ALRP RIGHT. THE SENATE COMMITTEE
ON BANKING AND FINANCIAL
INSTITUTIONS WILL COME TO ORDER
ON TODAY'S AGENDA. WE HAVE ONE
BILL, I'D LIKE TO WELCOME ALL
THE MEMBERS BACK, AND ALSO WE
HAVE SOMEONE HERE WHO IS A SUB
TODAY, SO WELCOME TO THE BANKING
AND FINANCE COMMITTEE, SENATOR
MENJIVAR. BEFORE WE HEAR FROM
OUR AUTHOR TODAY. I WOULD LIKE
TO ESTABLISH ROLL COSTS. IF WE
COULD PLEASE CALL THE ROLL.
SENATOR LIMÓN HERE AMOUNT HERE.
NEIL 00 HERE, BRADFORD BRADFORD
HERE, CABALLERO. MENJIVAR ARE
HERE. MEN IN HERE WHEN. ALL
RIGHT. THANK YOU. WE ARE GOING
TO GO AHEAD AND BEGIN OUR
HEARING, AND WE DO HAVE ONE
SECOND WHILE WE DO THAT, WE
DON'T HAVE ANY, UM BILLS ON
CONSENT.
ALRIGHT SO WE'RE GONNA GO AHEAD
AND BEGIN AND WE WELCOME SENATOR
GLASER, WHO IS GOING TO PRESENT
HIS BILL. SENATE BILL 869. YOU
MAY BEGIN WHEN YOU'RE READY.
THANK YOU. THANK YOU, MADAM
CHAIR AND MEMBERS. AH! FIRST I
WANT TO ACCEPT THE AMENDMENTS,
AS SUGGESTED BY IN THE ANALYSIS
ALSO WANT TO THANK THE COMMITTEE
STAFF. AND YOU, MADAM CHAIR FOR
YOUR GREAT WORK ON THIS ISSUE.
WE BEGAN THESE CONVERSATIONS A
YEAR AGO, ACTUALLY. AND, UM. I
WAS SAYING IN AN EARLIER
COMMITTEE. IT'S NOT ALWAYS EASY
TO CALL YOURSELF. CALL YOUR YOU
KNOW, MEASURE YOU'RE DOING A TWO
YEAR BILL. BUT WE'VE ALSO MADE
THAT CALL ON THIS MEASURE LAST
YEAR TO TAKE THE TIME. TO TRY TO
DO IT RIGHT. IN THE PAST FEW
YEARS. I'VE INTRODUCED TWO BILLS
LEGISLATING IN THIS ALTERNATIVE
COMMERCIAL FINANCING. AREA BOTH
OF WHICH HAD BEEN SIGNED INTO
LAW. IN 2018 SP 1235 CREATED THE
FIRST IN THE NATION. TRUTH AND
LENDING DISCLOSURES FOR SMALL
BUSINESS BORROWERS. THAT WAS
FOLLOWED UP THIS PAST YEAR BY SP
33. WHICH REMOVED A SUNSET
PROVISION OF THE 1235.
REQUIREMENT THAT COMMERCIAL
FINANCE PROVIDERS DISCLOSE THE
TOTAL COST OF FINANCING AS AN
ESTIMATED A PR AND THAT BRINGS
US TO THE BILL. THAT'S BEFORE
YOU TODAY. AH AS SMALL BUSINESS
BORROWERS HAVE INCREASINGLY
INCREASINGLY STRUGGLED TO ACCESS
TRADITIONAL BANK LOANS. THEY
HAVE RESORTED TO ALTERNATIVE
FORMS OF FINANCING TO START,
MAINTAIN AND GROW THEIR
BUSINESSES. ALTERNATIVE
FINANCING PRODUCTS. INCLUDE AND
THIS IS, I KNOW AN EDUCATION FOR
YOU. AND FOR MANY THESE
ALTERNATIVE FINANCING PRODUCTS
INCLUDE MERCHANT ADVANCES,
FACTORING LEAST FINANCING. ALL
OF WHICH ARE STRUCTURED IN WAYS
THAT DO NOT MAKE THEM QUOTE
UNQUOTE LOANS. WHILE THESE FORMS
OF FINANCING ARE A VIBRANT PART
OF THE MARKET. THE PROVIDERS AND
THE BROKERS HAVE GONE
UNREGULATED. LEAVING BORROWERS
UNPROTECTED. AND UNFORTUNATELY
THE GAPS IN CALIFORNIA'S
COMMERCIAL FINANCING LAWS HAVE
ALLOWED SOME BAD ACTORS TO TAKE
ADVANTAGE OF SMALL BUSINESS
BORROWERS. AT TIMES.
UNSCRUPULOUS ACTOR STEER SMALL
BUSINESS BORROWERS INTO HIGHER
COST FINANCING SO THEY CAN GET A
BETTER COMMISSION. BORROWERS
HAVE BEEN KNOWN TO BE ENCOURAGED
TO SIGN FINANCING CONTRACTS WITH
CLAUSES THAT WAIVE THEIR RIGHT
TO LEGAL REPRESENTATION AND
PROPER COURT PROCEDURES. SO THIS
BILL BEFORE YOU TODAY LEVELS,
THE PLAYING FIELD FOR LOAN AND
NON LOAN PRODUCTS. BY REQUIRING
LICENSE SURE FOR BROKERS AND
COMMERCIAL FINANCE PROVIDERS. IT
REGULATES PREDATORY BROKER
PRACTICES. AND IT CLOSES
LOOPHOLES IN OUR CALIFORNIA
COMMERCIAL FINANCING LAW. UNDER
THIS BILL, COMMERCIAL FINANCE
PROVIDERS AND BROKERS. WOULD
NEED TO OBTAIN A LICENSE FROM
THE DEPARTMENT OF FINANCIAL
PROTECTION AND INNOVATION IN
ORDER TO OPERATE IN THE STATE
WHILE ALSO PAYING LICENSING
FEES. IT REQUIRES LICENSURE
REMOVES THE UNFAIR ADVANTAGE
REQUIRING LICENSURE REMOVES THE
UNFAIR ADVANTAGE THAT
UNREGULATED AND NON LOAN
FINANCING COMPANIES HAVE OVER
REGULATED LENDERS. LEVELING THE
PLAYING FIELD FOR STAKEHOLDERS.
THE BILL ALSO REGULATES
PREDATORY PRACTICES. SUCH AS
SOME BROKERS ACTING AS QUOTE
MERCHANT CASH ADVANCE MILLS THAT
FOCUS ON PLACING APPLICANTS INTO
HIGH RATE FINANCING. NOW IT DOES
THIS BY REQUIRING THAT BROKERS
PROMINENTLY DISCLOSED THE
AVERAGE MINIMUM AND MAXIMUM A PR
FOR THE FINANCING THEY PLACED
CLIENTS INTO IN THE PREVIOUS
CALENDAR YEAR SO BORROWERS CAN
COMPARE BROKERS DO YOU THINK
ABOUT IT? WITH YOUR NEW BUSINESS
OR A BUSINESS THAT HAS SOMETHING
THAT BREAKS DOWN. YOU'VE GOT
PIZZA BUSINESS. AND THE PIZZA
OVEN BREAKS DOWN. AND YOU NEED A
NEW PIZZA OVEN IF YOU'RE GOING
TO KEEP DOING YOUR WORK AND YOU
GO TO A BROKER OR A LENDER
TRYING TO SEE IF YOU CAN BORROW
MONEY IN AN URGENT SITUATION.
HOW DO YOU COMPARE THAT BLENDER
AND THAT BROKERS OFFERINGS WITH
SOMEONE ELSE? AND IT'S A PLACE
OF GREAT VULNERABILITY. FOR ANY
SMALL BUSINESS PERSON. AND OF
COURSE, THE WHAT'S REALLY
IMPORTANT THERE IS THAT THEY CAN
COMPARISON SHOP. THEY CAN SEE
WHAT THE MARKETPLACES OFFERING
AND NOT BE MANEUVERED INTO A
PLACE WHERE FOR THE BENEFIT OF
THE LENDER. THEY'RE GOING TO
MAKE MORE MONEY OR THEY'RE GOING
TO MAKE A GREATER COMMISSION.
NOW. MY BILL ALSO CLOSES
LOOPHOLES IN OUR CURRENT LAW. BY
PROHIBITING ANY ACTION THAT HE
CONSTRUED AS A CONFESSION OF
JUDGMENT. CONFESSIONS OF
JUDGMENT PROHIBIT BORROWERS FROM
LEGAL REPRESENTATION IF THEY
DEFAULT ON A LOAN. NOW
CONFESSIONS OF JUDGMENT. I KNOW
THESE ARE TERMS THAT MAYBE
YOU'RE NOT ALL FAMILIAR WITH AND
I CERTAINLY HAVE LEARNED A LOT
IN HIS SPACE. CONFESSIONS OF
JUDGMENT WERE ACTUALLY
PROHIBITED IN CALIFORNIA IN
2022. BUT SOME COMMERCIAL
FINANCE PROVIDERS FOUND
LOOPHOLES. BY RESTRUCTURING,
LANGUAGE AND CONTRACTS TO CREATE
SIMILAR TOURS, TOOLS THAT WAVE
OF BORROWERS RIGHT TO LEGAL
REPRESENTATION AND PROPER COURT
PROCEDURE. AND THAT GETS FIXED
IN THIS BILL. NOW THERE ARE
CONTINUING CONVERSATIONS ABOUT A
PART OF THIS BILL WE'RE GOING TO
HEAR FROM. I KNOW THERE'S STILL
SOME OPPONENTS OUT THEIR
SUPPORTERS, BUT THERE ARE STILL
SOME OPPONENTS. THAT REQUIRE
BROKERS TO DISCLOSE AT THE
MOMENT OF PROVIDING FINANCING
OFFERS THE LOWEST POSSIBLE A PR
RECIPIENT MAY QUALIFY FOR AND I
COMMIT TO YOU THAT I'LL CONTINUE
TO WORK WITH OPPOSITION AND
STAKEHOLDERS TO ENSURE THAT
SMALL BUSINESS BORROWERS ARE
PROTECTED. WITH ME TODAY. I HAVE
TWO WITNESSES, AND I APPRECIATE
THAT. THANK YOU FOR GIVING ME
THE TIME TO KIND OF EXPLAIN THIS
BILL. IT'S IT CAN BE VERY
COMPLICATED. I HAVE TWO
WITNESSES TODAY. HEIDI PICKMAN
ON BEHALF OF THE CALIFORNIA
ASSOCIATION FOR MICRO ENTERPRISE
OPPORTUNITY, CAMILO. AND I
ALLOWING THEM TO COME TO THE
TABLE. OKAY SO HEIDI CAN CAN
COME FORWARD AND LOUISE CADDIES.
UH PACK IS A SENIOR FELLOW AT
THE NATIONAL COMMUNITY
REINVESTMENT COALITION AND A
FORMER FINTECH SMALL BUSINESS
FINANCING EXECUTIVE ALSO HERE IN
SUPPORT WITH THAT, RESPECTFULLY
ASK YOUR SUPPORT TODAY. GREAT
THANK YOU. NOW WE WILL HEAR FROM
WITNESSES IN SUPPORT. CHAIRMAN
CHAIRMAN LEE LIMÓN VICE CHAIR IN
YELLOW AND MEMBERS OF THE
COMMITTEE. GOOD AFTERNOON. KIMIO
IS A STATEWIDE NETWORK OF
BUSINESS SERVICE PROVIDERS IN
COMMUNITY LENDERS AND A STRONG
SUPPORTER OF SB 869. WE COMMEND
SENATOR GLAZER AND THE ENTIRE
CALIFORNIA LEGISLATURE AND
GOVERNOR NEWSOM FOR LEADING THE
COUNTRY. AND IN RESPONSIBLE
SMALL BUSINESS LENDING PRACTICES
. SB 869 CONTINUES THAT
LEADERSHIP. IT DOES THREE THINGS
IT REGULARLY REGULATES PREDATORY
PRACTICES BY BROKERS LEVELS, THE
PLAYING FIELD OR FOR LOAN AND
NON LOAN PRODUCTS AND CLOSES
LOOPHOLES IN OUR CURRENT LAW.
WORKING BACKWARDS CALIFORNIA'S
TRANSPARENT PRICE DISCLOSURE
REGULATIONS ARE GROUND BAKING
AND THE LEGISLATURE VOTED
UNANIMOUSLY LAST YEAR TO MAKE
THEM PERMANENTLY. THEY STILL
CONTAIN A FEW LOOPHOLES THAT
ENABLE BAD ACTORS TO QUOTE
MISLEADINGLY LOW PRICES WITHOUT
THE D F P I DEPARTMENT OF
FINANCIAL PROTECTION AND
INNOVATION, EVEN KNOWING THEY
ASKED THAT ACTORS TO POLICE
THEMSELVES AND SLAP THEIR OWN
WRISTS D F P. I ACKNOWLEDGE THE
NEED TO CORRECT THIS IN THE REAL
MAKING PROCESS, AND SB 869 DOES
JUST THAT AND ADDRESSES THIS
NEEDED FIX AND CLOSES SEVERAL
OTHER LOOPHOLES THAT NEW YORK
STATE CLOSED WHEN IT PASSED ITS
DISCLOSURE LAW, WHICH WAS BASED
ON CALIFORNIA'S SMALL BUSINESSES
NEED ACCESS TO CAPITAL AND
BELIEVE IT OR NOT, ARE SMALL
BUSINESSES MAY KNOW THEIR
BUSINESS. THEY MAY KNOW HOW TO
MAKE GREAT PIZZA. THEY MAY KNOW
THEIR CUSTOMERS, BUT THE SMALL
BUSINESSES FROM OUR EXPERIENCE
AND OUR MEMBERS, UM, DEAL WITH
APPROXIMATELY 150,000 SMALL
BUSINESSES EVERY YEAR. THEY'RE
NOT THEIR FINANCIAL ACUMEN IS
NOT THAT OF A CFOS OR SOMEBODY
WHO WOULD ACTUALLY SO MOST SMALL
BUSINESSES THAT WE'RE TALKING
ABOUT THEIR UNDER SMALL THEY'RE
UNDER 10 EMPLOYEES, AND THEY'RE
SMALL, AND THEY DON'T HAVE THE
FINANCIAL ACUMEN SO THEY NEED
ACCESS TO CAPITAL. WHETHER IT'S
ALONE OR NON LOAN PRODUCT AND
THE REGULATORY THEY DON'T
NECESSARILY DISTINGUISH IT IN
THE REGULAR. REGULATORY
FRAMEWORK SHOULDN'T DISTINGUISH
THE DIFFERENCE AND SHOULD TREAT
THE PRODUCTS THE SAME. SB 869
TAKES AWAY THIS UNFAIR ADVANTAGE
THAT UNREGULATED NON LOAN
FINANCING COMPANIES HAVE
OVERREGULATED LENDERS BY
PROVIDING ALL TYPES OF SMALL
BUSINESS FINANCING COMPANIES
WITH THE SAME ROLES TO PLAY BY
HALLMARK OF MARKET COMPETITION.
ADDITIONALLY THE BILL PRESENTS
SEVERAL OTHER PREVENTS SEVERAL
OTHER PREDATORY PRACTICES THAT
TAKES ADVANTAGE OF SMALL
BUSINESSES THAT SENATOR THE
SENATOR MENTIONED SUCH AS, UM
SKIRTING AROUND THE CALIFORNIA
CALIFORNIA'S BAN AND CONFESSIONS
OF JUDGMENT AND CONFIDENTIALITY
CLAUSES THAT MAY BULLY SMALL
BUSINESSES FROM SPEAKING OUT IF
THEY'RE VICTIMIZED, CLOSING
LOOPHOLES AND CREATING A
COMPETITIVE MARKET FOR SMALL
BUSINESS FINANCING WILL CATALYZE
GOOD LENDING TO SMALL
BUSINESSES. THE OPPOSITION WANTS
TO NARROW THE BILL, SO LOOPHOLES
REMAIN AND REMAIN UNREGULATED.
THEY ARE THE SAME OPPOSITION WHO
UNSUCCESSFULLY SUED CALIFORNIA
LAST YEAR TO OVERTURN ARE
TRANSPARENT PRICE DISCLOSURE
REGULATIONS. THE SAME
REGULATIONS THIS LEGISLATIVE
VOTED UNANIMOUSLY TO PASS LAST
YEAR AND PRESERVE UM, NEXT, MY
COLLEAGUE. WE'LL TALK ABOUT THE
THIRD THING, AND THAT'S RAINING
AND PREDATORY PRACTICES BY
BROKERS. THANK YOU. AND I
RESPECTFULLY ASK FOR YOUR IPHONE
ON SB 869. THANK YOU. MAYBE
AGAIN. HONORABLE MEMBERS. MY
NAME IS LUIS KEYDETS PECK. I'M,
A SENIOR FELLOW AT THE NATIONAL
COMMUNITY REINVESTMENT COALITION
, WERE PART OF THE RESPONSIBLE
BUSINESS LENDING COALITION,
WHICH INCLUDES BOTH FOR PROFIT
FINANCING COMPANIES AND
NONPROFIT ADVOCATES. I'M ALSO
PERSONALLY A FORMER FINTECH
SMALL BUSINESS FINANCING
EXECUTIVE AND FORMER APPOINTED
MEMBER OF THE FEDERAL CFPB'S
CONSUMER ADVISORY BOARD. SMALL
BUSINESSES TODAY ARE ROUTINELY
STEERED BY BROKERS INTO
UNNECESSARILY EXPENSIVE
FINANCING BECAUSE IT PAYS THE
BROKER A HIGHER FEE. THIS ECHO
IS ONE OF THE CAUSES OF THE
SUBPRIME MORTGAGE CRISIS. IN
FACT, REPORTS DESCRIBE SUBPRIME
MORTGAGE BROKERS WHO LOST THEIR
MORTGAGE LICENSES SIMPLY MOVING
OVER TO THE TOTALLY UNREGULATED
WILD WEST OF SMALL BUSINESS
FINANCING. BROKERING IN
PARTICULAR. SO I'D LIKE TO WALK
YOU THROUGH AN ADVERTISEMENT.
UM, THAT'S JUST BEEN PASSED OUT.
THANK YOU FROM A MERCHANT CASH
EVENTS COMPANY TO BROKERS. SO IN
THIS ADVERTISING WHAT WE SEE
HERE IS THE FINANCING COMPANIES
OFFERING BROKERS, HUGE
COMMISSION PAYOUTS, AND IT ALSO
OFFERS BROKERS. THIS IS ALL
CAPS. MAX UPSELL 12 POINTS. SO
IN OTHER WORDS, AFTER THE
FINANCING COMPANY QUOTES A PRICE
TO THE BROKER THE BROKER THEN
TURNS AROUND AND THEY'RE
PERMITTED TO UP SELL THE
BORROWER HIDDEN FEE AS HIGH AS
THEY THINK THE BORROWER MIGHT
TAKE UP TO 12% IN THIS CASE, IS
IT 12% BROKER FEE AND WE SEE UP
TO 15% ROUTINELY. THE
ADVERTISEMENT GOES ON TO ASK
BROKERS WITH A DEAL THIS GOOD.
WHY WOULD YOU EVEN CONSIDER
SUBMITTING YOUR DEALS ELSEWHERE?
SO THIS FINANCING COMPANY IS
EXPLICITLY SAYING THAT THEY ARE
TRYING TO AVOID COMPETITION, NOT
BY ACTUALLY COMPETING AND
LOWERING THEIR PRICES BUT BY
OVERCHARGING BORROWERS SO THEY
CAN PAY BROKERS. THESE HUGE
COMMISSION PAYOUTS. THIS BILL
WOULD ALLOW THE FBI TO LICENSED
BROKERS SO THAT SMALL BUSINESSES
CAN SEEK ACCOUNTABILITY IF
THEY'RE MISTREATED, AND IT WOULD
ALSO HELP SMALL BUSINESSES
DISTINGUISH BETWEEN BROKERS THAT
OFFER THERE. THERE'S LOTS OF
GOOD BROKERS OUT THERE, AND THIS
BILL WOULD ALLOW SMALL
BUSINESSES TO DISTINGUISH
BETWEEN BROKERS THAT ARE GOING
TO HELP THEM PLACEMENT OF THE
BEST FINANCING AVAILABLE TO THEM
FROM BROKERS THAT ARE JUST THESE
MERCHANT CASH ADVANCE MILLS THAT
JUST SEND PEOPLE INTO TRIPLE
DIGIT FINANCING IT PAYS THE
BROKER OF 15% FEE. BECAUSE IT
WAS THE SENATOR DESCRIBED IT
WOULD REQUIRE BROKERS TO
DISCLOSE THE MINIMUM MAXIMUM AND
AVERAGE ÁP ARE THAT THEY PLACE
BARBRA'S IN THE PREVIOUS YEAR. I
HEARD YOU TO PASS THIS BILL.
THANK YOU. GREAT THANK YOU. NOW
THAT WE'VE HEARD FROM WITNESSES
AND SUPPORT, WE'RE GOING TO HEAR
ANY OTHERS IN THE ROOM. YOU MAY
COME UP TO THE PODIUM AND PLEASE
JUST STATE YOUR AFFILIATION AND
POSITION. GOOD AFTERNOON, MADAM
CHAIRMAN MEMBERS, CHRISTOPHER
SANCHEZ ON BEHALF OF THE RISE
ECONOMY AND STRONG SO FAR, THANK
YOU. ANY OTHER. IN SUPPORT.
ALRIGHT SEE NOBODY ELSE IN
SUPPORT IN THIS ROOM WILL NOW
MOVE ON TO LEAD LEAD WITNESSES
AND OPPOSITION. YOU MAY COME TO
THE TABLE AND YOU'RE WELCOME TO
STAY AND MOVE OVER OR JUST
GIVING A LITTLE SPACE. IT'S UP
TO YOU, WHICHEVER YOU'D LIKE.
GOOD AFTERNOON, MADAM CHAIR AND
MEMBERS, CHRIS ROSE ON BEHALF OF
RAPID FINANCE AND CAPITALISTS.
UH, FIRST OF ALL I WANT TO THANK
SENATOR GLAZER AND HIS STAFF FOR
THEIR MANY HOURS OF WORKING ON
THIS BILL. IT'S BEEN A LONG HAUL
AND THE SAME THINGS I'D LIKE TO
PASS ALONG TO MR BURDICK AND THE
COMMITTEE. WE HAD A LOT OF
CONVERSATIONS IN ALL OF OUR
INPUT WAS THOUGHTFULLY
CONSIDERED. SO WE WANT TO THANK
YOU FOR THAT, UM, WE AGREE ON
THE GOALS OF THIS BILL
WHOLEHEARTEDLY SUPPORT THE
LICENSOR OF PROVIDERS OF
COMMERCIAL FINANCING PRODUCTS IN
THE MANNER THAT'S EQUIVALENT TO
COMMERCIAL FINANCING PRODUCTS
FOR THIS PROVIDING COMMERCIAL
LOANS. SECONDLY, WE SUPPORT
COMMERCIAL FINANCING BROKERS TO
BE LICENSED IN THE SAME MANNER
EQUIVALENT TO LICENSOR OF THOSE
ENTITIES PROVIDING BROKERING TO
COMMERCIAL LOANS. AND LASTLY, WE
SUPPORT ADDING ROBUST
PROTECTIONS TO CALIFORNIA LAW,
ENSURING THAT CALIFORNIA
CONSUMERS HAVE PROTECTION FROM
UNSCRUPULOUS BEHAVIORS BY
FINANCING BROKERS. UM. HOW TO
ACCOMPLISH THESE SHARED GOALS.
THAT'S OF COURSE, THE TRICK OF
THIS BILL TO TRICK EVERY THINK
OF MOST BILLS, AND WE HAVE NOT
YET FOUND THAT HAPPY MEDIUM. UM
WE STILL HAVE A FEW OUTSTANDING
ISSUES THAT WE'RE GOING TO BE
DISCUSSING WITH SENATOR GLAZER
AND HIS STAFF AND WE LOOK
FORWARD TO DOING THAT. SO AGAIN.
THANK YOU VERY MUCH FOR
PROVIDING THAT OPPORTUNITY FOR
DISCUSSION. THANK YOU. THERE WE
GO. ALL RIGHT, PAT JOYCE ON
BEHALF OF FORWARD FINANCING,
SALES BASED COMPANY THAT WOULD
FALL INTO THE PROVIDER BUCKET
UNDER THIS NEW LICENSING
PROPOSAL PROPOSAL WE HAVEN'T
OPPOSED UNLESS AMENDED POSITION
FORWARD FINANCING SUPPORTS THE
LICENSING OF PROVIDERS AND
BROKERS AND THE STATE. GENERALLY
THINK THAT'S A GOOD THING, AND I
THINK A LOT OF THE GOALS THAT
WERE STATED BY THE AUTHOR AND
PROPONENTS. WE ALSO AGREE WITH
AND WE APPRECIATE THE AMENDMENTS
REFERENCED THE ANALYSIS AND THE
AUTHOR AGREEING TO TAKE THOSE
AMENDMENTS. THANK YOU THINK THAT
MOVES IN A BETTER POSITION. UM
AS MY COLLEAGUE, CHRIS SAID.
THERE ARE STILL SOME OUTSTANDING
ISSUES, AND I HEARD THE AUTHOR
ADDRESS ONE OR REFERENCE ONE
EARLIER ABOUT. DISCLOSING THE
LOWEST A PR. THAT'S CERTAINLY
SOMETHING THAT WE WOULD LIKE TO
CLOSELY WITH YOU ON ADDRESSING
AND FINDING SOME AGREEMENT. UM
BUT BUT FOR NOW, WE, YOU KNOW,
APPRECIATE THE CONVERSATION AND
LOOK FORWARD TO WORKING ON THIS
FURTHER. THANK YOU. GREAT. THANK
YOU. ALRIGHT ANY OTHER WITNESSES
IN OPPOSITION IN THE ROOM? SEE?
YES. IF YOU CAN JUST COME TO THE
PODIUM STATE YEAR. NAME AND
AFFILIATION, PLEASE CAROLINE
VEAL HUNTER ON BEHALF OF THE
REVENUE BASED FINANCIAL
COALITION. WE ARE ACTUALLY NOT
OPPOSED TO THE BILL, BUT WE DO
HAVE SOME CONCERNS HAVE SOME
CONCERNS THAT WE LOOK FORWARD TO
WORKING WITH THE AUTHOR ON IS
THE BILL MOVES THROUGH THE
PROCESS, AND WE APPRECIATE HIS
WILLINGNESS TO CONSIDER THOSE
CONCERNS. THANK YOU. ALRIGHT SEE
NOBODY ELSE IN THE ROOM AND
WE'LL GO AHEAD AND MOVE IT TO
OUR MEMBERS AND WE HAVE A
SENATOR. MEN. THANK YOU FOR YOUR
TESTIMONY AND APPRECIATE THE
AUTHOR BRINGING THE BILL FORWARD
. UM IT'S SOMETHING YOU KNOW.
EARLIER IN MY CAREER, I CUT MY
TEETH AS A STAFFER ON CAPITOL
HILL DURING THE 2007 TO 8
FINANCIAL CRISIS AND THEN ITS
POLICY DIRECTOR AT THE CENTER
FOR AMERICAN PROGRESS, AND IT
STRIKES ME THAT A LOT OF WHAT
WE'RE SEEING IN THE SMALL
BUSINESS LENDING SPACE AS I
THINK YOU MENTIONED AND I FORGOT
YOUR NAME AGAIN. SORRY. HMM
LEWIS? YES AS LEWIS MENTIONED,
UM YOU KNOW, YOU'RE SEEING A LOT
OF THE SAME TYPES OF PATTERNS.
SO I HAD A QUESTION AND THEN A
COMMENT, BUT THE QUESTION IS,
YOU KNOW, DURING THE SUBPRIME
MORTGAGE CRISIS, THE FINANCING
WAS TYPICALLY COMING FROM
SECURITIZATION AND THEN THE
COLLATERAL IZATION OF THAT INTO
DIFFERENT TYPES OF DERIVATIVE
PRODUCTS. WHERE IS THE FINANCING
FOR THIS COMING FROM? BECAUSE
WHEN I SEE THIS FLYER AH,
DIRECT, GIVING BROKERS A LOT OF
POINTS. UM IT SUGGESTS TO ME
THAT THAT WALL STREET'S INVOLVED
THAT THERE'S SOME KIND OF SECOND
ROBUST SECONDARY MARKET FOR
THESE TYPES OF LOANS. UM, CAN
YOU TELL ME A LITTLE BIT MORE
ABOUT WHAT'S HAPPENING WITH
THESE? AND THAT COULD BE THE
OPPOSITION AS WELL. BUT I THINK
IT'D BE WONDERFUL TO HEAR FROM
THEM, TOO. FROM WHAT I
UNDERSTAND MERCHANT CASHMAN'S
COMPANIES THEY RAISED WAREHOUSE
LINES, SOMETIMES FROM
TRADITIONAL BANKS, SOMETIMES
FROM HEDGE FUNDS. UM AND WE
COULD SHARE MORE INFORMATION
ABOUT SOME OF THE SPECIFICS.
OKAY I'D BE INTERESTED IN THAT
AS A FOLLOW UP AND YOU KNOW, ONE
OF THINGS I'VE NOTICED IN MY
COMMUNITIES IN THE ONES I
REPRESENT. IS THAT A LOT OF
THESE LOANS, ONE DO APPEAR
PREDATORY ON THEIR FACE, BOTH IN
TERMS OF THE TYPES OF PRODUCT
FEATURES THAT THEY HAVE AS WELL
AS THE TYPES OF LENDING
PRACTICES THAT ARE INVOLVED IN A
LOT OF TIMES THEY TARGET THOSE
WHO ARE LOWER FINANCIAL LITERACY
, PARTICULARLY IMMIGRANT OWNED
SMALL BUSINESSES. UH AND WE'VE
SEEN A LOT OF THIS AND THAT WAS
ONE OF THE REASONS I AUTHORED SB
666 LAST YEAR, WHICH THANKS FOR
YOUR HELP IN GETTING THAT PAST,
UM AND OBVIOUSLY DURING COVID
THE PANDEMIC, WE SAW A LOT OF
STRESS ON SMALL BUSINESSES. AH
SO I THINK THIS IS AN IMPORTANT
BILL AND I APPRECIATE THE
CONVERSATION THAT WE'RE HAVING,
BECAUSE WHEN WE'RE TALKING ABOUT
REGULATING ACCESS TO CREDIT, YOU
HAVE TO BALANCE THAT ACCESS TO
CREDIT, WHICH I THINK THE
OPPOSITION IS BRINGING UP WITH
CONSUMER PROTECTION AT THE END
OF THE DAY, AND OBVIOUSLY WE
HAVE SEEN A LOT OF EVIDENCE OF
PREDATORY LENDING. TRYING TO GET
THAT BALANCE, RIGHT IS REALLY
TRICKY. AND I KNOW YOU'RE
WORKING HARD TO TRY TO MAKE THAT
HAPPEN. BUT I WILL SUPPORT THIS
BILL, UM, WOULD MOVE THE BILL AT
THE APPROPRIATE TIME AND JUST
WANT TO THANK YOU GUYS FOR AH,
WHAT I HOPE IS A CONTINUED
ROBUST CONVERSATION GOING
FORWARD. GREAT THANK YOU VERY
MUCH. WE DO HAVE EMOTION BY A
SENATOR MIN. BUT WE WILL
CONTINUE THE CONVERSATION. I
HAVE SENATOR CAVALLERO, FOLLOWED
BY VICE CHAIRMAN MILO. THANK YOU
VERY MUCH, MADAM CHAIR. I HAVE A
COUPLE OF QUESTIONS, AND MAYBE
IT'S UM, IT'S TO THE OPPOSITION.
I GUESS. NUMBER ONE IS I DON'T
UNDERSTAND WHAT A NON LOAN. YES.
IF YOU'RE LOANING MONEY, ANY
MONEY TRANSACTION IS HAPPENING
TO ME. THAT'S ALONE. SO I'M JUST
WONDERING FIRST IS, YOU KNOW
WE'VE SET UP THIS CATEGORY OF
NON A NON LOAN, BUT THE OTHER IS
WHAT'S THE ISSUE AROUND THE
LOWEST A PR? I DON'T I'M NOT
SURE I UNDERSTAND WHAT THAT WITH
THAT ISSUE IS, UM AND MAYBE, UM,
NOT TO. BOTH OF THOSE ARE
QUESTIONS FOR YOU, SENATOR SO
HAPPY TO TRY TO ADDRESS BOTH OF
THEM, UM THE. SO THE AP ARE NOW
IS LAW. AND UH, YOU HAVE LENDERS
AND BROKERS THAT ARE IN THE
MARKETPLACE LENDING MONEY. UM
AND THEY'RE GETTING DIFFERENT.
THEY'RE MAKING DIFFERENT
AGREEMENTS IN THE COURSE OF THAT
WORK. AND WHAT WE'RE TRYING TO
DO. THERE IS AH TO MAKE SURE
THAT THE POTENTIAL BORROWER HAS
SOME KNOWLEDGE OF THAT PERSON
AND THEIR RECORD. AND WHAT KIND
OF A PR THEY'RE ACTUALLY GETTING
CREATE THREE RANGES FOR THEM TO
DISCLOSE AS A PART OF THE BILL
IN ITS CURRENT FORM. THAT'S
SOMETHING THAT WE'RE CONTINUING
TO TALK ABOUT WITH THE OPPONENTS
ABOUT, BUT IT'S TO GIVE KIND OF
A UH HUH. STEADY COMPARISON THAT
THEY HAD SIMPLE TO UNDERSTAND
AND FOLLOW AT DIFFERENT LEVELS
FROM THE LENDERS. POINT OF VIEW,
THEY'RE GOING TO SAY HEY, EVERY
LOAN IS DIFFERENT. YOUR CREDIT
YOUR WHAT YOUR NEEDS. HOW LONG
YOU'RE GOING TO HAVE THE MONEY
WHEN YOU'RE GOING TO PAY IT BACK
THAT AND GIVEN ALL THE DIFFERENT
NEW FINANCING SCHEMES, AND IT'S
NOT JUST A FLAT, WE'RE GIVING
YOU THE MONEY AND YOU'RE PAYING
US BACK. BUT WE'RE GOING TO TAKE
A PENNY OUT OF EVERY CREDIT CARD
TRANSACTION OR WE'RE GOING TO
USE YOUR INVENTORY TO BORROW
AGAINST THAT. THERE'S THAT THAT
THIS SO CALLED LONE HAS BECOME
SO DIFFERENT IN OUR MODERN AGE
FOR LENDING MONEY, AND THESE
INNOVATIVE PRODUCTS AREN'T JUST
SO STRAIGHT FORWARD LIKE YOU'RE
GETTING MONEY FOR A CAR TO
BORROW FOR A CAR. AND IT'S CASH
AND YOU'RE PAYING IT BACK THAT
WITHIN THE RETAILS WORLD THAT
THERE'S NOW INNOVATIVE WAYS, SO
THAT'S THAT TRADITIONAL WHAT'S
ALONE AND NOT ALONE, AND THAT'S
REALLY WHERE IT BECOMES
DANGEROUS BECAUSE IT'S VERY EASY
TO MANIPULATE IN THAT SPACE.
WHEN I SAY ALL IT WILL COST YOU
IF YOU WILL GIVE YOU 10,000 FOR
YOUR PIZZA OVEN, BUT WE'RE JUST
GOING TO TAKE TWO CENTS OUT OF
EVERY CREDIT CARD TRANSACTION.
AND YOU SAY, WELL, THAT SOUNDS
LIKE A GOOD DEAL. BUT YOU DON'T
KNOW HOW LONG AND HOW MUCH
THAT'S ACTUALLY GOING TO COST
YOU OVER TIME, AND IT GETS VERY
MANIPULATIVE AND THAT SPACE AND
SO THESE NONTRADITIONAL LOANS
HAVE CREATED THIS. THIS THIS
THIS VULNERABILITY IN THE
MARKETPLACE, WHICH WE'RE NOW
TRYING TO ADDRESS. TRY TO TRYING
TO CREATE CONSISTENT STANDARDS.
SO YOU BORROWER AND EDUCATED
BORROWER SPOKEN EARLIER BY
SENATOR MEN UM YOU KNOW, YOU GO
INTO BUSINESS, NOT BECAUSE
YOU'VE GOT A N B A AND FINANCE.
OKAY SO WE'RE TRYING TO MAKE IT
AS SIMPLE AND CLEAR SO A BARBER
CAN MAKE SMART DECISIONS. RIGHT
ANSWERED YOUR QUESTION. YOU
HAVEN'T. I REALLY APPRECIATE
THAT. BECAUSE, UM, IT. UM, IT
REMINDS ME A LOT OF WHAT WAS
HAPPENING IN THE PERSONAL CREDIT
SPACE AS WELL. WHERE UM, THE
PAYDAY LENDINGS WERE THAT YOU
COULD BORROW $800. BUT SHE HAD
TO PAY IN TWO WEEKS. AND IF YOU
DIDN'T, THEN YOU ENDED UP IN A
SITUATION WHERE YOU WERE, IT
DOUBLED. IN IN YOUR DEBT DOUBLED
AND IT COULD TRIPLE AND BEFORE
YOU KNOW IT, YOU'RE PAYING WAY
MORE FOR THAT $800 THAN YOU EVER
EXPECTED TO. AND SO THAT THAT
WAS REALLY HELPFUL. I GUESS IN
THE A P R, UM UM, I AM. THAT'S
REALLY IMPORTANT TO ME, BECAUSE,
UM IT'S ONE OF THE FEATURES OF
BORROWING. THAT'S THE THAT'S THE
MOST EASILY UNDERSTOOD IF IT'S
CLEAR AND THE MORE THAT YOU CAN
MANIPULATE IT, THE MORE
DIFFICULT IT BECOMES, AS A, UM
AS A UNSOPHISTICATED BORROWER TO
UNDERSTAND WHAT THE FULL IMPACT
IS GOING TO BE, AND IN
PARTICULAR FOR A BUSINESS
PERSON. THEY MAYBE BE PUTTING UP
THEIR BUSINESSES COLLATERAL AND
THEY COULD LOSE A LOT MORE BY
TAKING OUT WHAT THEY THOUGHT WAS
A VERY SIMPLE LOAN. SO I
APPRECIATE WHAT YOU'RE DOING. I
REALLY WANNA SECOND WHAT MY GOOD
FRIEND, SENATOR, MIN SAID ABOUT
UM, UH, THE SMALLER BUSINESSES
THAT MANY OF WHOM ARE IMMIGRANTS
THAT ARE LOOKING FOR A WAY TO BE
ABLE TO CONTINUE, ESPECIALLY
COMING OFF OF COVID AND ARE
LOOKING WHO REALLY HAVE A
CHALLENGE IN THE TRADITIONAL
MARKET. I APPRECIATE THAT. GREAT
THANK YOU. WE'LL GO DEVICE TO
NEIL. THANK YOU, MADAM CHAIR.
REGULATION IS GOOD TO PROVIDE.
UH A FAIR PLAYING FIELD. I AGREE
WITH THAT. UM IF. THE REGULATORY
SCHEME IS OVERCOMPLICATED. OR
DIFFICULT TO UNDERSTAND IT WILL
RESULT NOT IN A FAIRER PLAYING
FIELD, BUT A LIMITED SUPPLY AS
PROVIDERS MIGHT LEAVE THE
MARKET. UM AND TO THE POINT OF
THE A P R. I CAN SEE WHERE
THAT'S DIFFICULT BECAUSE WE'RE
SALES BASED FINANCING. THE
PAYBACK IS GOING TO BE BASED
UPON WHAT THE SALES OF THE
ENTITY IS. AND THAT'S TOTALLY A
FUNCTION OF HOW THEY EXPECT
SALES TO BE IN THE FUTURE. SO
CERTAINLY YOU CAN SAY WELL. IF
MY SALES ARE GOING TO BE AT THIS
LEVEL AND THIS AMOUNT OF GROWTH
OVER WHAT I THINK THE TERM OF
THE LOAN IS GOING TO BE, AND YOU
DON'T EVEN KNOW THAT BECAUSE
BASED ON THE SHARE OF SALES THAT
THE LENDER IS GETTING, IT CAN BE
PAID OFF. SOONER OR LATER. UM
AND SO ALL OF THESE VARIABLES
CAN FEED INTO WHAT THE A P R IS,
BUT YOU HAVE TO MAKE ASSUMPTIONS
RELATIVE TO THE BASE
INFORMATION. AND THAT'S
DIFFICULT AND I COULD I COULD
SEE THE CONCERNS ABOUT THAT. UM
PROBABLY MORE IMPORTANTLY. IS
THE SIGNIFICANT DIFFERENCE IN
THE COMPENSATION TO THE
PROVIDER. UH OF THE SOURCE OF
FUNDS. AND THE ALTERNATIVE THAT
COULD BE AVAILABLE, PARTICULARLY
SMALL BUSINESS LOANS, AND IT
MIGHT BE WORTH CONSIDERING THAT
BEING DISCLOSED AS PART OF THE
PROCESS. UH MAYBE MORE EFFECTIVE
THAN TALKING ABOUT THE A P R
BECAUSE LOW, MIDDLE AND HIGH AH,
PARTICULARLY, WE'RE TALKING
ABOUT UNSOPHISTICATED BORROWERS.
UM SOMETIMES THE OPTIMISM OF THE
ENTREPRENEUR IS GOING TO
GRAVITATE TOWARD THAT LOW NUMBER
AND THINK GREAT. THAT'S WHAT IT
CAN BE. BUT THE COMPENSATION IS
AN OBJECTIVE NUMBER. SO I JUST
SUGGEST THINKING ABOUT THAT. THE
AND, UM, ONE THING THAT CAUGHT
MY ATTENTION IS PROVIDES. IN
ORDER TO MAKE TRY TO MAKE SURE
THAT A BROKER IS TAKING HIS
CUSTOMERS' INTERESTS INTO
ACCOUNT. WE HAVE. I THINK THIS
IS THE LANGUAGE THAT THE BROKER
OWES A DIRTY DUTY TO CARE, TOO,
AND HAS DUTY TO ACT IN THE
HIGHEST GOOD FAITH TOWARDS A
POTENTIAL RECIPIENT, INCLUDING
THE DUTY TO EXERCISE THE UTMOST
HONESTY AND INTEGRITY TOWARD THE
POTENTIAL RECIPIENT. I REALLY
DON'T KNOW HOW YOU CAN ENFORCE
THAT THAT CAN BE INTERPRETED IN
A SIGNIFICANTLY VARYING WAY AND.
FOR A REGULATION. I JUST THINK
THAT'S CHALLENGED LANGUAGE
BECAUSE OF THE IMPRECISE NATURE
OF IT. NOW I KNOW YOU, SENATOR
GLACIER AND I KNOW THAT YOU WILL
WORK WITH THE OPPOSITION ON
THESE THINGS. AND SO I'M UH,
CERTAINLY HAPPY TO SUPPORT THE
BILL MOVING FORWARD ON THE BASIS
OF THAT. OBVIOUSLY I CAN CHANGE
MY MIND AS THINGS TURN OUT, BUT
THOSE ARE THE SORTS OF THINGS
THAT THAT CONCERN ME. YEAH, I
THREW THE CHAIR. CAN I ADDRESS
THANK YOU FOR YOUR THOUGHTFUL
COMMENTS? THERE ARE THREE THAT
YOU RAISED. LET ME TRY TO ANSWER
TWO OF THEM, AND I THINK I'LL
TURN TO MY WITNESS TO ANSWER THE
THIRD. THE FIRST WAS ABOUT THE A
P. R THAT WAS THE FIGHT THAT WE
HAD SIX YEARS AGO. FOR REASONS
THAT YOU HAVE IDENTIFIED BUT
THROUGH THE WORK OF THE
LEGISLATURE, THE REGULATIONS
THAT CAME DOWN AFTER FOUR YEARS
OF WORK WITH THE STAKEHOLDERS
THAT'S NOW SETTLED SETTLED THAT
THERE WAS FORMULA IN LAW AND
REGULATION THAT TELLS SOMEONE
EXACTLY HOW IN GOOD FAITH THEY
SHOULD DO IT. OBVIOUSLY
CIRCUMSTANCES CAN CHANGE AND AS
YOU'VE IDENTIFIED THE LENGTH OF
TIME AND THE PAYBACK MODEL CAN
ALL CREATE DIFFERENCES, BUT
THERE IS A PROCESS NOW FOR A
GOOD FAITH ESTIMATE UNDER LAW
AND REGULATION. THAT AT LEAST IS
SETTLED AND COURT CASES THAT ALL
FAILED. IT'S NOW THE LAW OF THE
LAND AND THROUGH YOUR GOOD WORK
ON THE UNANIMOUS VOTE OF THE
LEGISLATURE. IT'S IN. THAT'S NOW
THE LAW SO WE'RE NOW FOCUSED NOW
ON THE LENDER AND BORROWER ARE
THE BROKER SIDE OF THE EQUATION,
NOT THE A. P. R. THE REASON A PR
IS IN THE CONVERSATION IS
BECAUSE WE'RE TRYING TO FIND A
WAY AND THIS IS GOING TO GET
YOUR THIRD POINT ABOUT THE
ELUSIVENESS OF HOW YOU DEFINE
DOING THEIR DUTY. YOU KNOW.
ORIGINALLY THE THINKING BEHIND
THIS BILL WAS TO USE THE WORD
FIDUCIARY OBLIGATION. IT'S VERY
COMMON WORD THAT WE USE IN OUR
FINANCIAL WORLD ABOUT YOU HAVE A
FIDUCIARY OATH AND LOYALTY TO
THE DOING WHAT'S IN THE INTEREST
OF THAT OTHER PERSON THAT YOU'RE
WORKING FOR. AND IT WAS BECAUSE
OF THAT ISSUE THAT YOU'RE
RAISING THAT WE'VE WE'VE
DEVIATED AND DEVIATED FROM THAT
LANGUAGE TO TRY TO GET TO
SOMETHING MORE CONCRETE. SO THAT
WE DON'T WE DON'T WANT TO CREATE
UNCERTAINTY. WE DON'T WANT TO
CREATE A LITIGIOUS ENVIRONMENT
FOR THIS. NO ONE HAS IN ANY
INTEREST IN THAT, AND THAT'S
WHERE THE BILL HAS NOW MOVED TO
TRY TO DEFINE THOSE TERMS A
LITTLE BIT MORE CONCRETELY. SO
WHEN WE TALK ABOUT THE MID THE
AVERAGE THE MAXIMUM WE'RE TRYING
TO NOW DEFINE IT MORE
SPECIFICALLY IN ACTION AND
ACTIVITY VERSUS THAT GENERICS
AND WILL CONTINUE TO WORK ON
THAT WITH THE OPPONENTS AND WITH
ALL OF YOU, AND CERTAINLY THE
EXPERTISE THAT THIS COMMITTEE
AND YOUR STAFF HAS BROUGHT TO
THIS CONVERSATION TO GET TO YOUR
POINT, SO YOU'RE RIGHT. AND I
THINK WE'RE GOING TO KEEP
WORKING ON IT TO TRY TO FIND
THOSE OBJECTIVE ELEMENTS. I DO
WANT TO TURN TO THE ONE OF MY
WITNESSES. THEY WANT TO SPEAK TO
THE ISSUE OF LENDER FEES AND HOW
THIS BILL HANDLES LENDER FEES,
COMMISSIONS IN IN IN OUR
MEASURES. IS THERE SOMETHING YOU
WANT TO ADD TO THAT OR SHARE
ABOUT THE DISCLOSURES THAT ARE
PROVIDED OR NOT? UM. WELL 11
THING THAT THAT I WE THOUGHT
ABOUT THIS WITH THE LENDER. BE
DISCLOSURE AND VICE CHAIR. I'M
GLAD YOU BROUGHT IT UP. UM THERE
WAS SOME RESEARCH AFTER THE
AFTER THE SUBPRIME MORTGAGE
CRISIS AS SENATOR MEN DESCRIBED
BECAUSE BROKER FEES PAID SUCH A
ROLE IN, UM IN DRIVING BORROWERS
INTO LESS APPROPRIATE FINANCING,
MORE EXPENSIVE FINANCING FOR
THEM, AND WHAT'S SOME RESEARCH
FOUND? INTERESTINGLY IS THAT
WHEN THE WHEN THE BROKERS
DISCLOSED TO THE BORROWER, UM
MORE KIND OF GOOD FAITH
INFORMATION ABOUT THEMSELVES
THAT LED THE BORROWERS TO TRUST
THE BROKERS MORE AND THE BROKERS
NOT TO ACT MORE TRUSTWORTHY, SO
IT HAD A SORT OF UNINTENDED
CONSEQUENCE. IT WAS THE MOST
EFFECTIVE WHAT THE SENATOR
DESCRIBED. THE CONCRETE THINGS
THE BILL DOES REALLY IS TO ARM
THE BORROWER WITH REALLY
CONCRETE INFORMATION ABOUT, UM,
WHAT KIND OF STUFF THEY CAN
EXPECT FROM THE BROKER OVERALL,
NOT NECESSARILY WHAT EVERY
SPECIFIC TRANSACTION WOULD BE,
BUT JUST CONTEXT TO SAY, HEY,
WHEN YOU PUT BROKERS WEBSITES
RIGHT NOW, THEY ALL LOOK THE
SAME. EVERY BROKER SAYS. WE DO S
B A LOANS IMMEDIATELY SAYS, AND
WE DO EVERYTHING BUT BEHIND THE
SCENES, SOME BROKERS ARE PLACING
MOST OF THEIR BORROWERS AND S B
A LOANS AND SOME BROKER AND
THEY'RE EARNING 1% AND SOME
BROKERS ARE PLACING MOST OF
THOSE BORROWERS INTO MERCHANT
CASH ADVANCES THAT CHARGE
BORROWERS. 100% 200% A P. R S
AND GET PAID 15% AND SO THIS
THIS WAY, THE BROKER WILL JUST
SAY HEY, LAST YEAR, THIS BROKER
THE MINIMUM WE DID WAS 50% A P
R. THAT MAXIMUM WAS 200. THE
AVERAGE WAS 150 VERSUS ANOTHER
ONE WHO HAS DIFFERENT NUMBERS.
SO THE BORROWERS WELL INFORMED
KIND OF WHAT? THEY'RE WHAT
THEY'RE WORKING WITH. WITH THE
GIVEN BROKER. JUST A VERY QUICK
FOLLOW UP COMMENT TO THE POINT
OF THE LEVEL OF SOPHISTICATION
OF THE BORROWERS AND THIS ISSUE
OF, UH. OF A DUTY AND FIDUCIARY
DUTY AND THE LIKE. UM. IF I WERE
TO ADVISE THE SMALL BUSINESSES
THAT ARE CONSIDERING THESE
THINGS, I WOULD MAKE THE
ASSUMPTION THAT WHOEVER I'M
DOING BUSINESS WITH DOES NOT
HAVE MY BEST INTERESTS AT HEART.
THAT IS THE MUCH MORE OPERABLE
ASSUMPTION AND I DO HAVE A
CERTAIN AMOUNT OF EXPERIENCE IN
THIS IN THIS AREA, PARTICULARLY
IN THE AREA OF BORROWING MONEY,
AND WE DEAL WITH A LOT OF
REPUTABLE BUSINESSES THAT LOAN
US. MORE MONEY THAN SOMETIMES
KEEPS ME AWAKE AT NIGHT. BUT I
DO NOT ASSUME THAT THEY HAVE MY
BEST INTERESTS AT HEART. UM AND
MAYBE THAT OUGHT TO BE TO
DISCLOSURE REALIZED THAT I DO
NOT HAVE YOUR BEST INTERESTS AT
HEART. YOU'RE THE ONLY ONE TO
JUDGE THAT. I'LL CALL THAT THE
NILO AMENDMENT IN THANK YOU.
SENATOR BRADFORD. THANK YOU. I'M
CURIOUS. UNDER CURRENT LAW,
THERE'S BEEN SOME NEW AUTHORITY
GIVEN TO THE DEPARTMENT OF
FINANCIAL PROTECTION INNOVATION,
TOO. OVERSEAS SOME OF THOSE
UNSCRUPULOUS PRACTICES THAT
YOU'RE DESCRIBING HERE HAS THERE
BEEN ANY ANALYSIS TO DETERMINE
IF THE DEPARTMENT OF FINANCIAL
PROTECTION INNOVATIONS CURRENT
REGULATORY OVERSIGHT IS
EFFECTIVE. IN THE COMMERCIAL
FINANCING MARKET AND THE IMPACT
THE CURRENT REGULATORY
OVERSIGHT. HOUSE ON THE
AVAILABILITY FOR COMMERCIAL
FINANCING OPTIONS IN CALIFORNIA.
I CAN SAY THIS, SENATOR BRADFORD
FIRST. THANK YOU FOR YOUR
QUESTION. I THAT THAT I THINK
THE DEPARTMENT HAS LIMITATIONS
HAVE BEEN PART OF THE PURPOSE OF
THIS BILL IS TO DEAL IN SPOTS IN
WHICH THEY UNDER LAW. THEY HAVE
NO ABILITY TO ENFORCE AND TO
ENSURE THE KIND OF PROTECTIONS
THAT THIS BILL PROFESSORS TO
ADVANCE OUR OUR FOLLOWED, UM,
THAT THERE HAS BEEN WORKAROUNDS
IN THE FINANCIAL MARKET PLACE
THAT SEEMINGLY ARE LEGAL ON
THEIR FACE, AND THEY HAVEN'T
CERTAINLY BEEN CHALLENGED. AND
IT'S PART OF THE MOTIVATION THAT
BRINGS THIS BILL HERE. WE HAVE
CONSULTED WITH THE DEPARTMENT.
THEY DON'T HAVE A FORMAL
POSITION ON THE BILL. BUT I
THINK WE THE TEAM THAT'S BEEN
WORKING ON THIS. TRYING TO GET
THEIR BEST INPUT AND WE FEEL
LIKE WE'RE ON THE RIGHT TRACK
ANYTHING WHAT? HEIDI'S WANT TO
ADD ANYTHING TO THAT. CURRENTLY
THESE NON FINANCE THESE NON LOAN
PRODUCTS THAT ARE NOT CONSIDERED
IN THE DEFINITION OF ALONE ARE
NOT UNDER THE PURVIEW OF THE
DEPARTMENT. SO THIS WOULD THIS
WOULD HAVE THEM. THAT'S THE IDEA
BEHIND THIS. YEAH. AND IN A
SIMILAR VEIN, JUST ADD THAT SOME
OF THE FIX IS IN THE BILL. THE
HOLES THAT ARE PLUGGED FOLLOW
STATEMENTS THAT THE FBI PUT OUT
IN THEIR STATEMENT OF REASONS IN
PREVIOUS RULEMAKING, SAYING,
HERE'S HERE'S SOMETHING THAT
SHOULD BE PURSUED IN THE FUTURE
THAT WE DON'T THINK WE CAN IN
THIS RULEMAKING. ALRIGHT SEE NO
OTHER QUESTIONS. I WANT TO THANK
THE AUTHOR WE'VE WORKED TOGETHER
IN THE LAST YEAR. UM AND I DO
WANT TO CLARIFY ONE PIECE, UM,
AS WAS MENTIONED BY THE AUTHOR
AT THE BEGINNING THAT THE DUTY
OF CARE PROVISION IS BEING
AMENDED OUT. IT IS ONE OF THE
AMENDMENTS, SO IT'S LISTED ON
PAGE 14. 15 ITEM QUÊ TO DELETE
SECTION 2264 RELATED TO THE DUTY
OF CARE OF THE COMMERCIAL
FINANCING BROKER. SO I THOUGHT
THAT THAT WOULD BE GOOD TO CLEAR
UP AND I THINK THAT THIS
COMMITTEE AND THE LEGISLATURE
WILL CONTINUE TO TACKLE THE
OVERALL PRINCIPLE OF WHAT WE'RE
TRYING TO ADDRESS CLARITY RIGHT
AND UNDERSTANDING WHAT? WE'RE
BORROWING. UM AND WE'VE HAD SOME
DIFFICULT CONVERSATIONS AS IT
RELATES TO ACCESS TO CAPITAL. WE
WANT ACCESS TO CAPITAL. FOR
INDIVIDUALS FOR SMALL
BUSINESSES. I SEE THIS FLYER AND
THERE'S A LOT LISTED HERE. I'M
NOT SURE I UNDERSTAND EVERYTHING
THAT IS LISTED ON HERE, BUT IT
SOUNDS GREAT. AND SO I THINK
THAT WHEN WE SEE SOMETHING LIKE
THIS, IT ALSO PUTS IT INTO
PRACTICE THAT EVEN FOLKS WHO
HAVE THE BEST ENGINE INTENTION
AND SOMETHING UM AH, YOU KNOW,
AND SOME BACKGROUND IN IT ARE
ALSO WONDERING. WELL, WHAT DOES
THIS ACTUALLY MEAN? I KNOW WHAT
IT READS. BUT WHAT IS IT THE
MEANING BEHIND THAT? AND SO WE
OFTEN TIMES AS HAS BEEN POINTED
OUT BY NUMBER OF MEMBERS ON THIS
COMMITTEE, WE THINK OF ALL THE
SMALL BUSINESS OWNERS, INCLUDING
THOSE THAT DON'T HAVE, UM,
PERHAPS A BACKGROUND IN
FINANCING THAT WEREN'T THE N B A
. YOU KNOW, UH, MAJORS OR DEGREE
HOLDERS, BUT THAT ARE IN OUR
COMMUNITIES AND ARE REALLY
IMPORTANT AND THAT WE WANT TO
PRESERVE AND SO WHO ARE THEY?
YOU KNOW WHAT BACKGROUNDS DO
THEY HAVE? AND WILL THEY
UNDERSTAND? SOMETHING LIKE THIS.
AND HOW DO WE MAKE IT MORE
CLEAR, SO THEY UNDERSTAND WHAT
THEY'RE BORROWING AND WHAT THE
COST OF BORROWING IS, UM, AND I
THINK THAT THAT'S REALLY WHERE
THIS IS COMING FROM, SO I LOOK
FORWARD TO CONTINUING TO WORK
TOGETHER ON THIS BILL AND THINK,
OF COURSE, THE COMMITTEE STAFF
YOUR STAFF. UM AND ALL THOSE
THAT HAVE BEEN WORKING TOGETHER,
I KNOW THAT WE WILL CONTINUE THE
CONVERSATIONS ALSO WITH THE
OPPOSITION, UH TO YOU KNOW, AS
THIS BILL MOVES FORWARD, SO WITH
THAT SENATOR LASER WOULD YOU
LIKE TO CLOSE? THANK YOU. THANK
YOU. CHAIR LIMÓN. AND THANK YOU
FOR ADDRESSING ONE OF SENATOR
NEAL OWES POINTS EARLIER IN THE
IN THE ANALYSIS THAT I MISSED. I
WANT TO THANK THE OPPOSITION
HAVE COME TODAY. BECAUSE THEY
HAVE ACKNOWLEDGED THAT WE SHARE
THE SAME GOALS AND THAT'S A REAL
BIG PROGRESS POINT. THIS WAS NOT
THE SAME FIVE YEARS AGO SIX
YEARS AGO AND SOME OF THESE
ISSUES, SO I APPRECIATE THEIR
ACKNOWLEDGEMENT OF THAT AND MY
PLEDGE TO CONTINUE TO WORK
TOGETHER. WE DON'T WANT IT TO BE
A MURKY LAW. WE WANTED TO BE A
CLEAR LAW AND WE WANT PEOPLE TO
BE ABLE TO KNOW HOW TO FOLLOW IT
APPROPRIATELY. UM ALL TO THE
BENEFIT OF BORROWERS THAT WE ARE
COMMITTED TO. THIS COMMITTEE IS
COMMITTED TO THAT CONSUMER
PROTECTION AND THAT'S THE
HERITAGE OF THE BANKING
COMMITTEE HERE IN THE SENATE,
AND I APPRECIATE IT. ONE FINAL
THING WOULD BE TO SAY THAT
SOMETHING THAT YOU ALL KNOW, UM
THAT THE SMALL BUSINESS
COMMUNITY WE TALK A LOT ABOUT
IT, AND WE SAY WE CARE A LOT
ABOUT IT. BUT WE ALSO
ACKNOWLEDGE AND I THINK, AS
SENATOR MEN MENTIONED EARLIER
HOW VULNERABLE THEY CAN BE,
ESPECIALLY AS IT RELATES TO
FINANCES. AND SO THE WORK OF
THIS BILL, I THINK IS AND
PREVIOUS EFFORTS REALLY GO TO
PUTTING THE PROOF BEHIND THE
RHETORIC ABOUT CARING ABOUT OUR
SMALL BUSINESS PEOPLE THAT WE
CAN HELP THEM THRIVE AND HAVE A
MARKETPLACE THAT THEY CAN BE
SUCCESSFUL, AND THAT MEANS
HAVING A LENDING MARKETPLACE
THAT WORKS AND SO WE'RE
COMMITTED TO THAT, AS WE WORK ON
THIS BILL WITH THAT
RESPECTFULLY, ASTRONAUT VOTE
GREAT. THANK YOU. WE HAVE A
MOTION, UH BY SENATOR MEN, THE
MOTION IS DUE PASS. BUT FIRST WE
REFER TO THE COMMITTEE ON
JUDICIARY. UM, WE WILL GO AHEAD
AND CALL THE ROLL. MOTION IS DUE
PASS TO THE COMMITTEE ON
JUDICIARY FOR SENATE BILL 869.
SENATOR LIMÓN. I NILO. BRADFORD
BRADFORD I CABALLERO CABALLERO I
HAVE ARE ARE I MEN I WIN. THANK
YOU. 26. ALRIGHT THAT BILL IS
OUT WITH SIX VOTES AND ONE NOT
VOTING. WE SHE'S LEFT. ALL
RIGHT, SO WITH THAT WE WILL GO
AHEAD AND ADJOURN OUR COMMITTEE
HEARING.