BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 984 (Hueso) - Pilot Program for Increased Access to  
          Responsible Small Dollar Loans: extension
          
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          |Version: February 10, 2016      |Policy Vote: B & F.I. 6 - 1,    |
          |                                |          JUD. 7 - 0            |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 2, 2016       |Consultant: Jolie Onodera       |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  SB 984 would repeal the January 1, 2018, sunset date  
          for the Pilot Program for Increased Access to Responsible Small  
          Dollar Loans, thereby making its provisions operative  
          indefinitely, as the Program for Increased Access to Responsible  
          Small Dollar Loans (Program).


          Fiscal  
          Impact:  Ongoing annual costs potentially in excess of $150,000  
          (Special Fund*) to the Department of Business Oversight (DBO) to  
          continue administrative and enforcement activities over the  
          Program, to be recovered through the authority to charge fees.  
          To the extent the removal of the sunset date fosters growth and  
          greater participation in the Program, the future costs of the  
          Program could potentially increase.

          *State Corporations Fund







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          Background:  Existing law establishes, until January 1, 2018, the Pilot  
          Program for Increased Access to Responsible Small Dollar Loans  
          (Pilot Program) for the purpose of allowing greater access to  
          affordable installment loans in principal amounts of at least  
          $300 and less than $2,500. The Pilot Program, administered by  
          the Commissioner of Business Oversight, imposes specified limits  
          on the interest rates, charges, and fees that a licensee may  
          impose, as well as other program requirements. 

          In its statutorily mandated report entitled "Report of Activity  
          Under Small Dollar Loan Pilot Programs - Affordable Credit  
          Building Opportunities Pilot Program and Pilot Program for  
          Responsible Small Dollar Loans, January 1, 2011 through December  
          31, 2014, (June 2015)" the DBO issued the following  
          recommendations:

              The current version of the small dollar pilot  
              program has been operational for just one year. The  
              DBO recommends policymakers give the program more  
              time to work before making changes. Recommendations  
              for improvements, at this time, would be premature.  
              The changes brought by the new program did double  
              the number of lenders participating in the program,  
              but the total remains less than 10. Additionally,  
              the revisions did not significantly affect the  
              amount of lending activity conducted by the  
              individual companies. The DBO will consult with  
              licensees, consumer advocates and policymakers to  
              explore ways to increase participation in the pilot  
              program by both lenders and borrowers.


          Proposed Law:  This bill would repeal the January 1, 2018,  
          sunset date on the Pilot Program for Increased Access to  
          Responsible Small Dollar Loans, thereby making its provisions  
          operative indefinitely. Additionally, this bill:
                 Strikes the word "pilot" from the Program's name.


                 Deletes the requirement that the commissioner include  
               recommendations regarding whether the Program should be  
               continued after January 1, 2018, in the report on Program  








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               utilization that is required to be submitted to the  
               Legislature by January 1, 2017. 




          Related  
          Legislation:  SB 235 (Block) Chapter 505/2015 authorizes finders  
          under the Pilot Program to disburse loan proceeds to borrowers,  
          receive loan payments from borrowers, and provide notices and  
          disclosures to borrowers, as specified; increases allowable  
          finder compensation; and provides pilot program lenders greater  
          flexibility in the way(s) in which they compensate their  
          finders.
          SB 318 (Hill) Chapter 467/2013 abolished the Pilot Program for  
          Affordable Credit-Building Opportunities, and, until January 1,  
          2018, established the Pilot Program for Increased Access to  
          Responsible Small Dollar Loans under the California Finance  
          Lenders Law. 

          SB 1146 (Florez) Chapter 640/2010 established the Pilot Program  
          for Affordable Credit Building Opportunities that allowed  
          licensees under the California Finance Lender Law to participate  
          in the pilot program involving unsecured consumer loans of less  
          than $2,500 until January 1, 2015.


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