BILL ANALYSIS Ó 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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 10, 2016 |Policy Vote: B & F.I. 6 - 1, | | | JUD. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 2, 2016 |Consultant: Jolie Onodera | | | | ----------------------------------------------------------------- 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 SB 984 (Hueso) Page 1 of ? 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 SB 984 (Hueso) Page 2 of ? 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. -- END --