BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 984  

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          Date of Hearing:  August 3, 2016


                               Lorena Gonzalez, Chair

          SB 984  
          (Hueso) - As Amended June 30, 2016

          |Policy       |Banking and Finance            |Vote:|12 - 0       |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |

          Urgency:  No  State Mandated Local Program:  YesReimbursable:   


          This bill extends the Pilot Program for Increased Access to  
          Responsible Small Dollar Loans (Pilot Program) for five years,  
          until January 1, 2023, and requires the Department of Business  
          Oversight (DBO) to post a report on the Pilot Program's  
          utilization by July 1, 2020.

          FISCAL EFFECT:

          Annual costs potentially in excess of $150,000 through 2022 to  


                                                                     SB 984  

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          DBO to continue administrative and enforcement activities over  
          the Pilot Program, to be recovered through the authority to  
          charge fees. (State Corporations Fund)


          1)Purpose. According to the author, SB 984 will extend a program  
            that promotes the type of lending that has been substantially  
            beneficial to consumers. The author's office notes that  
            low-income communities in California with low or new credit  
            histories often struggle to gain access to traditional forms  
            of credit, and the few options to them, such as payday  
            lending, are often at a significant cost.   

          2)Background. Existing law establishes, until January 1, 2018,  
            the Pilot Program for the purpose of increasing consumer  
            access to small dollar loans. The loan amounts can be of at  
            least $300 and less than $2,500. The Pilot Program was created  
            by SB 318 (Hill), Chapter 467, Statutes of 2013, which  
            replaced the underperforming Affordable Credit Building  
            Opportunities Pilot Program (ACBO). 

            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. Lenders may charge marginally  
            higher interest rates than otherwise permitted under state  


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            law, and the Pilot Program also allows the use of "finders" to  
            connect borrowers with lenders, though their fees are capped. 


          3)2015 DBO Report.  In 2015, DBO issued a report detailing the  
            utilization of small dollar loan programs. However, because  
            that report contained data for years 2011 through 2014, and  
            the current version of the Pilot Program was only operational  
            starting in 2014, the report has limited value in assessing  
            its success. DBO's preliminary data does show that the new  
            program increased the number of lenders participating in the  
            program, but it did not significantly affect the amount of  
            lending activity conducted by individual companies. However,  
            DBO also recommends that "policymakers give the program more  
            time to work before making changes."

          Analysis Prepared by:Luke Reidenbach / APPR. / (916)