BILL ANALYSIS Ó
SB 235
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Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 235
(Block) - As Amended August 17, 2015
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|Policy |Banking and Finance |Vote:|11 - 0 |
|Committee: | | | |
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| |Judiciary | |10 - 0 |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill expands activities authorized for licensed finders
under the Pilot Program for Increased Access to Responsible
Small Dollar Loans, which provides consumer loans in principal
amounts of $300 to $2,500, allowing finders to disburse loans
and collect payments on behalf of lenders and provide required
notices and disclosures to borrowers. The bill requires finders
to maintain records of all collections and disbursements and
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submit to regular examination from the Commissioner of Business
Oversight, and permits finders to receive compensation of up to
$65 per loan, plus $2 per payment received by the finder on
behalf of the lender.
FISCAL EFFECT:
Minor and absorbable enforcement costs to the Department of
Business Oversight (DBO).
COMMENTS:
1)Purpose. According to the author, relatively few consumer
loans are made in California with principal amounts under
$2,500, leaving those with little or poor credit with few
affordable options to borrow small, unsecured amounts. The
author contends credit cards are often unavailable or come
with prohibitively high interest rates and fees.
2)Squeezed in the Middle. The California Finance Lenders Law
(CFLL) contains interest rate restrictions on loans below
$2,500, incentivizing lenders to loan $2,500 or more, or
provide payday loans of up to $300. Borrowers with good
credit may access consumer loans in the $300 to $2,500 range
through credit cards, while higher-risk borrowers have limited
alternative options. According to a report from the
Department of Corporations, CFLL licensees made approximately
80,000 unsecured consumer loans under $2,500 in 2008, compared
with over 11 million payday loans over the same period.
3)Pilot. The small dollar pilot program was created in 2010 to
provide alternative incentives for lenders to make consumer
loans to borrowers with lower credit, allowing increased
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interest rates and fees, and requiring extensive underwriting.
Pilot lenders must improve efficiency to lower acquisition
costs and expand lending, and modifications to the program
made in 2013, and in this bill, are intended to improve
program competitiveness. Six pilot lenders are currently in
operation, having made approximately 200,000 loans under the
program since inception, though a single lender accounts for
the majority of those loans.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081