BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 984|
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UNFINISHED BUSINESS
Bill No: SB 984
Author: Hueso (D), et al.
Amended: 8/15/16
Vote: 21
SENATE BANKING & F.I. COMMITTEE: 6-1, 4/6/16
AYES: Vidak, Galgiani, Hall, Hueso, Lara, Morrell
NOES: Glazer
SENATE JUDICIARY COMMITTEE: 7-0, 4/19/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
SENATE FLOOR: 39-0, 6/1/16
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone,
Vidak, Wieckowski, Wolk
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR: 77-0, 8/18/16 - See last page for vote
SUBJECT: Pilot Program for Increased Access to Responsible
Small Dollar Loans: extension
SOURCE: Oportun
DIGEST: This bill extends the sunset date on the Pilot Program
for Increased Access to Responsible Small Dollar Loans (pilot
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program) by five years, to January 1, 2023, and requires the
Department of Business Oversight (DBO) to issue annual reports,
by July 1 of each year from 2017 through 2021, inclusive,
summarizing utilization of the pilot program, as specified.
Assembly Amendments modify the content, due dates, and number of
reports required to be submitted by DBO regarding utilization of
the pilot program.
ANALYSIS:
Existing law:
1)Authorizes the pilot program, until January 1, 2018, within
the California Finance Lenders Law (CFLL Financial Code
Sections 22365 et seq.). The pilot program authorizes lenders
that have been vetted by DBO to charge somewhat higher
interest rates and fees on loans of principal amounts up to
$2,500 than are otherwise allowed under the CFLL. The pilot
program also authorizes approved lenders to use finders, as
specified. Pilot program lenders must perform rigorous
underwriting, provide extensive borrower disclosures, offer
borrowers credit education prior to the disbursement of loan
funds, and report borrower payment history to at least one
major credit bureau - requirements that do not apply to CFLL
licensees which are not pilot program lenders.
2)Requires DBO to issue a report by January 1, 2017, summarizing
utilization of the pilot program and including recommendations
for whether the program should be continued beyond January 1,
2018.
3)Requires DBO to conduct a random sample survey of borrowers
who have participated in the pilot program to obtain
information regarding the borrowers' experience and licensees'
compliance with the pilot program. DBO is required to include
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the results of this survey in the reports it issues
summarizing utilization of the pilot program.
This bill:
1)Extends the sunset date on the pilot program by five years, to
January 1, 2023.
2)Changes the content, due dates, and number of reports required
to be issued by DBO summarizing utilization of the pilot
program, as follows:
a) The report required to be issued in 2017 is now due by
July 1, 2017, instead of January 1, 2017.
b) DBO is required to issue reports annually, summarizing
utilization of the pilot program, from July 2017, through
July 2021, inclusive.
c) DBO is no longer required to include the results of a
random sample survey of borrowers who participated in the
program in its pilot program summary reports.
Background
Relatively few installment loans are made in California with
principal amounts under $2,500. This represents a challenge to
the significant population of people in California who are
unable to access affordable credit through banks and credit
unions. Californians who lack credit scores, or have very thin
credit files or damaged credit, currently have very few
affordable options when they need to borrow money. Credit cards
are often unavailable to this population, or, if available, bear
very high interest rates and fees. When their spending needs
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outpace their incomes, these Californians commonly turn to
payday loans, auto title loans, or high-interest rate, unsecured
installment loans. All three of these options come with high
costs, and none rewards timely loan repayment with a credit
score increase.
In 2010, in an attempt to increase the availability of
affordable, credit-building installment loans made in California
in amounts below $2,500, the California Legislature first
authorized the pilot program (SB 1146, Florez, Chapter 640,
Statutes of 2010). The Legislature modified the pilot program
in 2013 and again in 2015, with the aim of attracting more
lenders to join the program and increasing the availability of
pilot program loans across the state (SB 318, Hill, Chapter 467,
Statutes of 2013 and SB 235, Block, Chapter 505, Statutes of
2015).
Comments
According to DBO, nine lenders have been approved to participate
in the pilot program through 2015, relative to a CFLL licensee
population of just under 2,600. Of these nine, only three pilot
program lenders actually lent under the program during 2015.
The vast majority of loans made under the pilot program are made
by a single lender (Oportun, the sponsor of this bill). In
2015, Oportun made over 190,000 pilot program loans; Lendify
made approximately 4,000 loans, while International Rescue
Committee made fewer than 200 loans.
By increasing the frequency with which detailed reports are
issued regarding utilization of the pilot program, this bill is
expected to provide information that can be used to inform
discussions around possible, future changes to the program. The
information contained in these reports should also help the
Legislature decide whether the pilot program should be made
permanent.
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Removal of the borrower survey. Eliminating the requirement
that DBO conduct a random sample survey of borrowers every time
it prepares a pilot program summary report is expected to save
DBO at least $50,000 per year, without reducing the value of
information contained in DBO's summary reports. In 2013 and
2014, surveys were returned by less than 1% of all pilot program
borrowers, too small a sample to be representative of borrower
experiences.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, this bill
will result in annual costs, potentially in excess of $150,000
through 2022, for DBO to continue administering the pilot
program. These costs are recoverable through DBO's authority to
charge fees.
SUPPORT: (Verified8/18/16)
Oportun (source)
African-American Farmers of California
Avanza Inc.
Brightline Defense Project
California Teamsters Public Affairs Council
California Urban Partnership
Capitol Good Fund
Casa Familiar
Center for Financial Services Innovation
Credit Shop
Fathers & Families of San Joaquin
Greenlining Institute
Hispanic 100
INSIKT
Latin Business Association
National City Chamber of Commerce
National Federation of Filipino American Association
National Hmong American Farmers
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Nisei Farmers League
Northern California Community Loan Fund
Otay Mesa Chamber of Commerce
Pacoima Beautiful
Pew Charitable Trusts
Salvadoran American Leadership and Educational Fund
Service Employees International Union
Silicon Valley Community Foundation
Silicon Valley Leadership Group
United Domestic Workers of America/AFSCME Local 3930
Western Center on Law & Poverty
OPPOSITION: (Verified8/16/16)
None received
ASSEMBLY FLOOR: 77-0, 8/18/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Holden,
Irwin, Jones, Jones-Sawyer, Lackey, Levine, Linder, Lopez,
Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez,
Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson,
Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth,
Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk,
Williams, Wood, Rendon
NO VOTE RECORDED: Harper, Roger Hernández, Kim
Prepared by: Eileen Newhall / B. & F.I. / (916) 651-4102
8/19/16 19:29:29
**** END ****
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