April Sacramento Update
The Legislature is in full swing, with policy committee hearings happening daily to consider the 2,000+ bills that were introduced this year. Although February 21 was the bill introduction deadline, hundreds of additional new proposals surfaced over the past several weeks via the "gut and amend" process, whereby placeholder bills are amended into substantive legislation. Some of these bills could have significant negative impacts on community banks, including:
-SB 825 (Limon) would allow DFPI to enforce UDAP violations. Although the bill specifies that state-chartered banks are exempt from the CCFPL, the bill removed the exemption from UDAP enforcement, which is concerning for community banks which are already regulated by the FDIC and UDAP. The bill would create a scenario where 2 different versions of UDAP are being enforced.
-AB 801 (Bonta) would establish the California Community Reinvestment Act, and would require a covered financial institution to have a continuing and affirmative obligation to meet the financial services needs of the communities, including low- and moderate-income communities and communities of color, in which the covered financial institution conducts substantial business, as specified. The bill would require DFPI to assess the record of each covered financial institution in satisfying this obligation no less than once every 3 years. After each assessment, the bill would require DFPI to assign one of 5 possible ratings to describe how the covered financial institution is meeting its community financial services needs, and to prepare a specified written evaluation of the covered financial institution’s record of performance. The bill would authorize DFPI to consider this record of performance when considering an application for, among other things, the establishment of a branch or the relocation of a main office. The bill would also prohibit a covered financial institution with certain ratings from receiving state funds for deposit or being awarded a state contract to provide financial services. CCBN helped defeat a Community Reinvestment Act bill several years ago and will advocate in opposition to this legislation.
-AB 909 (Schiavo) adds “induced transactions” to the coerced debt statute and limits an account holder’s liability to $50 on fraudulent transactions including funds transfer, payment orders, cash withdrawal, cash advances, credit extensions and other financial transactions. The burden of proof would be on the financial institution to determine that the transaction was not fraudulently induced and violations of the bill would be a UDAP violation.
-AB 1065 (Ortega) would eliminate interchange or "swipe" fees for credit transactions involving sales taxes and tips. There is a high likelihood that this would be federally preempted, so it disproportionately impacts state-chartered institutions.
-AB 1365 (Garcia) would establish the CalAccount program which would provide all Californians access to free, voluntary, zero-fee, zero-penalty, federally insured bank accounts. The CalAccount Commission would administer the program and would contract with financial institutions to ensure access to ATMs/locations where accountholders could deposit funds.
CCBN will be advocating on all of these bills to protect community banks and the customers they serve. The policy committee deadline in the Legislature is May 2, and most banking bills in the Assembly will be heard on April 21st, so April will be a busy month for our advocacy efforts. The legislative process in California is long, so we will have several opportunities to try to defeat or mitigate these harmful bills.