BILL ANALYSIS Ó
SB 984
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 984
(Hueso) - As Amended June 30, 2016
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|Policy |Banking and Finance |Vote:|12 - 0 |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
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
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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)
COMMENTS:
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)
319-2081