1
00:00:00.000 --> 00:00:02.250
Speaker 1: You have seen the
last the next bill before, thank

2
00:00:02.250 --> 00:00:04.650
you for the previous
conversation House Bill 1027 is

3
00:00:04.650 --> 00:00:08.220
before you. Now. And I do have a
substitute.

4
00:00:09.180 --> 00:00:12.780
Speaker 2: Okay. Is there an
option? Is there a motion to

5
00:00:12.780 --> 00:00:17.250
adopt the substitute? Is there a
motion to adopt the substitute

6
00:00:18.560 --> 00:00:19.550
Speaker 1: Committee members?

7
00:00:19.550 --> 00:00:23.110
Speaker 2: There's a motion to
adopt the substitute. Is there a

8
00:00:23.110 --> 00:00:31.150
second? Second.All right.
There's motion. Second. All

9
00:00:31.150 --> 00:00:34.840
those in favor say aye. Aye. All
right, Delegate Tran.

10
00:00:35.140 --> 00:00:37.990
Delegate Tran: Thank you, House
Bill 1027. We saw last week. And

11
00:00:37.990 --> 00:00:41.020
I want to remind folks, it was
really appreciative of how it

12
00:00:41.020 --> 00:00:44.350
came out of this body
unanimously. So really

13
00:00:44.350 --> 00:00:48.670
appreciate the bipartisan
support. We had to take a couple

14
00:00:48.670 --> 00:00:53.440
of days because the SEC reviewed
the bill last time, we

15
00:00:53.440 --> 00:00:56.140
identified some areas that
needed to be updated to address

16
00:00:56.140 --> 00:01:00.730
some fiscal concerns. And in
that meantime, you'll recall

17
00:01:00.730 --> 00:01:03.220
there were no there are no no
witnesses and opposition. But in

18
00:01:03.220 --> 00:01:08.950
the meantime, the industry got
itself organized and came to us

19
00:01:08.980 --> 00:01:12.910
late on Tuesday night with some
proposals, this substitute

20
00:01:12.940 --> 00:01:16.510
attempts to address those
proposals. I think at the end of

21
00:01:16.510 --> 00:01:21.670
the day, we all agreed that the
merchant cash advance, as a

22
00:01:21.670 --> 00:01:27.130
lending or financial practice
can be predatory. And we heard

23
00:01:27.130 --> 00:01:31.330
testimony from the Richmond
black restaurant experience

24
00:01:31.330 --> 00:01:37.600
members who have had a merchant
cash advance who and who, you

25
00:01:37.600 --> 00:01:40.360
know, are now really in a deep
hole, because they didn't fully

26
00:01:40.360 --> 00:01:43.510
understand the parameters of the
agreement in the beginning, what

27
00:01:43.510 --> 00:01:47.680
I've shared with you are two
examples of a merchant cash

28
00:01:47.710 --> 00:01:54.490
advance agreement. They're from
the same business. Because she

29
00:01:54.490 --> 00:02:00.490
had to borrow more money to pay
for the first the first

30
00:02:01.240 --> 00:02:05.560
agreement, it's not alone. So
the first agreement. As you can

31
00:02:05.560 --> 00:02:08.770
tell, looking, just looking at
the two documents, doesn't give

32
00:02:08.770 --> 00:02:12.250
you a whole lot of information.
I'm sorry, I know it's late, but

33
00:02:12.520 --> 00:02:13.750
I have a lot of strong feelings.

34
00:02:14.050 --> 00:02:16.270
Speaker 2: Is that is the
substitute?

35
00:02:16.300 --> 00:02:19.630
Delegate Tran: So what this
substitute does is it adds for

36
00:02:19.630 --> 00:02:24.940
you that, you know, a date and
time for when some of the fees

37
00:02:24.940 --> 00:02:30.370
have to be submitted, that was
for the SEC, so by line 47 on my

38
00:02:30.370 --> 00:02:35.560
draft, but by September 15,
every year, it also industry

39
00:02:35.560 --> 00:02:39.370
recommended adding brokers,
third party entities that sell

40
00:02:39.370 --> 00:02:43.330
these offer these opportunities
as well to be regulated. And we

41
00:02:43.330 --> 00:02:47.110
took that we took that
recommendation, industry also

42
00:02:47.110 --> 00:02:51.520
recommended that we banned the
use of confessions of judgment,

43
00:02:52.060 --> 00:02:54.010
which I thought was really
helpful. And we also took that

44
00:02:54.010 --> 00:03:00.040
recommendation, the two that we
then then industry also asked

45
00:03:00.070 --> 00:03:03.790
indicated they can't calculate
the APR, the way we've laid it

46
00:03:03.790 --> 00:03:07.090
out in the bill, although the
only other state that has this

47
00:03:07.090 --> 00:03:10.480
implemented, just reinforce
their APR requirements. We've

48
00:03:10.480 --> 00:03:14.020
also eliminated that from the
bill. The third, the fourth

49
00:03:14.020 --> 00:03:17.440
piece that we don't have
agreement on is industry and

50
00:03:17.440 --> 00:03:20.980
recomm requested that the
jurisdiction for arbitration or

51
00:03:20.980 --> 00:03:25.660
cause of action not be limited
to the location of the business.

52
00:03:27.370 --> 00:03:30.370
And I have not agreed to that. I
do not think that Virginia,

53
00:03:30.400 --> 00:03:32.830
small businesses should be
traveling all around the country

54
00:03:33.040 --> 00:03:35.620
to try to resolve any issues.
They have agreements.

55
00:03:35.890 --> 00:03:40.480
Speaker 2: Is it just in that
regard? Is it? Is the language

56
00:03:40.480 --> 00:03:44.560
just that it has to occur in the
Commonwealth? Or does it

57
00:03:44.560 --> 00:03:47.380
actually have to occur in like,
if I've got a business that

58
00:03:47.380 --> 00:03:49.390
Alexandria, I've got to do it
and Alexandria.

59
00:03:49.420 --> 00:03:51.910
Speaker 1: I left it as
originally, which is you would

60
00:03:51.910 --> 00:03:55.330
have to do it in Alexandria.
Okay. That's where I left it

61
00:03:55.330 --> 00:03:57.940
originally. I think we are still
tinkering on some of the

62
00:03:57.940 --> 00:04:00.970
language in terms of the
disclosure, what the disclosure

63
00:04:00.970 --> 00:04:04.360
notices would have to be. But I
hope that if we can continue to

64
00:04:04.360 --> 00:04:07.270
move this bill forward, that we
could fine tune that language. I

65
00:04:07.270 --> 00:04:08.290
think that's really important.

66
00:04:08.590 --> 00:04:10.480
Speaker 2: All right. Now it's
time to take a little bit of

67
00:04:10.480 --> 00:04:12.910
testimony, I believe. Thank you
for walking us through the

68
00:04:12.910 --> 00:04:15.880
changes that have occurred,
since we already kind of went

69
00:04:15.880 --> 00:04:19.390
over the overhaul. Is there
anybody that would like to speak

70
00:04:19.420 --> 00:04:22.960
for or against or share their
concerns?

71
00:04:34.780 --> 00:04:37.180
Unknown: Mr. Chair, members of
the subcommittee Nicole Brenner

72
00:04:37.180 --> 00:04:39.760
with Reed Smith on behalf of the
Small Business Finance

73
00:04:39.760 --> 00:04:43.750
Association and the retail based
finance coalition, both of whom

74
00:04:43.750 --> 00:04:46.150
are nationwide trade
associations of finance

75
00:04:46.150 --> 00:04:49.180
companies offering a portfolio
of financing products to small

76
00:04:49.180 --> 00:04:52.900
businesses. I want to start out
by thanking the patron. She is

77
00:04:52.900 --> 00:04:57.310
right we have taken the week to
get organized and she has been

78
00:04:57.340 --> 00:05:00.940
gracious with her time and
consideration of Our issues over

79
00:05:00.940 --> 00:05:05.140
the last week and we appreciate
the conversations. I have not

80
00:05:05.140 --> 00:05:09.610
reviewed the substitute but she
is correct in characterizing our

81
00:05:09.610 --> 00:05:16.660
concerns. And while I understand
there are some lending statutes

82
00:05:16.840 --> 00:05:22.600
that do speak to venue, Delegate
Bagby patron one two years ago,

83
00:05:22.600 --> 00:05:26.920
I'm sure he remembers that
lenders cannot bring an action

84
00:05:27.100 --> 00:05:29.560
against a merchant outside of
the Commonwealth. That's very

85
00:05:29.560 --> 00:05:33.550
different than the arbitration
and invalidation of contract

86
00:05:33.550 --> 00:05:36.400
provisions that are in the bill
from last week. So we would

87
00:05:36.400 --> 00:05:39.130
appreciate the committee's
consideration of continuing that

88
00:05:39.130 --> 00:05:41.530
conversation. And I hope that
patron will continue to work

89
00:05:41.530 --> 00:05:45.790
with us on that in the next few
days. As to disclosure of the

90
00:05:45.790 --> 00:05:49.510
APR. I'll also say we have a
number of our member companies

91
00:05:49.510 --> 00:05:53.320
online, and we have asked them
to not be online to testify

92
00:05:53.320 --> 00:05:57.160
anymore out of deference to the
committee's time. But as to APR,

93
00:05:57.160 --> 00:06:01.480
I do want to defer to an
industry expert, Jesse Carlson

94
00:06:01.510 --> 00:06:04.630
from one of our member companies
is with me, and I think he can

95
00:06:04.630 --> 00:06:06.820
explain that issue a little
better than I can

96
00:06:07.090 --> 00:06:09.430
Speaker 2: Alright ,thank you.
So if you could.

97
00:06:11.080 --> 00:06:13.720
Speaker 4: Good evening,
committee members, I'll be

98
00:06:13.720 --> 00:06:15.820
reading my comments. My name is
Jesse Carlson and the general

99
00:06:15.820 --> 00:06:18.610
counsel of capitas. We are a
leading provider of small

100
00:06:18.610 --> 00:06:22.240
business financing a variety of
products. We have offices in New

101
00:06:22.240 --> 00:06:24.190
York and in Arlington, Virginia
and have been in the

102
00:06:24.190 --> 00:06:28.780
Commonwealth for more than a
decade. As I have not reviewed

103
00:06:28.810 --> 00:06:33.490
the language as I understood it,
we have we have worked very

104
00:06:33.490 --> 00:06:35.530
successfully with Delegate Tran,
who is very knowledgeable on

105
00:06:35.530 --> 00:06:38.800
these issues. We believe that
based on my understanding of the

106
00:06:38.800 --> 00:06:42.280
changes to the bill, the only
issue that we would have to

107
00:06:42.280 --> 00:06:44.920
continue to work with her on is
the venue selection provision

108
00:06:44.920 --> 00:06:47.740
assuming that APR has been
removed, I believe that she's

109
00:06:47.740 --> 00:06:50.590
strengthened the bill and we
share her goals of protecting

110
00:06:50.590 --> 00:06:56.170
small businesses and giving them
transparency and protecting them

111
00:06:56.170 --> 00:06:59.470
from potential bad actors in the
industry. If he has any

112
00:06:59.470 --> 00:07:00.700
questions, I'd be happy to
answer them.

113
00:07:00.760 --> 00:07:03.970
Speaker 2: So it sounds like we
only have one little bit to do.

114
00:07:04.060 --> 00:07:05.410
Do we think we can get there?

115
00:07:05.920 --> 00:07:06.940
Speaker 4: I believe so.

116
00:07:07.660 --> 00:07:09.010
Speaker 2: Delegate. Do you have
a question?

117
00:07:09.030 --> 00:07:15.270
Unknown: Yes. I have a question
for the patron. Yes, sir. Allah

118
00:07:15.270 --> 00:07:19.620
has been saved. But now that the
rabbit the rabbit has the gun.

119
00:07:20.580 --> 00:07:23.460
Tell me exactly does this bill
do much of anything?

120
00:07:25.170 --> 00:07:27.980
Speaker 1: I have a lot of
feelings delegate. But I would

121
00:07:28.041 --> 00:07:31.646
answer that by saying this. I'm
gonna answer that by saying

122
00:07:31.707 --> 00:07:35.128
this. This particular product on
the market right now is

123
00:07:35.189 --> 00:07:38.977
completely unregulated at the
federal level, and frankly, only

124
00:07:39.038 --> 00:07:42.459
really regulated in one other
state. This puts us at the

125
00:07:42.520 --> 00:07:46.125
cutting edge of wrapping our
arms around the information of

126
00:07:46.186 --> 00:07:49.974
what's happening in Virginia and
making sure at the very least

127
00:07:50.035 --> 00:07:53.456
when Virginia small businesses,
particularly main street

128
00:07:53.518 --> 00:07:57.122
businesses that don't have
access to traditional financing,

129
00:07:57.183 --> 00:08:00.788
cap, you know, opportunities
that they get the full picture

130
00:08:00.849 --> 00:08:04.270
of the agreement they're
entering into, and I think that

131
00:08:04.331 --> 00:08:07.020
in and of itself is a positive
step forward.

132
00:08:07.020 --> 00:08:13.330
Unknown: All right, thanks. Doug
Bagby. Motion report. There's

133
00:08:13.449 --> 00:08:20.354
been a motion report is there as
or with a substitute, but

134
00:08:20.473 --> 00:08:27.379
there's been a motion report
with a substitute. Is there a

135
00:08:27.498 --> 00:08:34.760
second? There's been a motion to
report with a substitute and

136
00:08:34.880 --> 00:08:41.428
properly seconded. Will the
clerk please open the roll?

137
00:08:41.547 --> 00:08:48.571
Corker Clozaril. Committee
recommends reporting nine to one

138
00:08:48.691 --> 00:08:52.620
with an effort for this last bit.

139
00:08:52.920 --> 00:08:55.600
Speaker 1: Great. Thank you so
much members of the committee.

140
00:08:55.653 --> 00:08:56.190
Thank you.

141
00:08:56.190 --> 00:08:56.610
Speaker 2: All right