1 00:00:00.115 --> 00:00:03.765 Bill, um, item number four, SB 8 69. 2 00:00:05.215 --> 00:00:08.245 Thank you. Um, this, this bill along with the next bill 3 00:00:08.245 --> 00:00:11.005 that you will hear from me, uh, were were pieces 4 00:00:11.025 --> 00:00:13.645 of legislation that I worked hard on last year. 5 00:00:14.305 --> 00:00:16.845 Uh, but in consultation with the policy committee 6 00:00:17.505 --> 00:00:20.645 and stakeholders, I decided to call it, 7 00:00:20.645 --> 00:00:22.325 call it a two year bill, uh, 8 00:00:22.325 --> 00:00:24.365 to give a little extra time to do more work. 9 00:00:24.825 --> 00:00:26.925 And so that applies to this bill and the next one. 10 00:00:27.425 --> 00:00:28.765 Uh, but this bill, um, 11 00:00:29.345 --> 00:00:32.045 and by the way, I'm accepting the amendments that, uh, were 12 00:00:32.875 --> 00:00:34.165 suggested from Senate banking 13 00:00:34.165 --> 00:00:36.525 that I think is on your docket today. 14 00:00:37.435 --> 00:00:40.335 Uh, as small business borrowers have increasingly struggled 15 00:00:40.335 --> 00:00:43.415 to access traditional bank loans, they've resorted 16 00:00:43.415 --> 00:00:47.095 to alternative forms of financing to start to maintain 17 00:00:47.235 --> 00:00:48.495 and to grow their business. 18 00:00:48.925 --> 00:00:52.095 Unfortunately, the gaps in California's commercial financing 19 00:00:52.155 --> 00:00:55.175 law have allowed some bad actors to take advantage 20 00:00:55.195 --> 00:00:56.575 of small business borrowers. 21 00:00:57.165 --> 00:00:59.695 It's not, not like the old days where you'd go into a brick 22 00:00:59.695 --> 00:01:02.775 and mortar bank and say, I need some money, and, 23 00:01:02.775 --> 00:01:03.975 and they talk about the terms. 24 00:01:04.555 --> 00:01:06.975 Uh, most of the, uh, lending on the, uh, 25 00:01:07.025 --> 00:01:08.295 today is on the internet, 26 00:01:08.835 --> 00:01:10.735 and it's a, it's a different playing field that many 27 00:01:10.735 --> 00:01:14.175 of us have, uh, uh, grown up at, been used to. 28 00:01:15.635 --> 00:01:18.255 So this bill tries to level the playing field for loan 29 00:01:18.315 --> 00:01:23.015 and non loan products by requiring licensure for brokers 30 00:01:23.015 --> 00:01:24.735 and commercial finance providers. 31 00:01:25.395 --> 00:01:28.335 It also regulates predatory broker practices, 32 00:01:28.595 --> 00:01:31.215 and it closes a loophole in California's comm commercial 33 00:01:31.365 --> 00:01:32.575 financing law. 34 00:01:34.065 --> 00:01:37.205 Now, it regulates predatory broker practices by, 35 00:01:37.385 --> 00:01:39.885 by requiring brokers to prominently disclose 36 00:01:40.505 --> 00:01:41.645 the average minimum 37 00:01:41.745 --> 00:01:45.445 and maximum, uh, annual percentage rate for financing 38 00:01:45.445 --> 00:01:48.285 that they put clients into in the previous year. 39 00:01:48.305 --> 00:01:49.925 So borrowers can compare brokers, 40 00:01:49.925 --> 00:01:51.885 and that's a key element of trying 41 00:01:51.885 --> 00:01:55.205 to make sure it's a fair playing field for borrowers, is 42 00:01:55.205 --> 00:01:58.325 that we've now created under law that this committee 43 00:01:58.345 --> 00:02:01.205 and this legislature passed, uh, six years ago 44 00:02:01.745 --> 00:02:05.365 to create a standard rate in which to compare, uh, uh, a, a, 45 00:02:05.765 --> 00:02:07.565 a proposal to, to lend money to you. 46 00:02:07.565 --> 00:02:09.125 And that's the annual percentage rate's 47 00:02:09.125 --> 00:02:10.205 the same on your credit card. 48 00:02:10.675 --> 00:02:13.405 When you see that rate in your credit cards, what's the, 49 00:02:13.635 --> 00:02:16.525 that money's gonna cost you and that you can compare, 50 00:02:16.545 --> 00:02:19.845 and that now is AP applicable to commercial, uh, lending. 51 00:02:20.875 --> 00:02:23.145 Um, I want, I wanna mention, 52 00:02:23.205 --> 00:02:24.265 and I don't have to go into detail 53 00:02:24.285 --> 00:02:25.465 unless people want to know more, 54 00:02:25.485 --> 00:02:28.905 but I'm closing a loophole, uh, to prohibit any action 55 00:02:28.905 --> 00:02:32.355 that can be construed as a confession of judgment, uh, 56 00:02:32.355 --> 00:02:35.115 which prohibits borrowers from legal representation if 57 00:02:35.115 --> 00:02:36.155 they default on a loan. 58 00:02:37.185 --> 00:02:40.725 Now, there are continuing conversations, uh, about a part 59 00:02:40.725 --> 00:02:42.245 of the bill that requires brokers 60 00:02:42.245 --> 00:02:43.885 to disclose financing history. 61 00:02:44.325 --> 00:02:45.605 I mentioned that just a moment ago. 62 00:02:46.085 --> 00:02:49.245 I commit to continuing to work with, uh, opposition 63 00:02:49.395 --> 00:02:51.725 with stakeholders to ensure that, uh, 64 00:02:51.725 --> 00:02:52.925 borrowers are protected, 65 00:02:52.925 --> 00:02:54.645 but we have a fair standard in which they 66 00:02:54.645 --> 00:02:55.685 can be held accountable to. 67 00:02:56.275 --> 00:02:59.445 With me today, I have two witnesses, Heidi Pickman on behalf 68 00:02:59.445 --> 00:03:00.765 of the California Association 69 00:03:00.765 --> 00:03:04.485 for Microenterprise Opportunity, also known as Cameo. 70 00:03:04.945 --> 00:03:06.845 And Louis Kades Peck, 71 00:03:06.845 --> 00:03:08.925 who is the senior fellow at the National Community 72 00:03:09.165 --> 00:03:10.285 Reinvestment Coalition. 73 00:03:10.505 --> 00:03:13.565 Former, uh, FinTech Small Business Financing exec. 74 00:03:13.565 --> 00:03:14.565 And with that, respectfully ask 75 00:03:14.565 --> 00:03:15.565 for your I vote today. Alright. 76 00:03:15.565 --> 00:03:19.995 Thank you, ma'am. Sorry. Thank you. 77 00:03:20.195 --> 00:03:21.555 Chairman Berg and Vice Chair 78 00:03:21.555 --> 00:03:22.715 Wilkes and members of the committee. 79 00:03:23.145 --> 00:03:24.315 kimo is a statewide network 80 00:03:24.375 --> 00:03:27.275 of 400 business service providers and community lenders, 81 00:03:27.335 --> 00:03:29.715 and a strong supporter of SB 8 6 9. 82 00:03:29.845 --> 00:03:32.075 Along with a thousand other organizational members 83 00:03:32.095 --> 00:03:33.795 of our coalition that supports this bill, 84 00:03:34.335 --> 00:03:37.195 we commend Senator Glaser, the California legislature 85 00:03:37.195 --> 00:03:40.195 and Governor Newsom for leading the country in responsible 86 00:03:40.195 --> 00:03:42.155 small business lending prac practices. 87 00:03:42.715 --> 00:03:44.875 SB 8 69 continues this leadership. 88 00:03:45.575 --> 00:03:47.515 It does three things, as the center mentioned, 89 00:03:47.915 --> 00:03:49.355 regulates predatory practices 90 00:03:49.375 --> 00:03:53.155 by brokers levels the playing field between non between loan 91 00:03:53.175 --> 00:03:54.395 and non loan products, 92 00:03:54.695 --> 00:03:56.755 and closes loopholes in our current law. 93 00:03:57.065 --> 00:03:58.195 Working backwards, 94 00:03:58.515 --> 00:04:01.475 California's transparent price disclosure regulations are 95 00:04:01.475 --> 00:04:04.475 groundbreaking, and the legislature voted unanimously last 96 00:04:04.475 --> 00:04:05.875 year to make them permanent. 97 00:04:06.305 --> 00:04:07.995 They still contain a few loopholes 98 00:04:07.995 --> 00:04:10.795 that can enable bad actors to quote misleadingly low prices 99 00:04:11.255 --> 00:04:14.315 and police themselves and slap their own wrists. 100 00:04:15.255 --> 00:04:18.515 SSB 8 69 directly addresses this needed fix 101 00:04:18.655 --> 00:04:20.315 and closes several other loopholes 102 00:04:20.505 --> 00:04:23.075 that New York State closed when it passed its disclosure 103 00:04:23.145 --> 00:04:25.475 laws that were based on California's 104 00:04:26.715 --> 00:04:29.585 small businesses need access to capital, be it a loan, 105 00:04:29.805 --> 00:04:30.985 be it a non loan product. 106 00:04:30.985 --> 00:04:33.025 They kind of don't distinguish necessarily, 107 00:04:33.285 --> 00:04:35.385 and the regulatory framework shouldn't either 108 00:04:35.845 --> 00:04:37.425 and should treat non loan products 109 00:04:37.425 --> 00:04:38.585 the same as loan products. 110 00:04:39.225 --> 00:04:41.585 SB 8 69 takes away the unfair advantage 111 00:04:41.615 --> 00:04:44.905 that unregulated non loan financing companies have over 112 00:04:44.935 --> 00:04:47.425 regulated lenders by providing all types 113 00:04:47.445 --> 00:04:50.225 of small business financing companies with the same roles 114 00:04:50.285 --> 00:04:53.265 to play by a hallmark of market competition. 115 00:04:54.305 --> 00:04:56.705 Additionally, the bill presents several other predatory 116 00:04:57.065 --> 00:05:00.185 practices that the senator mentioned about, uh, 117 00:05:00.425 --> 00:05:03.105 skirting bans on confession of judgment 118 00:05:03.525 --> 00:05:06.065 and confide confidentiality clauses 119 00:05:06.065 --> 00:05:08.985 that bully small businesses from speaking out a victimize. 120 00:05:09.415 --> 00:05:10.825 Closing these loopholes 121 00:05:10.825 --> 00:05:13.465 and creating a competitive market for small business finance 122 00:05:13.975 --> 00:05:16.745 will ca catalyze good lending to small businesses. 123 00:05:17.325 --> 00:05:19.145 The opposition wants to narrow the bills, 124 00:05:19.205 --> 00:05:21.545 so loophole remains and they remain unregulated. 125 00:05:21.735 --> 00:05:23.065 They're the same opposition 126 00:05:23.085 --> 00:05:25.385 who unsuccessfully sued California last year 127 00:05:25.405 --> 00:05:29.705 to overturn our transparency, price disclosure regulations, 128 00:05:30.085 --> 00:05:33.345 the same regulations this legislator voted unanimously. If 129 00:05:33.345 --> 00:05:36.015 You go ahead and wrap it up, I'm, I and I'm done. 130 00:05:36.035 --> 00:05:37.055 You're wrapped. All right. 131 00:05:37.115 --> 00:05:38.735 I'm wrapped all I respectfully 132 00:05:38.735 --> 00:05:39.775 ask for your iye vote. Alright, 133 00:05:39.915 --> 00:05:40.915 Thanks. 134 00:05:41.165 --> 00:05:42.165 Next witness, 135 00:05:48.925 --> 00:05:49.925 Honorable members. 136 00:05:49.955 --> 00:05:51.375 My name is Lewis Kitz Peck. 137 00:05:51.675 --> 00:05:53.295 I'm a senior fellow at the National 138 00:05:53.295 --> 00:05:54.695 Community Reinvestment Coalition. 139 00:05:54.905 --> 00:05:57.175 We're part of the Responsible Business Lending Coalition, 140 00:05:57.245 --> 00:06:00.245 which includes both for-profit financing companies 141 00:06:00.265 --> 00:06:01.525 and nonprofit advocates, 142 00:06:01.745 --> 00:06:02.965 and is part of the coalition 143 00:06:02.965 --> 00:06:05.445 of over a thousand organizations that supports this bill. 144 00:06:05.865 --> 00:06:08.085 Uh, personally, I'm also a small business financing 145 00:06:08.115 --> 00:06:09.285 executive, formerly, 146 00:06:09.625 --> 00:06:10.845 and a former appointed member 147 00:06:10.845 --> 00:06:12.525 of the CFBs Consumer Advisory Board. 148 00:06:13.495 --> 00:06:16.085 Small businesses today are routinely steered 149 00:06:16.105 --> 00:06:19.285 by brokers into unnecessarily expensive financing 150 00:06:19.395 --> 00:06:22.085 because it pays the broker a higher fee. 151 00:06:22.595 --> 00:06:23.965 This echoes one of the causes 152 00:06:23.965 --> 00:06:25.165 of the subprime mortgage crisis, 153 00:06:25.385 --> 00:06:27.765 as Senator Min observed in in the hearing yesterday. 154 00:06:28.385 --> 00:06:32.525 Um, uh, in fact, reports describe subprime mortgage brokers 155 00:06:32.585 --> 00:06:34.525 who lost their mortgage brokering 156 00:06:34.525 --> 00:06:35.885 licenses after that crisis. 157 00:06:36.115 --> 00:06:39.125 Just moving over to the totally unregulated wild West 158 00:06:39.185 --> 00:06:42.765 of small business financing brokering, I'd like to walk you 159 00:06:42.765 --> 00:06:44.765 through an advertisement that was just passed out. 160 00:06:44.765 --> 00:06:46.725 Thank you. From a merchant cash advance company 161 00:06:46.865 --> 00:06:49.045 to brokers the financing company, 162 00:06:49.305 --> 00:06:51.845 the Merchant Cash Advance Company in this ad offers brokers 163 00:06:51.845 --> 00:06:53.685 trying to attract the brokers business, 164 00:06:54.355 --> 00:06:55.725 huge commission payouts. 165 00:06:56.225 --> 00:07:00.485 The financing company offers brokers max upsell 12 points. 166 00:07:01.305 --> 00:07:04.205 In other words, the financing company quotes a price 167 00:07:04.345 --> 00:07:06.815 to the broker for a given small business, 168 00:07:06.875 --> 00:07:08.735 and that brokers then permitted to turn around 169 00:07:08.735 --> 00:07:11.095 and upsell the borrower. 170 00:07:11.095 --> 00:07:12.935 They can add a hidden fee as high 171 00:07:12.935 --> 00:07:15.695 as they believe the borrower might take up to 12%, 172 00:07:15.695 --> 00:07:18.015 in this case, a 12% broker fee. 173 00:07:18.115 --> 00:07:19.735 We see 15 commonly as well. 174 00:07:20.555 --> 00:07:22.855 The advertisement goes on to ask brokers 175 00:07:23.165 --> 00:07:24.455 with a deal this good, 176 00:07:24.835 --> 00:07:28.055 why would you even consider submitting your deals elsewhere? 177 00:07:29.035 --> 00:07:32.735 In other words, the the financing company is explicitly 178 00:07:32.735 --> 00:07:35.815 trying to avoid competition, not by lowering their prices, 179 00:07:36.155 --> 00:07:37.215 so borrowers choose them, 180 00:07:37.475 --> 00:07:39.695 but by overcharging borrowers so 181 00:07:39.695 --> 00:07:42.375 that the financing company can pay the brokers huge 182 00:07:42.375 --> 00:07:43.455 commission payouts. 183 00:07:44.045 --> 00:07:46.695 This bill would allow DFBI to license brokers so 184 00:07:46.695 --> 00:07:49.735 that small businesses can seek accountability if mistreated. 185 00:07:49.995 --> 00:07:51.975 It would also help small businesses distinguish 186 00:07:51.975 --> 00:07:54.015 between brokers offering affordable products. 187 00:07:54.195 --> 00:07:55.255 All righty. Thank you very much. 188 00:07:55.825 --> 00:07:57.735 Thank you. Thank you. I urge your support. Thank 189 00:07:57.735 --> 00:07:58.735 You. Alright. 190 00:07:58.735 --> 00:08:01.025 Uh, opposition. 191 00:08:03.175 --> 00:08:06.315 Yeah, sorry. Can do a quick tweener. 192 00:08:06.555 --> 00:08:07.875 Margaret Gladstein here on behalf 193 00:08:07.875 --> 00:08:09.075 of the Secured Finance Network. 194 00:08:09.375 --> 00:08:11.115 We are not supporting or opposed. 195 00:08:11.135 --> 00:08:12.435 We are working with the author and, 196 00:08:12.455 --> 00:08:14.595 and appreciate his commitment to keep working with us. 197 00:08:14.955 --> 00:08:16.915 Concerns about section 2, 2, 2, 6 5. 198 00:08:16.915 --> 00:08:18.515 Thank you, alrightyy. Thank you. Um, 199 00:08:18.685 --> 00:08:19.835 let's go to opposition. 200 00:08:24.335 --> 00:08:25.505 Good morning, chair and members. 201 00:08:25.505 --> 00:08:27.225 Chris Rose on behalf of Rapid Finance 202 00:08:27.365 --> 00:08:28.585 and capita with, uh, 203 00:08:28.585 --> 00:08:30.345 respectful oppose and less amended position. 204 00:08:30.875 --> 00:08:32.665 First of all, thank you to Senator Glaser 205 00:08:32.805 --> 00:08:35.705 and to his staff for the many meetings that we've had 206 00:08:35.705 --> 00:08:38.225 and thoughtful considerations of our amendments. 207 00:08:38.225 --> 00:08:39.905 Those conversations have been productive 208 00:08:39.905 --> 00:08:40.985 and we look forward to more. 209 00:08:41.365 --> 00:08:44.465 Um, I want to stress the fact that Capita 210 00:08:44.605 --> 00:08:46.945 and Rapid, we share the same goals 211 00:08:47.605 --> 00:08:48.985 as the author and his sponsors. 212 00:08:49.105 --> 00:08:51.705 We hardly support the licensure of providers 213 00:08:51.705 --> 00:08:54.105 of commercial financing products in a manner 214 00:08:54.105 --> 00:08:55.600 that's equivalent to the, the licensure 215 00:08:55.600 --> 00:08:57.240 of those providing commercial loans. 216 00:08:57.605 --> 00:09:01.045 Secondly, we support the commercial financing brokers 217 00:09:01.145 --> 00:09:04.125 to be licensed in the same manner as the licensure 218 00:09:04.125 --> 00:09:06.485 of entities providing brokery of commercial loans. 219 00:09:06.625 --> 00:09:09.525 And lastly, we support adding robust protections 220 00:09:09.525 --> 00:09:12.845 to California law, ensuring consumer protection, um, 221 00:09:12.875 --> 00:09:15.605 from the unscrupulous behavior of, um, 222 00:09:16.095 --> 00:09:17.805 commercial financing brokers. 223 00:09:18.265 --> 00:09:21.805 How to accomplish this is the real trick, as you all know, 224 00:09:21.905 --> 00:09:23.325 as crafters of policy. 225 00:09:23.905 --> 00:09:26.525 Uh, we still have some divide on how to do that, 226 00:09:26.585 --> 00:09:27.365 but we are having good 227 00:09:27.365 --> 00:09:28.765 conversations and we're thankful for that. 228 00:09:28.825 --> 00:09:31.285 So thank you so much again, opposed this amended. Thank you. 229 00:09:31.935 --> 00:09:36.295 Thank you. Next, Good morning chair committee members. 230 00:09:36.475 --> 00:09:37.855 My name is Pat Joyce on behalf 231 00:09:37.855 --> 00:09:40.575 of Ford Financing a sales-based financing company 232 00:09:40.925 --> 00:09:43.175 that would fall into the provider bucket under this 233 00:09:43.335 --> 00:09:44.415 proposed licensing framework. 234 00:09:44.985 --> 00:09:46.605 Uh, we have an opposed unless amended position. 235 00:09:47.345 --> 00:09:48.485 Um, I'd like to acknowledge some 236 00:09:48.485 --> 00:09:50.045 of the comments from yesterday's committee hearings since 237 00:09:50.045 --> 00:09:51.485 some of the committee members are here today. 238 00:09:51.965 --> 00:09:54.685 I think the trick here is how do you balance an effective 239 00:09:54.685 --> 00:09:56.965 licensing framework with effective re regulations 240 00:09:56.965 --> 00:10:00.045 and effective requirements while avoiding constraining the 241 00:10:00.045 --> 00:10:01.205 supply of capital in the market? 242 00:10:01.665 --> 00:10:04.005 And that's the trick. And how do you weigh that? 243 00:10:04.145 --> 00:10:06.845 And I think right now, the way the bill's currently written 244 00:10:07.025 --> 00:10:08.285 is it's out of whack. 245 00:10:08.285 --> 00:10:09.605 It needs to be rebalanced. 246 00:10:10.065 --> 00:10:11.645 So I think moving forward, we're gonna have those 247 00:10:11.645 --> 00:10:13.205 conversations on how do you go about doing that. 248 00:10:13.895 --> 00:10:15.675 Um, there are still some outstanding issues, 249 00:10:15.815 --> 00:10:17.675 but we do appreciate, uh, 250 00:10:17.735 --> 00:10:19.435 the author taking the amendment's reference 251 00:10:19.435 --> 00:10:21.235 and the analysis, especially the removal 252 00:10:21.235 --> 00:10:22.755 of the fiduciary duty requirement. 253 00:10:22.755 --> 00:10:24.115 Thank you. Um, 254 00:10:24.775 --> 00:10:27.355 and, uh, as it relates to the other kind of sticking point, 255 00:10:27.355 --> 00:10:30.955 is the lowest a PR that the broker's required to disclose, 256 00:10:31.175 --> 00:10:32.795 uh, the analysis references 257 00:10:32.795 --> 00:10:35.075 that acknowledges more work to be done? 258 00:10:35.255 --> 00:10:37.635 So look forward to working with the bill sponsors 259 00:10:37.655 --> 00:10:39.515 and author as we move forward. Thank you. 260 00:10:39.925 --> 00:10:44.305 Thank you. Alright, uh, let's now turn to yes, 261 00:10:46.575 --> 00:10:47.585 supporter, oppose 262 00:10:47.925 --> 00:10:49.665 In between Carolyn Bill Hunter on behalf 263 00:10:49.665 --> 00:10:51.585 of the Revenue Based Financial Coalition. 264 00:10:51.585 --> 00:10:52.825 Again, we're not opposed to the bill, 265 00:10:52.825 --> 00:10:54.705 but we'll be looking forward to working with the author 266 00:10:54.705 --> 00:10:56.145 as the bill continues to move through the process. 267 00:10:56.575 --> 00:10:58.225 Alright, thank you very much. Alright. 268 00:10:58.765 --> 00:11:01.225 Um, so now let's take me to testimony. 269 00:11:01.415 --> 00:11:03.825 Give us your name, your affiliation, 270 00:11:04.005 --> 00:11:06.825 and your position support, oppose or in between. 271 00:11:06.895 --> 00:11:10.985 Alright. Um, those who wish to testify in Me Too fashion, 272 00:11:10.985 --> 00:11:12.025 please approach the microphone, 273 00:11:12.025 --> 00:11:13.465 seeing no one approaches the microphone. 274 00:11:13.675 --> 00:11:15.025 Let's now turn to committee members, 275 00:11:15.025 --> 00:11:16.425 committee members questions. 276 00:11:16.535 --> 00:11:18.705 Send 'em in. Then Senator Nilo. 277 00:11:19.085 --> 00:11:20.945 Uh, I was one of the people who heard this bill yesterday 278 00:11:20.945 --> 00:11:22.625 in banking and just want 279 00:11:22.625 --> 00:11:24.345 to reiterate some of the comments I made. 280 00:11:24.365 --> 00:11:28.025 Um, I did cut my teeth earlier in my career working at, um, 281 00:11:28.565 --> 00:11:30.225 as a policy advisor, uh, 282 00:11:30.565 --> 00:11:33.305 around the time when we had the subprime mortgage crisis. 283 00:11:34.045 --> 00:11:36.985 And a lot of the products that we're seeing today, uh, 284 00:11:37.665 --> 00:11:40.105 targeted to small businesses really do resemble both in 285 00:11:40.545 --> 00:11:43.265 substance and in, um, some of the marketing techniques, 286 00:11:43.265 --> 00:11:44.465 what we saw during that crisis. 287 00:11:44.645 --> 00:11:46.025 And it's very troubling. 288 00:11:46.025 --> 00:11:49.105 It's one of the reasons I authored SSB 6 66 last year to try 289 00:11:49.105 --> 00:11:50.865 to address some of the junk fees 290 00:11:51.005 --> 00:11:53.845 and opaque pricing that we see in this same space. 291 00:11:54.385 --> 00:11:56.245 Uh, and I just think it's important, um, 292 00:11:56.545 --> 00:11:57.845 to start to get a handle on this. 293 00:11:57.905 --> 00:12:00.565 Uh, what we've always seen in these types 294 00:12:00.565 --> 00:12:02.565 of financing markets is the capital goes 295 00:12:02.565 --> 00:12:05.885 to unregulated spaces, is regulatory arbitrage. 296 00:12:06.065 --> 00:12:08.765 And as much as we want to say that markets always work, 297 00:12:08.765 --> 00:12:11.365 we've seen too many examples of places where 298 00:12:11.885 --> 00:12:13.165 consumers get taken advantage of. 299 00:12:13.385 --> 00:12:16.845 And, uh, this is a space where in California, a lot 300 00:12:16.845 --> 00:12:19.485 of the small businesses are owned by people, uh, 301 00:12:19.785 --> 00:12:20.805 who are immigrants, 302 00:12:21.015 --> 00:12:23.285 where maybe they're not the most sophisticated actors. 303 00:12:23.635 --> 00:12:25.285 English may not be their first language. 304 00:12:25.285 --> 00:12:26.965 I've seen it in my district. And, uh, 305 00:12:27.005 --> 00:12:28.845 I just think it's important we get a handle on this. 306 00:12:28.905 --> 00:12:31.805 Now, I, I do wanna, uh, reflect the comments made 307 00:12:31.805 --> 00:12:35.285 by Mr. Joyce that this is, um, you know, it's important 308 00:12:35.285 --> 00:12:36.925 to get the balance right, to make sure 309 00:12:36.925 --> 00:12:39.245 that we're not just constraining access to capital 310 00:12:39.305 --> 00:12:42.365 and access to credit for these types of, uh, borrowers. 311 00:12:42.385 --> 00:12:43.485 But, but that being said, 312 00:12:43.565 --> 00:12:45.325 I think this is an appropriate first step to try 313 00:12:45.325 --> 00:12:46.885 to create a licensing scheme. 314 00:12:47.005 --> 00:12:49.325 I, I think, uh, we need to start addressing this. 315 00:12:49.325 --> 00:12:50.885 We're, we're hearing anecdotally, 316 00:12:50.885 --> 00:12:52.445 and I suspect the data will come soon. 317 00:12:52.705 --> 00:12:53.925 Far too many examples of, 318 00:12:53.985 --> 00:12:56.485 of grossly abusive tactics and products. 319 00:12:56.505 --> 00:12:57.725 So I wanna thank the author 320 00:12:57.745 --> 00:12:59.405 and would move the bill at the appropriate time. 321 00:13:01.015 --> 00:13:02.515 Righty. Thank you. Senator Niello. 322 00:13:03.165 --> 00:13:04.395 Thank you, Mr. Chair. 323 00:13:04.575 --> 00:13:08.555 Um, I was, uh, in the meeting yesterday, so it's 324 00:13:09.105 --> 00:13:10.355 deja vu all over again. 325 00:13:10.495 --> 00:13:14.475 And, uh, for those of you who were present yesterday, 326 00:13:14.715 --> 00:13:16.835 I apologize for the redundancy, 327 00:13:16.855 --> 00:13:19.875 but I do wanna, um, repeat what I said yesterday. 328 00:13:20.885 --> 00:13:25.155 First of all, if, uh, regulations are, uh, uh, 329 00:13:25.335 --> 00:13:26.355 two restrictive 330 00:13:26.415 --> 00:13:30.435 or confusing, uh, the end result of that approach 331 00:13:30.535 --> 00:13:32.395 to regulatory, uh, 332 00:13:32.545 --> 00:13:36.635 writing is a re a restriction in whatever supply, uh, 333 00:13:36.735 --> 00:13:39.755 of the product that, that we're trying to regulate. 334 00:13:39.855 --> 00:13:43.105 So we need to be careful, uh, about that. 335 00:13:44.045 --> 00:13:47.655 And, uh, to that point, the 336 00:13:48.465 --> 00:13:51.295 substitute for the fiduciary responsibility, 337 00:13:51.395 --> 00:13:54.925 the statements in the bill, as I said yesterday, is, um, 338 00:13:55.945 --> 00:13:58.565 to me impossible, but at least difficult to understand. 339 00:13:58.585 --> 00:14:02.125 And just so everybody knows, I'll, um, read it that, uh, 340 00:14:02.125 --> 00:14:06.005 commercial financing broker owes a duty of care to 341 00:14:06.145 --> 00:14:07.925 and has a, uh, a duty 342 00:14:08.025 --> 00:14:10.165 to act in the highest good faith toward 343 00:14:10.725 --> 00:14:13.965 a potential recipient, including the duty to exercise, 344 00:14:13.985 --> 00:14:15.125 the utmost honesty 345 00:14:15.125 --> 00:14:18.125 and integrity toward the potential, uh, recipient. 346 00:14:18.745 --> 00:14:23.495 Um, I just would have a hard time enforcing 347 00:14:23.495 --> 00:14:25.375 that on either side of it, quite frankly. 348 00:14:26.075 --> 00:14:30.895 And relative to the, uh, um, the a PR uh, 349 00:14:30.945 --> 00:14:35.055 estimation, um, what is not in the bill 350 00:14:35.075 --> 00:14:38.295 and is mentioned by some is that maybe a disclosure 351 00:14:38.295 --> 00:14:42.615 that really needs to be made is what the compensation is, 352 00:14:43.035 --> 00:14:46.575 uh, to the broker, uh, for, uh, providing the loan. 353 00:14:46.915 --> 00:14:50.415 And, uh, uh, any borrower that saw that kind 354 00:14:50.415 --> 00:14:51.765 of compensation compared 355 00:14:51.765 --> 00:14:53.765 to something else would have to question it. 356 00:14:53.945 --> 00:14:58.645 And to that point, I also said yesterday that I have lots 357 00:14:58.645 --> 00:15:01.525 of experience on being the borrower side of loans. 358 00:15:02.225 --> 00:15:05.245 And, uh, quite frankly, my assumption is that, uh, 359 00:15:05.245 --> 00:15:07.805 the person that I'm dealing with, uh, however nice 360 00:15:07.825 --> 00:15:10.045 and reputability organization is, 361 00:15:10.355 --> 00:15:12.285 they don't have my best interest at heart. 362 00:15:12.865 --> 00:15:15.325 Um, only they have their best interest at heart. 363 00:15:15.345 --> 00:15:16.805 And also these contracts 364 00:15:16.805 --> 00:15:19.725 that people are signing are unilateral contracts. 365 00:15:19.725 --> 00:15:23.085 That is, they're written by, um, the, uh, 366 00:15:23.085 --> 00:15:24.925 party providing the loan in this case. 367 00:15:25.585 --> 00:15:29.405 And, uh, good luck in trying to get language of it changed. 368 00:15:29.945 --> 00:15:32.885 Uh, and so caveat mTOR is the best approach 369 00:15:32.945 --> 00:15:34.445 for anybody with these, uh, loans. 370 00:15:34.445 --> 00:15:36.285 That's what I would advise any small business. 371 00:15:36.425 --> 00:15:40.405 But, um, I, uh, I know Senator Glaser 372 00:15:40.405 --> 00:15:42.525 and I trust that he'll continue to working on it. 373 00:15:42.525 --> 00:15:44.565 And so I support the bill at this point. 374 00:15:45.855 --> 00:15:49.685 Thank you, Sonito. Other questions, comments? Seeing none. 375 00:15:50.105 --> 00:15:51.565 Oh, I'm sorry. Senator Wilke. 376 00:15:51.615 --> 00:15:55.715 Thank you, Mr. Chair. Uh, actually, Senator Nelo hit on, 377 00:15:56.375 --> 00:15:57.635 hit on my concerns on the bill, 378 00:15:57.635 --> 00:15:58.875 so I'm gonna support it today. 379 00:15:59.335 --> 00:16:01.155 Um, the reason why I'm supporting it today is 380 00:16:01.275 --> 00:16:02.555 'cause I trust you, uh, 381 00:16:02.575 --> 00:16:04.435 and I know you'll continue to work with opposition 382 00:16:04.435 --> 00:16:07.395 and try to find that sweet spot that benefits everybody. 383 00:16:08.085 --> 00:16:09.505 So thank you. Thank you. 384 00:16:10.535 --> 00:16:13.205 Thank you. Alright. Um, seeing no further comments 385 00:16:13.265 --> 00:16:15.525 or questions, Senator Glaser, would you like to close? 386 00:16:16.035 --> 00:16:19.645 Well, Senator Nilo kind of, uh, hit the some key points 387 00:16:19.645 --> 00:16:21.805 that, you know, we've been working hard on, which is 388 00:16:21.805 --> 00:16:23.565 that we don't want ambiguity in this space. 389 00:16:24.145 --> 00:16:25.605 We want someone who's a lender 390 00:16:25.665 --> 00:16:27.725 or a broker to know what the rules are 391 00:16:28.825 --> 00:16:30.765 and not have it be in squishy spaces. 392 00:16:31.305 --> 00:16:32.925 And that's what we have worked on 393 00:16:32.925 --> 00:16:34.125 and what we'll continue to work on. 394 00:16:34.285 --> 00:16:35.565 I have my commitment to do that. 395 00:16:36.245 --> 00:16:37.485 I, I didn't note at the beginning. 396 00:16:37.485 --> 00:16:40.725 This is joint authored by, uh, Senator Limon, the chair 397 00:16:40.725 --> 00:16:42.645 of our banking committee, who, her 398 00:16:42.645 --> 00:16:44.005 and her staff worked on the bill 399 00:16:44.385 --> 00:16:46.165 and will continue to work with me on this bill 400 00:16:46.185 --> 00:16:47.685 as if it goes forward today. 401 00:16:48.285 --> 00:16:50.525 I wanna note that access to capital is very important. 402 00:16:50.545 --> 00:16:51.605 We don't wanna dry it up. 403 00:16:52.075 --> 00:16:56.405 It's a part of, uh, creating a robust, uh, retail community. 404 00:16:56.785 --> 00:16:59.405 Uh, but I also wanna, uh, emphasize in my close the point 405 00:16:59.405 --> 00:17:02.925 that Senator Min has made, which is that the, the folks 406 00:17:02.925 --> 00:17:06.205 that are borrowing money, they don't have an MBA, uh, 407 00:17:06.205 --> 00:17:10.045 in finance, but some folks do, um, around this table. 408 00:17:10.045 --> 00:17:12.365 Mine's an account. Oh, yours is an accounting. All right. 409 00:17:12.745 --> 00:17:15.245 But, and I think you spoke yesterday in the hearing about 410 00:17:15.245 --> 00:17:17.205 things that kept you up at night when you were making these 411 00:17:17.205 --> 00:17:18.685 borrower decisions and you were a very 412 00:17:18.685 --> 00:17:20.485 sophisticated businessman. 413 00:17:21.145 --> 00:17:23.325 Um, but a lot of the folks out there that, 414 00:17:23.325 --> 00:17:24.765 that they just have a dream 415 00:17:24.945 --> 00:17:27.605 and a hope to, uh, provide for their family. 416 00:17:27.745 --> 00:17:31.045 And, and you all have been into so many shopkeepers spaces 417 00:17:31.265 --> 00:17:33.885 to see the wonderful, vibrant community that 418 00:17:34.195 --> 00:17:36.165 that is our small business retail sector. 419 00:17:36.585 --> 00:17:39.885 And we wanna make sure that they, you know, we, 420 00:17:39.885 --> 00:17:42.285 that we set the table right, they're gonna make choices as 421 00:17:42.285 --> 00:17:43.445 to what they, uh, served, 422 00:17:43.505 --> 00:17:44.685 but we wanna set the table right 423 00:17:44.685 --> 00:17:45.845 so they can be treated fairly. 424 00:17:45.905 --> 00:17:47.725 And honestly, that's the purpose of the bill. 425 00:17:47.995 --> 00:17:49.725 Without respectfully ask for an aye vote. 426 00:17:50.405 --> 00:17:51.985 Uh, thank you Senator Glaser. Alright. 427 00:17:52.325 --> 00:17:54.585 Um, Madam Secretary, please call the, oh, is there a motion? 428 00:17:54.895 --> 00:17:56.865 Yeah, Senator. Oh, Senator man moves. Alright. 429 00:17:56.965 --> 00:17:58.425 Um, Madam Secretary, please call the rule. 430 00:17:59.455 --> 00:18:02.265 This is file item number four, SB 8 69. 431 00:18:02.285 --> 00:18:06.025 The motion is to pass to appropriations berg. Aye. Berg Aye. 432 00:18:06.045 --> 00:18:10.745 Wil Aye. Wil Aye. Allen Ashby Aye. Ashby Aye. 433 00:18:10.745 --> 00:18:14.705 Caballero Aye. Cero Aye. Gonzalez? Aye. Gonzalez? Aye. 434 00:18:14.755 --> 00:18:19.025 Laird? Aye. Laird, I min aye Min Aye. Nelo Aye. 435 00:18:19.495 --> 00:18:23.485 Nelo aye. Stern wiener seven 436 00:18:23.665 --> 00:18:25.925 or sorry, eight to zero with members missing. Alright, 437 00:18:25.925 --> 00:18:27.125 We'll put that on call. 438 00:18:27.185 --> 00:18:30.245 All right. The final bill in Senator Glaser Day here at 439 00:18:30.245 --> 00:18:32.085 Senate Judiciary Committee is, uh.