS ARE VERY
FAMILIAR WITH. AND IT PROVIDES
THEM WITH CRUCIAL INFORMATION
INTENT IN A DIGESTIBLE MATTER
EXACTLY THE REASON WHY- I THINK
THE DEPARTMENT AND I. AM VERY
SUPPORTIVE OF THE REGULATIONS
THEY DID CREATE NOW SB THIRTY
THREE REPEALS THE SUNSET THAT
WAS INCORPORATED INTO SB TWELVE
THIRTY FIVE. ALLOWING FOR THE
CONTINUED DISCLOSURE OF TOTAL
COST OF FINANCING TO BE
EXPRESSED AS AN APR. THIS BILL
WILL ENSURE THAT SMALL BUSINESS
OWNERS TO BORROW MONEY CONTINUE
TO BENEFIT FROM THE PROTECTIONS
THE LEGISLATURE ADOPTED IN TWO
THOUSAND EIGHTEEN- WITH ME TODAY
I HAVE BIANCA BLOOMQUIST. WITH
THE CALIFORNIA POLICY SHE'S THE
CALIFORNIA POLICY DIRECTOR TO
THE SMALL BUSINESS MAJORITY. AND
MICHAEL RAPAPORT WHO IS THE
CHIEF EXECUTIVE OFFICER AND
PRESIDENT OF AC ON OPPORTUNITY
FUND TO TESTIFY IN SUPPORT OF
THE BILL. GREAT WE WILL NOW HEAR
FROM. THE WITNESS THE LEAD
WITNESSES IN SUPPORT WHO HAVE
THREE MINUTES EACH COMBINED SIX.
RIGHT OH SURE. THANK. THANK YOU
SO MUCH SHARON MALONE- FACE
CHAIRMAN YELLOW AND MEMBERS OF
THE COMMITTEE. MY NAME IS BIANCA
BLOMQUIST IN THE POLICY DIRECTOR
FOR SMALL BUSINESS MAJORITY FOR
A SMALL BUSINESS ORGANIZATION
WITH MULTIPLE OFFICES THROUGHOUT
CALIFORNIA WE EMPOWER AMERICA'S
ENTREPRENEURS. TO BUILD A
THRIVING AND EQUITABLE ECONOMY
WE ARE FOUNDING MEMBERS OF THE
RESPONSIBLE BUSINESS LENDING
COALITION AND NETWORK OF LENDERS
ADVOCATES AND INVESTORS
COMMITTED TO INNOVATION IN SMALL
BUSINESS LENDING. AND WE SURE
SERIOUS CONCERNS ABOUT THE RISE
OF IRRESPONSIBLE SMALL BUSINESS
LENDING IN OUR STATE. WHEN THE
STATE LEGISLATURE PASSED SB
TWELVE THIRTY FIVE CALIFORNIA
BECAME THE FIRST STATE IN THE
NATION. TO REQUIRE COMMERCIAL
FINANCE COMPANIES TO PROVIDE
TRUTH IN LENDING DISCLOSURES TO
SMALL BUSINESS OWNERS ALLOWING
BORROWERS TO MORE EASILY COMPARE
COMPARISON SHOP AND UNDERSTAND
THE TRUE COST OF THE MONEY THAT
THEY'RE BORROWING. SB THIRTY
THREE PROTECTS SB TWELVE THIRTY
FIVE MOST CRITICAL PROTECTION
DISCLOSURE OF THE ANNUAL
PERCENTAGE RATE OR APR. APR IS
THE ONLY PRICING METRIC THAT
INCLUDES ALL THE RATES AND FEES
OVER A COMMON UNIT OF TIME. IT
IS THE METRIC THAT ALL BORROWERS
KNOW AND TRUST BECAUSE IT IS
ALREADY MANDATED FOR CONSUMER
LOANS. WITHOUT THIS METRIC SMALL
BUSINESS BORROWERS WOULD NOT BE
ABLE TO MAKE IT GUIDED DECISION
ABOUT THE EFFECTS OF A FINANCIAL
PRODUCT ON THEIR BUSINESS AND
THEIR WORKERS NOR WILL THEY BE
ABLE TO COMPARE THE COST OF
DIFFERENT TYPES OF FINANCING. I
JUST HAVE TO FINANCING PRODUCT
CAN LEAD TO SMALL BUSINESS
OWNERS LIVELIHOOD TO FINANCIAL
RUIN. GEREN AND THE TASHA
PRESTON OF MALIBU'S BURGERS IN
OAKLAND BECAME SMALL BUSINESS
OWNERS IN TWENTY NINETEEN. BY
EARLY TWENTY TWENTY THE COVER
NINETEEN PANDEMIC CORRUPTED
DERREN AND THE TASHA STRUGGLE TO
ACCESS CAPITAL THROUGH
TRADITIONAL FINANCIAL
INSTITUTIONS. AND GOVERNMENT
BACKED PROGRAMS EFFECTIVELY LEFT
THEM BEHIND. DESPITE USING HER
ENTIRE INHERITANCE OF EIGHTY
THOUSAND DOLLARS TO LAUNCH THE
BUSINESS. THE TASHA AND DARREN
FILED FOR CHAPTER ELEVEN
BANKRUPTCY AND THE TASHA FILED
FOR BANKRUPTCY PERMANENTLY THE
REASON THEY SAID WAS FALLING
PREY TO A BAD LOAN AND IT WAS
BACK. THEN AFTER THE POPULAR
ALTERNATIVE ONLINE LENDERS THAT
PROVIDED A FINANCING PRODUCT
WITH OPAQUE IN CHANGING TERMS.
TRAPPING THEM IN A CYCLE OF HIGH
COST DEBT. ONE YEAR AND THIRTY
THOUSAND DOLLARS IN INTEREST
LATER THEIR BALANCE WAS HIGHER
THAN THE COST OF THEIR ORIGINAL
LOAN OF EIGHTY FIVE THOUSAND
DOLLARS. WHICH ULTIMATELY BECAME
AN FEASIBLE FOR THEM TO PAY.
THIS LACK OF TRANSPARENCY IN
SMALL BUSINESS LOANS OF HOW
COUNTLESS OTHER BUSINESSES AND
BUSINESS OWNERS LIKE DARREN AND
A TASHA. HAVE BEEN EXPLOITED BY
DECEPTIVE LENDERS AND HINDERING
THEIR ABILITY TO BUILD WEALTH
FOR THEMSELVES. THEIR EMPLOYEES
AND THEIR COMMUNITIES. THIS BILL
WILL SUPPORT SMALL BUSINESSES IN
THEIR QUEST FOR ACCESS TO
CAPITAL GROWTH AND SUCCESS WHICH
IS ESPECIALLY IMPORTANT PORTENT
IN OUR POST CODE WORLD. FOR
THESE REASONS SMALL BUSINESS
MAJORITY URGES YOUR YES VOTE ON
SB THIRTY THREE. THANK YOU SO
MUCH. THANK YOU. GOOD AFTERNOON
MEMBERS OF THE SENATE BANKING
AND FINANCIAL INCLUSION
COMMITTEE. I AM PLEASED TO JOIN
YOU ALL TODAY IN SUPPORT OF SB
THIRTY THREE. A BILL THAT WOULD
REQUIRE PROVIDERS TO CONTINUE TO
DISCLOSE THE TOTAL COSTS OF
FINANCING THEIR FOR THEIR
PRODUCT THEIR FINANCING
PRODUCTS. PASSED THE JANUARY
TWENTY TWENTY FOUR DAY. MY NAME
IS MICHAEL RAPAPORT AND I AM THE
PRESIDENT AND CHIEF OPERATING
OFFICER AND ACTION OPPORTUNITY
FUND. WE ARE A CALIFORNIA BASED
LEADING NONPROFIT COMMUNITY
DEVELOPMENT FINANCIAL
INSTITUTION. WE ARE SMALL
BUSINESS LENDER THAT PROVIDES
COACHING TECHNICAL ASSISTANCE
AND CAPITAL TO ENTREPRENEURS
NATIONWIDE. IN CALIFORNIA WE
HAVE DEPLOYED NEARLY FIVE
HUNDRED EIGHTY MILLION DOLLARS
IN CAPITAL TO ALMOST THIRTEEN
THOUSAND ENTREPRENEURS AND 90%
OF OUR CLIENTS ARE WOMEN PEOPLE
OF COLOR WHERE PEOPLE WITH LOW
TO MODERATE INCOMES. WE ARE WE
AS WELL OUR FOUNDING MEMBER OF
THE RESPONSIBLE BUSINESS LENDING
COALITION AND WE INITIALLY
SUPPORTED S. B. TWELVE THIRTY
FIVE AND THE TRANSPARENT
DISCLOSURE OF A COMMONLY USED
MEASURE OF THE COST OF A LOAN.
THE ANNUAL PERCENTAGE RATE WHICH
IS BEING USED ACROSS MOST
LENDING PRODUCTS FOR DECADES.
IT'S CRITICAL THAT SMALL
BUSINESS OWNERS HAVE A UNIVERSAL
MEASURE TO DO EVALUATE DIFFERENT
FINANCING OPTIONS ESPECIALLY
WHEN OUR RESEARCH HAS SHOWN THAT
SOME FINANCING OPTIONS FOR SMALL
BUSINESS OWNERS. RESULT IN
AVERAGE APR AS OF 94% AND CAN
EVEN RESULT IN A P. R. AS AS
HIGH AS THREE HUNDRED AND 58%
RUNNING A SMALL BUSINESS IS
REALLY HARD WORK. AND IT'S EVEN
HARDER TODAY AS ENTREPRENEURS
ACROSS CALIFORNIA NAVIGATE
ECONOMIC UNCERTAINTIES AND THE
LINGERING EFFECTS OF COVERT. YET
HISTORICALLY SMALL BUSINESS
OWNERS HAD NOT BEEN GIVEN THE
SAME PROTECTION AS INDIVIDUAL
CONSUMERS WHEN IT COMES TO
TRANSPARENCY. CALIFORNIA BLAZE
THE TRAIL FOR THAT TRANSPARENCY
WITH S. B. TWELVE THIRTY FIVE.
NOW THEY CAN THEY CAN TAKE A
TAKING AWAY THAT PROTECTION OF
APR DISCLOSURE WOULD MAKE IT
HARDER FOR ENTREPRENEURS TO
NAVIGATE THE MANY FINANCING
OPTIONS THAT ARE AVAILABLE
TODAY. THEREFORE WE STRONGLY
SUPPORT SB THIRTY THREE WHICH
WILL MAKE THESE CRITICAL
TRANSPARENCY PROTECTIONS
PERMANENT. PERMANENT PROTECTIONS
HELP SMALL BUSINESS OWNERS
BETTER UNDERSTAND AND COMPARE
THEIR FINANCING OPTIONS AS WELL
AS PROVIDE AFFORDABLE FINANCING
PRODUCTS. LET'S NOT GO BACKWARDS
IN SUPPORTING OUR STATE SMALL
BUSINESS ENTREPRENEURS LET'S
PROVIDE THEM THE PROTECTIONS
THEY NEED TO MAKE GOOD CHOICES
WHEN IT COMES TO RAISING LOAN
CAPITAL TO SUPPORT. THEIR
BUSINESS AND OUR ECONOMY THANK
YOU. THANK YOU. WE WILL NOW MOVE
TO ANY OTHER WITNESSES IN ROOM
TWENTY ONE HUNDRED WHO WHICH
SITS TO TESTIFY IN SUPPORT JUST.
ME TO PLEASE JUST STATE YOUR
NAME. AN AFFILIATION. GOOD
AFTERNOON MADAM CHAIR MEMBERS
ROBERT CORRAL EXECUTIVE DIRECTOR
OF THE CONSUMER FEDERATION OF
CALIFORNIA IN SUPPORT OF THIS
BILL THANK YOU. Q. GOOD MORNING
HI MY NAME IS A ALISON PETERSON
WITH THE CALIFORNIA ASSOCIATION
FOR MY PRINTER PRICE
OPPORTUNITY. I WANT TO SAY WERE
IN STRONG SUPPORT OF SB THIRTY
THREE THANK YOU THANK YOU THANK
YOU. CENA NO OTHER WITNESSES IN
SUPPORT IN ROOM TWENTY ONE
HUNDRED WILL GO TO THE
OPPOSITION. AND I WILL INVITE TO
THE OPPOSITION LEAD WITNESSES
SAID TO PLEASE. COME UP. AND
IT'S THREE MINUTES EACH FOR A
TOTAL OF SIX MINUTES. THANK YOU.
GOOD AFTERNOON MEMBERS OF THE
COMMITTEE AND CHAIR LIMÓN MY
NAME IS KATE FISHER I'M AN
ATTORNEY WITH THE LAW FIRM
HUDSON COOK AND I REPRESENT THE
REVENUE BASED FINANCE COALITION.
A NONPROFIT GROUP OF RESPONSIBLE
PROVIDERS OF CAPITAL TO SMALL
AND MEDIUM SIZED BUSINESSES. I
THINK EVERYONE HERE AGREES ON
TWO PRINCIPLES FIRST CALIFORNIA
SMALL BUSINESSES DESERVE
ACCURATE AND HELPFUL
DISCLOSURES. AND SECOND ACCESS
TO CAPITAL IS CRITICAL FOR SMALL
BUSINESSES AND CALIFORNIA'S
ECONOMY. ACCORDING TO THE US
SMALL BUSINESS ADMINISTRATION
THERE ARE MORE THAN FOUR MILLION
SMALL BUSINESSES IN CALIFORNIA
WHICH EMPLOYS NEARLY HALF OF ALL
CALIFORNIANS EMPLOYEES. THE
ISSUE BEFORE YOU TODAY IS
WHETHER THE ESTIMATED APR
DISCLOSURE. ACHIEVES THESE TWO
PRINCIPLES. AND PROVISIONAL AIDS
. THIS IS THE DISCLOSURE- WITH
THE ESTIMATED APR INSTANCE ONE
LINE HERE THE AGREED OUT SO YOU
CAN SEE IT. THIS IS WHAT
CALIFORNIA'S COMMERCIAL
FINANCING DISCLOSURE WOULD LOOK
LIKE WITHOUT ESTIMATED APR AND
AS YOU CAN SEE IT IS STILL A
VERY ROBUST DISCLOSURE OF THE
TERMS OF FINANCING SO FOR
EXAMPLE IT SETS OUT. THE AMOUNT
OF FUNDING PROVIDED MINUS ANY
FEES ARE DEDUCTED. THE FINANCE
CHARGE AND YOU CAN SEE IT SAYS
THIS IS A TOTAL DOLLAR COST OF
YOUR FINANCING. THE TOTAL
PAYMENT AMOUNT THIS IS THE TOTAL
AMOUNT OF PAYMENTS THE RECIPIENT
WILL MAKE UNDER THE CONTRACT.
ESTIMATED MONTHLY COST PAYMENT
PAYMENT TERMS ESTIMATED TERM IF
THERE ARE ANY PREPAYMENT
PENALTIES OR DISCOUNTS THEN
THERE'S AN ADDITIONAL ITEM IS
ATION OF THE AMOUNT FINANCED
WHICH BREAKS DOWN ANY FEES ARE
DEDUCTED FROM THE FUNDS PROVIDED
. WITHOUT THE ESTIMATED APR THIS
INCLUDES EVERYTHING THAT A SMALL
BUSINESS PERSON NEEDS TO
EVALUATE A FINANCING OFFER.
ESTIMATED APR DISCLOSURE IS
RESTRICTING ACCESS TO CAPITAL
FOR SMALL BUSINESSES. WE'VE SEEN
MANY REPUTABLE COMPANIES STOPPED
OFFERING REVENUE BASED FINANCING
IN CALIFORNIA BECAUSE THE
ESTIMATE APR DISCLOSURE EXPOSES
THEM TO SIGNIFICANT LITIGATION
AND ENFORCEMENT RISK. REENACTING
THE RATE DISCLOSURE REQUIREMENTS
EVEN IF ONLY TO PUSH THE SUNSET
TO A LATER DATE DOES NOTHING TO
PROTECT CALIFORNIA'S SMALL
BUSINESSES. IN FACT MANY REVENUE
BASED FINANCING PROVIDERS ARE
TAKING A WAIT AND SEE APPROACH
AND PLAN TO RE ENTER THE
CALIFORNIA MARKET AND JANUARY
ONE TWENTY TWENTY FOUR WHEN THE
APR RATE DISCLOSURE SUNSETS. WE
RESPECTFULLY ASK MANY TO HELP
PRESERVE ACCESS TO CAPITAL FOR
CALIFORNIA SMALL BUSINESSES BY
NOT MAKING THE ESTIMATED APR
DISCLOSURE PERMANENT THANK YOU.
THANK YOU. ANY OTHER WHICH LEAD
WITNESSES IN OPPOSITION. RAC NO
OTHER LEAD WITNESSES IN
OPPOSITION ANY BODY ELSE IN ROOM
TWENTY ONE HUNDRED WHO IS
OPPOSED PLEASE JUST COME UP TO
SAY YOUR NAME AND AFFILIATION.
RH'S AT NO ONE IN OPPOSITION
ROOM TWENTY ONE HUNDRED WE WILL
NOW MOVE ON TO WITNESSES WAITING
TO TESTIFY VIA TELECONFERENCE
SERVICES- AND SO- MODERATOR IF
YOU WOULD PLEASE PROMPT ANY
INDIVIDUALS WITH WITH ANY
INDIVIDUALS WAITING TO TESTIFY
EITHER IN SUPPORT OR OPPOSITION
FOR SB THIRTY THREE WE WILL
BEGIN. THANK YOU TO EXPRESS
SUPPORT OR OPPOSITION FOR THIS
BILL AND IF YOU HAVE NOT ALREADY
DONE SO YOU MAY PRESS ONE THEN
ZERO ON YOUR TELEPHONE KEYPAD.
AGAIN THAT'S ONE FOLLOWED BY
ZERO. OUR FIRST COMMENT TODAY
COMES FROM LINE TWO HUNDRED
SIXTY SEVEN PLEASE GO AHEAD.
HELLO THANK YOU YOUR WOMANLY
MOLDING COMMITTEE MEMBERS MY
NAME IS PAMELA DEAN CAN YOU
EXPECT TO GET THE RECTOR FOR THE
MICRO ENTERPRISE COLLABORATIVE
OF ELIM SOUTHERN CALIFORNIA AND
WE SERVICE SMALL BUSINESSES AND-
HELPING THEM TO START AND GROW
THEIR BUSINESS WITH RESOURCES.
AND SMALL BUSINESS OWNERS IN
CALIFORNIA DESERVE COMMONSENSE
TRANSPARENCY ABOUT THE PRICE OF
LOANS THAT THEY'RE OFFERED SB
THIRTY THREE WELDING. AT THE
FUTURE THIS IS JUST. IS SUPPORT-
THIS IS JUST A ME TOO IN IN
OPPOSITION OR IN SUPPORT. I'M IN
SUPPORT THANK YOU. THANK YOU.
NEXT WE HAVE LINE TO EIGHTY FIVE
. YEAH HELLO THIS IS GREG FOSTER
EXECUTIVE DIRECTOR OF THE
REDWOOD REGION ECONOMIC
DEVELOPMENT COMMISSION AND
HUMBOLDT COUNTY- WE ARE A SMALL
BUSINESS LENDER- AND I AM
CALLING IN SUPPORT. THANK YOU.
LINE TWO FIFTY TWO. HI THIS IS
HEIDI PICK THEM FROM CARRYING
OUT VERY VERY STRONG SUPPORT
FOR- SB THIRTY THREE. THANK YOU
. WE HAVE LINE. TO SEVENTY
THREE. HELLO YES MY NAME IS
CHRISTOPHER GRAHAM TESTIFYING ON
BEHALF OF THE INNOVATIVE
PLATFORM TO SUSHI ASIAN LEADING
TRADE ASSOCIATION FOR ONLINE
LENDING AT SERVICE COMPANIES
SERVING SMALL BUSINESSES-
TESTIFYING IN SUPPORT OF SENATE
BILL THIRTY. THANK YOU. NEXT IN
LINE. TO SEVENTY FOUR. HELLO
SARAH BOBBY THE WORKING SOLUTION
YES HI WELL BUSINESS MICRO
LENDER SERVING NORTHERN
CALIFORNIA IN FULL SUPPORT OF
THE STILL. THANK YOU. CLIMB. TO
SEVENTY ONE. GOOD AFTERNOON MY
NAME IS NADIA MEDINA ALONG ON
THE EXECUTIVE DIRECTOR FOR THE
NATIONAL LATINA WOMEN
ASSOCIATION IN THE INLAND EMPIRE
CALIFORNIA AND WE'RE CALLING IN
SUPPORT OF THE U. THIRTY THREE.
THANK YOU. WE HAVE SEVERAL MORE
IN Q. ME JUST ANOTHER MOMENT
PLEASE. NEXT IN LINE. TO SEVENTY
TWO. HELLO THIS IS MERCEDES IT'S
SEVEN COMING FROM THE GREEN
LINING INSTITUTE IN SUPPORT OF
SB THIRTY THREE THANK YOU. NEXT
WE HAVE. TO SEVENTY SEVEN TO
SEVENTY SEVEN PLEASE GO AHEAD.
GOOD AFTERNOON MY NAME IS RUDY
ESPINOZA INSERTED THE EXECUTIVE
DIRECTOR OF INCLUSIVE ACTION
HERE IN LOS ANGELES I WE ARE
SMALL BUSINESS LENDER IN VERY
STRONG SUPPORT OF SB. THIRTY
THREE. WE HAVE A FEW MORE IN Q.
MANAGER ONE MOMENT. NEXT IS LINE
. TWO EIGHTY FOUR. HI MY NAME IS
RYAN MAKE UP ON THE DIRECTOR OF
PUBLIC AFFAIRS AT FUNDING CIRCLE
FUNDING CIRCLE IS A LEADING
ONLINE LENDING PLATFORM FOR
SMALL BUSINESS BORROWERS AS
RIGID FOUR THOUSAND TWO HUNDRED
TWENTY SEVEN LOANS TOTALING SIX
HUNDRED THIRTY BILLION DOLLARS
TO CALIFORNIA SMALL BUSINESSES-
IN ADDITION OFFERING TERM LOANS
WE ALSO ALSO OFFER OTHER
COMMERCIAL FUNDING THREE
PRODUCTS OR MARKET PLACE- WE ARE
IN SUPPORT OF SB. THIRTY THREE.
PINE. TWO EIGHTY SEVEN. HELLO
THIS IS THE BEST SALAS ACTING
YOU KNOW FINANCIAL WE ASK THAT
YOU SUPPORT SB THIRTY THREE
CENTS TO CALIFORNIA SMALL
BUSINESS OWNERS. WE HAVE LINE.
TO EIGHTY EIGHT. AMERITAS
AMERICANS I'M GOING TO HAVE TO
ASK WHICH IS PROJECTED AS THE
OWNERS WERE US TREASURY
CERTIFIED INVOLVING FINANCIAL
INSTITUTION OF THE SENSORS THAT
RESPOND PROPERTIES NEW
DEVELOPMENTS ACIDO THE ARTISTS
OF THE COUNTRY. INCLUDING FORTY
FOUR DIVISION CALIFORNIA OUR
COLLECTIVE SUPPORT. SB THIRTY
THREE THANK YOU. IT FAT THERE
ARE NO. COMMENTS IN QUEUE AT
THIS TIME. EIGHT THANK YOU SO
MUCH- MEMBERS WE WILL BRING IT
BACK- FOR QUESTIONS OR
DISCUSSION ANYBODY WITH
QUESTIONS AND- BY STERN JANA.
SENATOR GLAZER TO- CLARIFY WITH
REGARD TO THE REGULATIONS THAT
WERE DEVELOPED- ADDED THEY HAVE
THOSE BEEN IN EFFECT FOR A WHILE
AND THEREFORE- GOVERNING HOW THE
LOAN DISCLOSURES ARE MADE AND
FOR HOW LONG. IT WENT INTO
EFFECT IN DECEMBER BUT THE-
ASSESS THAT WAS ONGOING WAS VERY
TRANSPARENT PROCESS THAT
EVERYONE HAD THE OPPORTUNITY
DRAFT RAGS COMMENT DRAFT ROEG'S
COMMENTS. THIS PROCESS HAS BEEN
GOING ON FOR A NUMBER OF YEARS
SO YES THEY'VE GONE INTO EFFECT
IN DECEMBER BUT THE ACT. THE
DISCLOSURE AND- AND
UNDERSTANDING OF THE WAY THE
RULE MAKING WAS GOING HAS BEEN
PRETTY CLEAR FOR A LONG TIME K.
THIS. THANKS FOR. AND THE-
QUESTION OF THE- PERSON WHO
SPOKE IN OPPOSITION- TWO TWO
QUESTIONS- IN YOUR CONTRASTING
DISCLOSURE. IN THE SECOND ONE
YOU COME UP WITH A NUMBER OF THE
COST OF THE LANDING PRESUMABLY
IN DOLLAR TERMS. BUT YOU KNOW
WHAT THE LOAN IS- GIVEN THOSE
TWO NUMBERS WHY CAN YOU NOT
CALCULATE A PERCENTAGE THANK YOU
FOR THAT QUESTION IS A GREAT
QUESTION- FOR A REVENUE BASED
FINANCING AND THEY KNOW EXACTLY
WHAT THE COST WILL BE AS A FIX
TO THE AMOUNT NOT INTEREST THAT
ACCRUES- THE PIECE OF THE
PARTIES DO NOT KNOW AT THE
BEGINNING OF THE TRANSACTION IS
HOW LONG IT WILL TAKE. TO PAY
OFF THAT AMOUNT AND THE REASON
IS THAT THESE TRANSACTIONS
REQUIRE PAYMENTS BASED ON A
PERCENTAGE OF REVENUE. SO FOR
EXAMPLE IF I IT WAS A BUSINESS
OWNER AND I SOLD 10% OF MY
REVENUE- UP TO A CERTAIN AMOUNT
EACH DOLLAR I MADE. WOULD MEAN
THAT TEN CENTS GOES TO THE
FINANCING PROVIDER AND WHAT WE
DON'T KNOW IS HOW. QUICKLY I
WILL GENERATE THAT REVENUE WILL
RESULT IN PAYING OFF THE
FINANCING INTERESTINGLY- OFTEN
BUSINESS OWNERS USES FINANCING
TO INCREASE OUR CAPACITY EITHER
TO TAKE ADVANTAGE OF AN
INVENTORY OPPORTUNITY OR MAYBE
TO- ADD MORE TABLES TO THE
RESTAURANT THINGS LIKE THAT. ON
THAT CAN GENERATE SUCCESS WHICH
GENERATES MORE REVENUE WHICH
MEANS THAT IT'S PAID OFF FASTER-
ALSO IF A SMALL BUSINESS HAS A
DOWN PERIOD FOR EXAMPLE
SEASONAL. OR OF COURSE WITH THE
PANDEMIC THE REVENUE WILL BE
GENERATED SLOWER. AND NO ONE
KNOWS HOW LONG OR IF EVER IT
WILL BE PAID OFF SO THAT. TIME
OF THE PAYMENT IS THE PIECE THAT
WE DON'T KNOW AND THAT'S WHY
IT'S VERY DIFFICULT TO
IMPOSSIBLE TO CALCULATE AN
ACCURATE ESTIMATED APR. I
RECOGNIZE THAT- AND THIS IS
OBVIOUSLY NON STANDARD LENDING-
AND THE ATTEMPT IS TO BE ABLE TO
TRY TO COMPARE THINGS SO. I
THINK CLEARLY THIS IS NOT GOING
TO BE YOUR SORT OF LENDING IS
NOT GOING TO BE COMPARED
AGAINST- TRADITIONAL BANK
LENDING. I BECAUSE I THINK IT'S
LIKELY THEY'RE TALKING TO YOU
BECAUSE OF LIMITED CAPACITY TO
ACHIEVE- TYPICAL CONVENTIONAL
FINANCING. SO WELL I RECOGNIZE
THE CHALLENGE IN THE EXPRESSION.
THE REGULATIONS AT LEAST TO GIVE
YOU A GUIDELINE OUT AS AS TO HOW
TO STATE STATE AND NUMBER. AND
THEREFORE YOU AND OTHER REVENUE
FINANCE LENDERS WOULD BE ON A
LEVEL PLAYING FIELD IN TERMS OF
COMPARING THEM- SO. EVEN THOUGH
I RECOGNIZE YOU HAVE PROBLEMS
WITH THE ACCURACY OF THAT
THERE'S STILL A MEANS FOR A
BORROWER TO MAKE THAT.
COMPARISON AND YOU MENTIONED
LEGAL LIABILITY- THE THREAT OF
BEING SUED IF YOU'RE FOLLOWING A
STATE REGULATION. AS ITS
PROMULGATED AND PUBLISHED HOW
WOULD YOU BE LIABLE FOR- AS A
SUIT ON THAT BASIS YEAH THAT'S
THAT'S AN EXCELLENT QUESTION SO
ON THE REGULATIONS SET OUT IN
DETAIL A NUMBER OF ESTIMATES
THAT REVENUE BASED FINANCING
PROVIDERS ARE REQUIRED TO MAKE-
BUT- EACH FINANCING PROVIDER HAS
QUITE A BIT OF LEEWAY. IN HOW
THEY ENGAGE AND THE ESTIMATES
FOR EXAMPLE THERE IS A
REQUIREMENT THAT A REVENUE BASED
FINANCING PROVIDER- CALCULATE
AND DISCLOSE WHETHER THEY
REASONABLY ANTICIPATE A TRUE UP
. NOW A TRIP IS A FUNCTION OF
THIS PRODUCT WHERE THE PAYMENTS
ARE BASED ON ACTUAL REVENUE. AND
IF THE BUSINESS OWNERS REVENUE
HAS IF THE BUSINESS HAS DROPPED
THERE IS AN OPPORTUNITY FOR THE
BUSINESS TO OBTAIN A LOWER
PAYMENT SO THE PAYMENT
OBLIGATION IS MATCHED TO THAT
FOR EXAMPLE 10% OF ACTUAL
REVENUE. THE REGULATIONS REQUIRE
A REVENUE BASED FINANCING
PROVIDER AT THE BEGINNING OF THE
TRANSACTION TO DISCLOSE THE
AMOUNT AND DATE. OF ANY
REASONABLY ANTICIPATED TRUE UP.
SO THAT REQUIRES THEM TO-
ESSENTIALLY LOOKING TO THE
FUTURE AND GUESS ON THIS DAY
BUSINESS OWNER I THINK YOUR
PAYMENT WILL DROP BY TWO HUNDRED
DOLLARS A DAY. ON THAT IS VERY
DIFFICULT AND IMPOSSIBLE TO
ACCURATELY SO TWO DIFFERENT
REVENUE BASED FINANCING
PROVIDERS WHO ARE OFFERING THE
SAME TERMS TO THE SAME BUSINESS.
MIGHT MAKE DIFFERENT GUESSES AND
ASSUMPTIONS ON WHEN THAT WOULD
HAPPEN AND THAT'S GOING TO HAVE
A MATERIAL IMPACT ON THE APR SO.
EVEN FOLLOWING THE RULES- IT IS
LIKELY THAT TWO DIFFERENT
PROVIDERS WILL HAVE A DIFFERENT
DISCLOSED APR AND THERE IS A
VERY- NARROW TOLERANCE FOR HOW
PRECISE THAT APR NEEDS TO BE. SO
ON A LOOK BACK BASIS THE
REGULATOR FOR THE BUSINESS CAN
SAY TO YOU DISCLOSES APR WAS X.
BUT HELLO TRANS TRANSACTION PAID
PLAYED OUT IT WAS DIFFERENT THAN
THAT AND AS A RESULT YOU'RE
LIABLE TO ME- NOT LIABLE. I
WOULD REGULATIONS UP SORRY NOT
LIABLE WHICH IS YOUR QUESTION
YEAH I'M- I UNDERSTAND THE
ARGUMENT YOU'RE MAKING I STILL
THINK IT BE DIFFICULT TO- TO SUE
THE LENDER PROSPECTIVE LENDER.
IF YOU'RE FALLING REGULATION
EVEN IF THERE IS DISCRETION AND
FOLLOWING THE REGULATION BUT ANY
RATE I APPRECIATE YOUR- ANSWERS
. THANK YOU- ANY OTHER MEMBERS
WITH QUESTIONS OR COMMENTS.
SENATOR BRADFORD I'M JUST
CURIOUS- ARE THERE'RE. BEEN THE
FACT THAT TO GIVE US FIVE YEARS
TO STAND THIS. PROGRAM UP. HOW
ARE YOU TAKING THIS FIVE YEAR-
SUNSET. GOING FORWARD GOOD JOBS
IN ORIGINAL BILL. I KNOW I THINK
THAT SAID NOW THAT IT'S HAD THE
SCRUTINY THE REVIEW OVER THE
LAST FEW YEARS I THINK THAT. WAS
A LOT OF CONFIDENCE BY THE
DEPARTMENT IN THE RATE. I THINK
IS A LOT OF CONFIDENCE IN THE
SMALL BUSINESS COMMUNITY WHICH
YOU HEARD. FROM TODAY THAT IS-
THAT THEY'RE PROTECTED ON THE
LEGAL SIDE FROM ANY KIND OF A
LAWSUIT- I KNOW THAT DOESN'T-
MAKE THE FOLKS THAT ARE OPPOSING
THIS HAPPY. AND THEY OPPOSE THE
ORIGINAL BILL AND THEY'RE SUING
THE STATE ON THE LOT RIGHT NOW
IN FACT. BUT NO I THINK THERE'S
CONFIDENCE THAT TED NOBODY WANTS
TO THEY SAY THAT- WE'RE GONNA
RESTRICT ACCESS TO CAPITAL THAT
SIMPLY OPPOSITE OF WHAT WE WANT.
COMPLETELY AND THAT WAS THE CASE
I'D- BE THE FIRST ONE AUTHORED A
BILL TO GET RID OF IT. WHICH
COULD HAPPEN GOING THAT GOING
FORWARD IF THAT WERE EVER THE
CASE BUT I THINK THE OPPOSITE.
IS HAPPENING. PROVIDING HONEST
TRANSPARENCY GOING FORWARD AND I
THINK THAT. THAT'S SOMETHING I
THINK WE'RE VERY COMFORTABLE
PUTTING A LOT PERMANENTLY NOW.
ANY OTHER QUICK. ALL RIGHT WE DO
HAVE A MOTION TO MOVE THAT BILL
BY SENATOR MANAGE. ANY FINAL
QUESTIONS OR COMMENTS. R. EIGHT
I THINK YOU US SENATOR GLAZER
FOR BRINGING THIS FORWARD I KNOW
WE'VE HAD CONVERSATIONS ABOUT
THIS AND I KNOW THAT THIS
COMMITTEE WILL CONTINUE TO HAVE
CONVERSATIONS AND JUST FOLLOW-
THE PROGRESS AS IT MOVES THROUGH
THIS- COMMITTEE. WOULD YOU LIKE
TO CLOSE I WOULD LIKE TO SAY A
COUPLE THINGS AND CLARIFICATION.
AND THE REGULATIONS CLEARLY
STATE THAT THE DISCLOSURE IS AN
ESTIMATE SAYS IT RIGHT THERE-
AND IN FACT THE COMPANY CAN
CORRECT ERRORS WITHIN SIXTY DAYS
I DON'T THINK THERE'S ANY LEGAL
EXPOSURE IF YOU'VE DONE YOUR
GOOD FAITH ESTIMATE. AND EVEN AS
THE OPPONENTS HAVE CLAIMED. A
GOOD FAITH THAT COULD BE SOME
DIFFERENCES. BUT THAT'S
PERFECTLY LEGAL UNDER THE
REGULATIONS THAT BEEN PUT INTO
EFFECT. BUT WHAT THE BILL DOES
DO. DESPITE ALL THESE DIFFERENT
FINANCING SCHEMES. IS IT
REQUIRES- A CONSUMER TO BE TOLD
WHAT THE COST OF MONEY WOULD BE
OVER A YEAR. YOU COULD SAY WOMAN
TO PAY OFF THE LOAN IN SIXTY
DAYS OR NINETY DAYS WITH THESE
TERMS OF THOSE TERMS. BUT LEAST
CREATES AN APP AND APPLES
COMPARISON SO THAT. IF YOU NEED
THAT TEN THOUSAND FOR YOUR PIZZA
OVEN. YOU CAN SHOP AROUND AND BE
ABLE TO COMPARE. THEY COULD
STILL MARKET WHATEVER PRODUCTS
THEY WANT TO MARKET WITH
WHATEVER SCHEMES THEY WANNA. PUT
FORWARD. BUT AT LEAST YOU HAVE A
WAY TO COMPARE AND MAKE A SMART
DECISION SO YOU'RE NOT BEING
TAKEN ADVANTAGE OF. AND IT'S
VERY EASY FOR SMALL BUSINESS TO
BE TAKEN ADVANTAGE OF. WHEN IT
COMES TO THE COST OF MONEY.
BECAUSE WE KNOW THERE'S SO MANY
THINGS THAT COME INTO EFFECT IN
THAT REGARD. SO I APPRECIATE THE
THAT. CHAIRS AT- CONVERSATION
THE STAFF WORK ON THIS. I THINK
THIS BILL IS GOING TO PROVIDE A
LEVEL OF TRANSPARENCY. AND TRUTH
IN LENDING PRACTICES THAT WILL
BENEFIT ALL OF US CERTAINLY OUR
SMALL BUSINESSES. WHICH IS WHY
WE'VE HAD SUCH SUPPORT FROM THE
SMALL BUSINESS COMMUNITY TODAY.
SO WITH THAT. REQUEST FOR AN AYE
VOTE. THANK YOU. THE MOTION IS
DO YOU PASS BUT FIRST RE REFER
TO THE COMMITTEE ON JUDICIARY. I
CAN WE PLEASE CALL THE ROLL.
MOTION IS DUE PASSED THE FIRST
BE REFERRED TO THE COMMITTEE ON
JUDICIARY. SENATOR LIMÓN AYE
LIMÓN AYE. HELLO AYE. AYE
BRADFORD. GUERRIERO CABALLERO I
MEN. MAN I WENT. WHEN I
PORTANTINO. THANK YOU VERY MUCH
ALL RIGHT WE WILL PUT OF THAT
BILL ON CALL. THANK YOU. AND NOW
I WILL HAND THE GAVEL TO VICE
CHAIR SO THAT AIM AT CAN PRESENT
AS BEFORE A ONE.
FOR YOU GO. ACTIONS. HE CALLS.
GET AFTER NEVER HEARD OF A
SLIGHT. BIT OF CLEAN UP TO
ANNOUNCE THE PRIOR VOTE. SO WE-
THE BILLS ON COST SORRY- YEAH
JUST BECAUSE WE WERE MISSING ALL
RIGHT HAD FIVE AYE VOTES BUT IT
IS ON CALL OKAY- CHAIR LIMÓN YOU
MAY PRESENT SB FOUR OH ONE THANK
YOU I PRESENT TO YOU AS BEFORE A
ONE A BILL THAT WOULD ENACT
PROTECTIONS ON AND OVERSIGHT OF
CRYPTO KIOSK CRYPTO KIOSKS ARE
PHYSICAL MACHINES THAT ALLOW
CONSUMERS TO PURCHASE CRYPTO
ASSETS USING CASH DEBIT OR
CREDIT CARD OR BANK TRANSFER.
THESE MACHINES ARE OFTEN LOCATED
IN GROCERY AND CONVENIENCE
STORES AND GENERALLY TARGET
CONSUMERS WHO ARE LESS
KNOWLEDGEABLE OF CRYPTO MARKETS
AND RELATED TECHNOLOGIES THANK
IN SOMERS WHO USE ONLINE TRADING
PLATFORMS IN ADDITION TO THE
INVESTMENT RISK INHERENT WITH
THE CRYPTO MARKETS CRYPTO KIOSK
POSE ADDITIONAL CONCERNS RELATED
TO CRIMINAL ACTIVITY AND HIGH
COST FOR CONSUMERS WE KNOW THAT
SCAMMERS AND FRAUDSTERS ARE
TRICKING VICTIMS INTO SENDING
CRYPTO ASSETS USING KIOSKS
PARTIALLY DUE TO THE MANY KIOSKS
HAVING FEWER FRAUD PREVENTION
MEASURES IN PLACE THEN POPULAR
CUSTODIAL EXCHANGES. WE ALSO
KNOW THAT THE FBI AND DEA HAVE
FLAGGED KIOSKS FOR THEIR USE IN
FACILITATING DRUG AND HUMAN
TRAFFICKING AND ALLOWING
CRIMINAL ORGANIZATIONS TO MOVE
FUNDS ACROSS BORDERS. FOR THESE
REASONS SB FOUR OH ONE PLACES A
TRANSACTION LIMIT OF. ONE
THOUSAND DOLLARS PER CUSTOMER
PER DAY. TO LIMIT THE HARMS OF
LARGER FRAUDS IN ORGANIZED
CRIMINAL ACTIVITY OUTSIDE OF THE
LEGAL USES OF CRYPTO KIOSK WE
MUST CONFRONT THE INCREDIBLY
HIGH FEES THAT THESE OPERATORS
CHARGE. AS REFLECTED IN THE
ANALYSIS WE KNOW THAT SOME
OPERATORS ARE CHARGING MORE THAN
A 30% MARKET BETWEEN THE PRICE
THAT THEY WILL PURCHASE A CRYPTO
ASSET FROM A CONSUMER AND THAT
PRICE AT WHICH THEY SELL THE
SAME ASSET. AND THAT DOES NOT
ACCOUNT FOR ANY FIXED
TRANSACTION FEES THAT WOULD BE
IN ADDITION TO THE MARKET.
COMPARE THESE FEES TO ONLINE
STOCK BROKERAGE ACCOUNTS THAT
OFTEN CHARGE ZERO FEES AND
OFFERS PRICE SPREADS IN OF LESS
THAN 1% OR EVEN ONLINE CRYPTO
TRADING PLATFORMS THAT TYPICALLY
KEEP THEIR TOTAL FEET BELOW 2%
OF THE TRANSACTION AMOUNT. TO
ADDRESS THESE HIGH FEES SB FOUR
OH ONE PROPOSES A CAP THE FEE
CAP OF 2% OR FIVE DOLLARS. FOR
PER TRANSACTION WHICHEVER IS
GREATER. THE OPPOSITION SAID
THAT THIS OF WILL OR STATE THAT
THIS WILL PUT THEM OUT OF
BUSINESS SO I'M OPEN TO A
DISCUSSION ABOUT THE FEE CAP AND
INTERESTED TO HEAR FROM
COMMITTEE MEMBERS. ABOUT WHAT
YOUR THOUGHTS ARE ON THIS
MATTER. I WANT TO KEEP IN MIND
THAT THESE KIOSKS ARE NOT
LENDING OUT MONEY TO CONSUMERS.
BUT RATHER THEY ARE SELLING THE
SAME CRYPTO ASSETS THAT ARE
OFFERED FOR MUCH BETTER PRICES
ONLINE. AND ANY FEES THAT KIOSKS
ARE COLLECTING ARE ULTIMATELY
MAKING IT HARDER FOR CONSUMERS
TO MAKE A POSITIVE RETURN. ON
THESE INVESTMENTS. I THINK THOSE
REALITIES CAN INFORM OUR VIEWS
AND- ON WHAT CAN BE CONSIDERED A
FAIR FEE. IN ADDITION TO THE FEE
DISCUSSION I WANT TO CALL
ATTENTION TO PAY JUST SEVEN AND
EIGHT OF THE ANALYSIS THAT LAY
OUT SEVERAL CONSIDERATIONS FOR
ADDITIONAL POLICIES THAT CAN
ADDRESS CONCERNS RELATED TO
CRIMINAL ACTIVITY. AND CONSUMER
PROTECTIONS. I WELCOME THE
COMMITTEE'S FEEDBACK ON THE
ISSUE AS WELL AS ANY OTHER
CONSIDERATIONS REYES. IN THE
ANALYSIS OR FROM OPPOSITION AND
I LOOK FORWARD TO CONTINUED
CONVERSATIONS AROUND THIS BILL
AS WE MOVE THROUGH THE PROCESS.
THAT SAID I FEEL STRONGLY THAT
WE NEED TO ENACT BETTER
PROTECTIONS. FOR CONSUMERS WHO
INTERACT WITH CRYPTO KIOSKS. I
WOULD NOW LIKE TO TURN TO OUR
SUPPORTING WITNESSES ROBERT
HERALD FROM THE CALIFORNIA
FEDERATION OF CONSUMERS. THANK
YOU. GOOD AFTERNOON- MISTER VICE
CHAIR AND MEMBERS OF THE
COMMITTEE ON ROBERT CORRAL THE
EXECUTIVE DIRECTOR OF THE
CONSUMER FEDERATION OF
CALIFORNIA- QUICKLY SOME THANKS
THANKS TO CENTER EARLY MON. FOR
HAVING THE LEAD ON THIS AND
RELATED ISSUES THE LAST FEW
YEARS. ARE ALSO VERY THOROUGH
ANALYSIS- THAT I THINK LAYS OUT
THE ISSUE NICELY INCLUDING SOME
OPTIONS FOR FUTURE
CONSIDERATION. I ALSO LIKE TO-
THANK THE PRO TEM HERSELF AND
HER OFFICE FOR THEIR ACTIVE
ENGAGEMENT ON THIS ISSUE- AS THE
AS CEREMONY- SUMMARIZED VERY
NICELY- WHAT YOU HAVE HERE ARE
THERE SOMETIMES CALLED EITHER
CRYPTO KIOSKS OR- CRYPTO ATMS
SOMETIMES BTM IS TO BE STANDING
FOR BIG COIN- ALTHOUGH THEY TÌM
PART OF IT AS THE CENTER JUST
POINT OUT IS A BIT MISLEADING.
BECAUSE PEOPLE AREN'T REALLY
PULLING MONEY OUT THERE KIND OF
PUTTING MONEY IN AND
UNFORTUNATELY THEY'RE DOING SO
IN SUCH A WAY WHERE THEY'RE
GETTING CHARGE MUCH MUCH HIGHER
FEES- THEY'RE ALSO- HAVING TO
PAY A SPREAD THAT'S WAY FAR
BEYOND ANYTHING THAT THEY CAN
FIND REASONABLY IN THE
MARKETPLACE- FURTHERMORE WHAT
WE'VE SEEN. IS THAT THAT WHERE
THESE PHYSICAL KIOSKS TEND TO BE
LOCATED- TENDS TO SKEW VERY
HEAVILY INTO. LOWER INCOME LOWER
SCS NEIGHBORHOODS- THIS IS- IN
FACT IF YOU DO AN OVERLAY OF
WHERE THE PHYSICAL LOCATION OF
MADE THESE KIOSKS ARE YOU FIND
IT IT REALLY LOOKS A LOT LIKE-
WHERE MANY PAYDAY LENDING
OPERATIONS ARE. THAT'S NOT AN
ACCIDENT I WOULD DOUBT- YOU HAVE
LAW ENFORCEMENT CONCERNS YOU
HAVE FBI IT'S BECOME A BIT OF A
HUB FOR MONEY LAUNDERING AND
OTHER KIND OF NEFARIOUS
ACTIVITIES. THE FEDERAL
GOVERNMENT HAS AS RAISE THIS
ISSUE AND SO THE APPROACH OF THE
BILL HERE WHICH WE THINK IS VERY
REASONABLE IS TO HAVE SOME BASIC
RULES IN PLACE. SO THAT
CONSUMERS ARE CHARGED A
REASONABLE AMOUNT IF THEY CHOOSE
TO GET IN HERE- AND- IT WILL WE
ARE LIKE THE AUTHOR AND THE ARE-
INTERESTED ENGAGING IN FUTURE
CONVERSATIONS AS THIS MOVE MOVES
THROUGH THE PROCESS- THE
ANALYSIS ALSO POINTS OUT THAT.
SOME OF THE RHETORIC THAT YOU
HEAR ABOUT FINANCIAL INCLUSION
AND I THINK THE ANALYSIS DOES A
VERY GOOD JOB POINTING OUT
STUDIES BY THE BROOKINGS
INSTITUTION AND B. I. S. WHICH
ESSENTIALLY SAID THAT WE'RE NOT
SEEING THAT HERE. SO SOME OF THE
PROMISES THAT YOU HEAR THAT
SURROUND NOTCHES THIS MICRO
ISSUE BUT THE LARGER ISSUE
RELATING TO CRYPTO- REALLY HAVE
BEEN BORNE OUT BY ANY REASONABLE
DATA OR FACTS. SO WITH THAT WE
WOULD URGE THE MEMBERS TO
SUPPORT THE BILL- TODAY THANK
YOU VERY MUCH. IS THERE ANOTHER
OF. LEAD WITNESS. IN SUPPORT. I
THOUGHT YOU INDICATED THERE WERE
TWO SORRY THIS IS ONE OKAY I
MISUNDERSTOOD- SO LET'S HEAR
FROM ANY OTHER- PEOPLE- IN THE
ROOM THAT SUPPORT. SB. FOUR ONE-
SEEING NONE THEN- WE WILL GO TO
THE- LEAD WITNESSES IN
OPPOSITION. GOOD AFTERNOON THANK
YOU MR VICE CHAIRMAN COMMITTEE
MEMBERS HI MY NAME IS JOSEPH
YOUR CALL ON THE FOUNDER
PRESIDENT OF THE AML REGULATORY
COMPLIANCE CONSULTANCY SERVING
THE CRYPTO SPACE. SINCE TWENTY
FIFTEEN OVER THE PAST EIGHT
YEARS I'VE WORKED WITH HUNDREDS
OF CRYPTO FINANCIAL INSTITUTIONS
INCLUDING KIOSK OPERATORS
CRYPTOCURRENCY CHAOS IN
CALIFORNIA SUBJECT TO ROBUST
REGULATION AT THE FEDERAL LEVEL
TO ENSURE THAT THESE BUSINESSES
OPERATE IN A SAFE AND SECURE
MANNER. THESE REGULATIONS HELP
TO PREVENT DETECT AND DETER
LISTED TRANSACTIONS WHILE ALSO
PROVIDING PROTECTIONS FOR
CONSUMERS. THIS IS WHY THE MOST
RECENT CRIME REPORT DONE BY
CHAINALYSIS HIGHLIGHTS ONLY 1%
OF FRAUD AND SCAM CASES IN THE
CRYPTO ECOSYSTEM ARE PERPETRATED
BY USING A CRYPTO KIOSK. ONE OF
THE PRIMARY FEDERAL REGULATIONS
THE CRYPTOCURRENCY KIOSK
COMPANIES MUST COMPLY WITH IS
THE BANK SECRECY ACT. UNDER THIS
ACT OF THESE COMPANIES MUST
VERIFY THE IDENTITIES OF THEIR
CUSTOMERS RETAIN CUSTOMER AND
TRANSACTION RECORDS TRAIN ALL
EMPLOYEES ON AML AND UNDERGO
INDEPENDENT FEDERAL EXAMINATIONS
THESE ARE MANY MORE REGULATIONS
AND COMPLIANCE EXPECTATIONS ARE
ENFORCED BY THE FINANCIAL CRIMES
ENFORCEMENT NETWORK OR FINCEN
WHICH IS A PAIR OF THE UNITED
STATES TREASURY. KIOSK OPERATORS
MUST DETECT INVESTIGATE AND
REPORT POTENTIAL SUSPICIOUS OR
UNUSUAL ACTIVITY BY FILING
WHAT'S KNOWN AS A SAR OR
SUSPICIOUS ACTIVITY REPORT WITH
VINCENT. LAW ENFORCEMENT ACROSS
THE UNITED STATES HAS ACCESS TO
THE SARS AND REGULARLY RELIES ON
SARS TO FURTHER CRIMINAL
INVESTIGATIONS. HELP IDENTIFY
AND REACH OUT TO VICTIMS AND
ADDITIONALLY THE STATE MONEY
TRANSMITTER REGULATORY
AUTHORITIES ALSO HAVE ACCESS. TO
THE STARS FOR PURPOSES OF
EXAMINATION. APID AMMO OF WHAT
IN HER TREMENDOUS POSITIVE. FOR
BOTH MEMBERS OF LAW ENFORCEMENT
IN KIOSK OPERATORS ABOUT THIS
COOPERATIVE IN PROFESSIONAL
PARTNERSHIP. THE OPERATORS WE
WORK WITH AND REPRESENT WANT TO
MAKE SURE CONSUMERS FEEL SAFE
WHILE USING THESE MACHINES. AND
WE SUPPORT A LICENSING REGIME
SPECIFIC THE CALIFORNIA HOWEVER
WE THINK THAT THERE ARE OTHER
PROTECTIONS THAT CAN BE
CONSIDERED. MANY OF WHICH ARE
OUTLINED IN THE COMMITTEE'S
ANALYSIS THAT WOULD ACTUALLY
PROTECT CONSUMERS. VERSUS BUYING
THESE MACHINES FROM OUR STATE.
THANK YOU. THANK YOU- IS THERE
ANOTHER LEAD WITNESS IN
OPPOSITION. GOOD AFTERNOON- GOOD
AFTERNOON CHAIR AND COMMITTEE
TWO MINUTES TWO MINUTES GREAT
THANKS- MY NAME'S CHRIS GROSJEAN
I'M FROM SAN DIEGO I AM A-
CRYPTOCURRENCY FRAUD
INVESTIGATOR SO PRIVATE I. AM I
ALSO DO COMPLIANCE AS A SERVICE
FOR A LOT OF THESE CREEK TO
FINANCIAL INSTITUTIONS. AS WELL
AS HELP THE MAIN OPERA OBTAINED.
IF YOU'RE A MONEY TRANSMITTER
LICENSES- I WANTED TO POINT OUT
HERE THAT- THE REAL ISSUE IS
THAT CRYPTOCURRENCY KIOSKS DO
NOT PROVIDE THE SAME SERVICES.
AS A TRADITIONAL ATM THEY DO NOT
ALLOW CUSTOMERS TO ACCESS THEIR
OWN FUNDS. THEY PROVIDE A POINT
OF SALE AND AN INSTANTANEOUS
ACCESS POINT FOR PEOPLE TO
PURCHASE OR SELL BITCOIN AND
CRYPTOCURRENCY. RIGHT THE
EXCHANGES DO NOT. NECESSARILY
HAVE THE INSTANTANEOUS FEATURE
THAT FOLKS ARE LOOKING FOR. AND
SO THIS IS ONE OF THE KEY
FACTORS THAT MAKES THE
DIFFERENCE BETWEEN WHAT A
BITCOIN ATM AS IN A REGULAR
EIGHTY- I WANT I AM IN THE
OFFICE OPPOSITION OF US BEFORE
ONE BEFORE. I WANTED TO MAKE
SURE THAT EVERYBODY KNEW THAT
THESE BUT WHAT THE DIFFERENCE
WAS BETWEEN THE KIOSK AND- AND A
BIG ONE ATM OR A BIG MADE HIM IN
A REGULAR TÌM. UP SO THEY GIVE
UP ON AN OFF RAMP FOR PEOPLE IN
A VERY CONVENIENT AND EASY WAY.
USUALLY THROUGH MOM AND POP
SHOPS. GROCERY STORES
CONVENIENCE STORES THESE FOLKS
ARE ALSO TEND TO GET IN INCOME
FROM THE SO THE POTENTIAL
DOWNSIDE OF THIS IS THAT SMALL
BUSINESS OWNERS ARE ALSO GOING
TO LOSE. AND ACROSS THE COUNTRY
OVER TWENTY MILLION DOLLARS IN
REVENUE ACROSS AND THE STATE
ALONE IS PROBABLY CLOSER TO
THREE TO FIVE MILLION DOLLARS-
THE ISSUES WE HAVE WITH THE BILL
ARE THE FEES THE CAP FEE-
DOESN'T MAKE ANY SENSE FROM THE
PERSPECTIVE OF THE BUSINESS YES
ONLINE EXCHANGES. PROVIDE LOWER
EXCHANGE RATES BUT THEY DO NOT
GIVE YOU THE INSTANTANEOUS
ACCESS. MORE MY CLIENTS BY BIG
COIN FROM AN EXCHANGE TO SELL
THROUGH THEIR KIOSKS THERE THEY
ARE CHARGED A PERCENTAGE USUALLY
ANYWHERE BETWEEN POINT SEVEN
FIVE ONE PERCENT. OF ITS CAP TO
RADI LOST HALF THAT DOESN'T
INCLUDE THEIR MAINTENANCE THEIR
MARKETING INSURANCE AML
COMPLIANCE. CASH MANAGEMENT THE
FEES THAT THE BANKS CHARGE THEM
TO MAINTAIN AND OPERATE ACCOUNT.
THOSE THINGS JUST MAKE IT
IMPOSSIBLE TO OPERATE AT TWO
PERCENT. SECONDLY THE DEPOSIT
WITHDRAWAL LIMITS OF A THOUSAND
DOLLARS DO NOT ACTUALLY FIX.
FRAUD ISSUES- FRAUD WILL JUST GO
ONLINE IT'S STILL GOING TO BE
THE SAME THING. JUST IN A
DIFFERENT FORM TO WHICH WE WILL
THEN IF YOU COULD FIGURE TO WRAP
UP. THE THIRD THING AND LASTLY
IS BASICALLY THAT THE KIOSK THAT
MANDATING IT TO A KIOSK. IS CASH
INTENSIVE BECAUSE THE KIOSK DO
NOT OFFER ALWAYS OPERATE. IN A
WAY THAT THE MONEY GOING IN IS
THE SAME MONEY WITHDRAWN. WHICH
MEANS THERE'S TWO SEPARATE SETS
OF CASH IN THE MACHINE WHICH
MEANS IT'S VERY CAPITAL
INTENSIVE FOR OPERATORS TO
MAINTAIN. OVERALL THIS BILL IS-
BASICALLY DETRIMENTAL TO THE
CRYPTOCURRENCY INDUSTRY. AND IT
SHOWS THAT THERE'S NOT ENOUGH
UNDERSTANDING OF HOW THESE KIOSK
OPERATORS ACTUALLY WORK. AND I
AM IN OPPOSITION OF THIS BILL
INTO IT. UNLESS IT GETS AMEND
THANK YOU. THANK YOU. ARE THERE
ANY OTHER- PEOPLE IN THE ROOM
OPPOSE- THIS WILL BE- ME TO.
FORMAT NAME ORGANIZATION.
CHARLES BELT ACTIVE DIRECTOR
BLOCKCHAIN ADVOCACY COALITION-
WE OPPOSE UNLESS AMENDED.
ANYBODY ELSE- SEEING NO ONE. WE
WILL NOW MOVE TO- WITNESSES
WAITING TO TESTIFY. THE- THE-
TELECONFERENCE- SERVICE
MODERATOR IF YOU WOULD PLEASE
PROMPT THE INDIVIDUALS WAITING
TO TESTIFY IN SUPPORT OR
OPPOSITION OF SP FOUR OH ONE.
WILL BEGIN. THANK YOU LADIES AND
GENTLEMAN ON THE PHONE LINES IF
YOU WISH TO MAKE A PUBLIC
COMMENT ON. SB FOUR ONE IN
SUPPORT. OR OPPOSITION PLEASE
PRESS ONE ZERO AT THIS TIME. AND
WE DO HAVE ONE OR TWO GIVING UP
ONE MOMENT WE'LL GO TO LINE TWO
FIFTY TWO PLEASE GO AHEAD. YEAH
AB ONE CAMEL CALIFORNIA BECAUSE
WE WON'T FOR EXAMPLE. IN REFORM
. THANK YOU. I'M SORRY MA'AM I
DO APOLOGIZE I JUST NEED TO GIVE
YOU YOUR LINE NUMBER WHICH
NUMBER TO OUR LIVER COLON
EXCITED OVER THE CONFERENCE.
QUOTE ALL RIGHT. WILL BE WITH US
IN ONE MOMENT PLEASE.
YOU SHOULD BE WITH SOMEONE WILL
. MY TO SIXTY NINE PLEASE GO
AHEAD. HI THIS IS BRUCE WERE
LOWER AMONG SECTION OF DIRECTOR
FOR THE NATIONALLY TM COUNCIL
AND I WANT TO EXPRESS- OR REPORT
FOR THE SENTIMENTS OF THE BILL
BUT OUR OPPOSITION TO THE BILL
AS CURRENTLY WRITTEN APPS
AMENDMENT. WE LOOK FORWARD TO
WORKING WITH THE COMMITTEE TO
ADDRESS OUR OCEANS THANK YOU
THANK YOU. MODERATORS THAT
EVERYBODY ON THE PHONE LINES YES
THAT IS MISTER CHAIR THANK YOU
THANK YOU VERY MUCH NOW WILL
BRING IT BACK TO THE COMMITTEE
DOES ANYBODY HAVE ANY COMMENTS I
WOULD JUST SAY BY THE WAY THAT-
I AM ALWAYS UNCOMFORTABLE VOTING
ON A BILL THAT IN ITS FORM HI I
CANNOT SUPPORT. BUT I ENCOURAGE
YOU TO- WORK TO AMENDED TO MAKE
IT- AN ACCEPTABLE BILL SO I JUST
WILL LAY OFF FOR THAT REASON SO
. SENATOR MATT QUESTION IF I MAY
WITH THE SECOND WITNESS. THANK
YEAH AND I GOT MY HIGH-
CRISSCROSS ON FROM CONSTRUCTIVE
SAN DIEGO THANK YOU- WHAT WOULD
BE THE RIGHT THE PERCENTAGE OR
NUMBER. IN YOUR MIND. THAT'S A
GREAT QUESTION I HATE THE PIGEON
HOLE THE INDUSTRY BY PICKING A
NUMBER BUT WHAT I WOULD SAY YOU
CAN GO BALLPARK I JUST. CURIOUS
TRUE BUT WHAT I WOULD LIKE TO
SAY IS THAT THIS IS A FREE
MARKET AND SO IF I GO DOWN THE
STREET IN SOMEONE'S CHARGING
SEVENTEEN OR TWENTY PERCENT.
DOESN'T MEAN THAT I HAVE TO USE
THAT SERVICE I CAN GO TO ANOTHER
PLACE THAT'S CHARGING SEVEN TO
TEN FREE MARKET WITH USURY LAWS
BUT YEAH GO AHEAD. ARE THERE TO
ME IT'S THE NUMBER THAT MAKES
SENSE FOR THE BUSINESS IN ORDER
TO NOT OPERATE AT A LOSS.
USUALLY AND I UNDERSTAND I'M
ASKING YOU YOU HAVE A NUMBER IN
YOUR MIND FOR YOUR MACHINES THAT
MIGHT FILL THAT. ARE IT I REALLY
COULDN'T GIVE A NUMBER PER SE
BECAUSE IT'S AND IT'S TO BUT I
WOULD IT'S DEFINITELY IN THE-
OVER SEVEN TWO SO PROBABLY 20%
RANGE. IT REALLY JUST DEPENDS ON
THE OPERATION. IN WELL A I WOULD
JUST POINT. IT THE POINT AND
JUST SUGGESTED EARLIER THAT WE-
IT WE HAVE A FREE MARKET BUT IT
THAT IT IMPLIES COMPETITIVENESS
IT ALSO COMPLY IMPLIES. THAT
THERE ARE BASIC LAWS ON ABUSE
INCLUDING USURY CAPS BUT I
APPRECIATE THE ANSWER TO THAT- I
SUSPECT IN SOME WAYS WE MIGHT
GIVEN WHAT THIS IS JUST HAPPEN
WITH THE CRYPTOCURRENCY. BE
TRYING TO REGULATE THE VHS
MACHINE BUT THAT'S OKAY THAT'S
NOT MY PROBLEM- I WOULD ALSO
JUST NOTE FOR THE RECORD THAT I
DON'T THINK THIS IS LIKE A TÌM
JUST GIVEN THE HUGE VOLATILITY
WE SEE WITH CRYPTOCURRENCY. I
WHEN I GET CASH OUT OF THE
MACHINE I DON'T EXPECTED TO GO
UP 20% OR DOWN 20% IN A DAY- BUT
THAT ALL BEING SAID I.
APPRECIATE THE AUTHOR'S- IT
STATED INTENT TO WORK ON THE
FIFTY CAPS PIECE OF THIS THAT'S
THE PART THEY GAVE ME CONCERNED
SO WITH THAT COMMITMENT IN MIND
IN UNDERSTANDING HEARING FROM
YOU THAT THAT THIS IS KIND OF A
MOVING TARGET A LOT OF WAYS AND
KNOWING THE AUTHOR HERE I'M
GONNA. VOTE FOR THE BILL TODAY.
ANY OTHER QUESTIONS OR COMMENTS
. THE R. THE BILL HAS BEEN
MOVED- AND- CENTER DO YOU HAVE A
CLOSE I RESPECTFULLY ASK FOR
ABBOTT. THAT'S A CLOSE. THANK
YOU VERY MUCH. SO THE MOTION IS
TO PASS BUT FIRST- RE REFER TO
THE COMMITTEE ON APPROPRIATIONS.
PLEASE CALL THE ROLL. MOTIONS TO
PASS THAT FIRST BE REFERRED TO
THE COMMITTEE ON APPROPRIATIONS
CENTRE LIMÓN I. THE MAN HI NILA.
NOT VOTING. BRADFORD BRADFORD I
GOT A YELLOW. MAN I'VE BEEN I.
WENT PORTANTINO. PORTANTINO I.
WE WERE. THIS AT THE ONE. PERSON
THIS. THE A PATH. TO OKAY TORI.
YEAH THE OTHER BILL IS ON CALL.
WITH KIND. OF LIKE THE. WE HAVE
A COUPLE OTHER THINGS COULD
HAPPEN I DON'T KNOW THANK YOU
HAVE A YEAH. WITH THE- ON OFF
OKAY. THANK YOU THANK YOU SO
MUCH TO OUR VICE CHAIR NOW WE
ARE GOING TO LIFT THE CALL UP
FOR AND SB THREE THREE AND HAVE
FOLKS- ADD ON TO THAT. SENATE
BILL. THIRTY THREE. SENATE BILL
THIRTY THREE DO PASSED THAT
FIRST BE REFERRED TO THE
COMMITTEE ON JUDICIARY CENTER
LIMÓN IS VOTING I. BRADFORD
PORTANTINO PORTANTINO HI FOLKS
THAT. ALL RIGHT- THAT BILL HAS
SIX VOTES. AND WE ALSO HAVE THE
CONSENT CALENDAR. CONSENT
CALENDAR- SENATOR WENT. WHEN I
PORTANTINO PORTANTINO AYE
ASSEMBLY. ALL RIGHT TO THE
CONSENT CALENDAR HAS SEVEN VOTES
. AND WE WILL GO AHEAD AND WAIT
FOR ANY ABSENT MEMBERS. YEAH.
OUR R. EIGHT WHICH WOULD WE WILL
OPEN THE ROLE FOR SB FOUR OH
ONE. SENATE BILL FOR A WOMAN TO
PASS AS AMENDED THAT FIRST- I'M
SORRY TO PASS BUT FIRST BE
REFERRED TO COMMITTEE ON
APPROPRIATIONS SENATOR LIMÓN
VOTED I CENTER CUT. CABALLERO I
. ALL RIGHT THAT BILL IS OUT OUT
WITH FIVE VOTES AND NOW WE WILL
GO AHEAD AND- ADJOURN ARE A
HEARING UP FOR SENATE AND
BANKING AND FINANCIAL
INSTITUTIONS.