There was movement recently on two California bills that we have been tracking closely and could substantially alter the lending and brokering landscape under the California Financing Law (CFL).

On July 9, AB-539, which proposes to cap interest rates at 36 percent plus the federal funds rate on CFL loans of $2,500 to $10,000, passed the Senate Committee on Judiciary and was sent to the Appropriations Committee, where we believe the bill will be heard around the end of August. If the bill passes the Appropriations Committee, it will move to the Senate Floor.

On July 10, AB-642 failed to pass in the Senate Banking and Finance Committee. Minor amendments were made to the bill on July 11, and the bill was re-referred to the Banking and Finance Committee, which is on recess until August 12. September 13 is the last day for a bill to be passed in 2019. No date has been set for the rehearing, and we are under the impression that the bill is unlikely to advance this year.

AB-642 is described by its drafter as an attempt to modernize the CFL to add a regulatory framework designed to protect people who use lead generators to obtain installment loans. It would expand the scope of activities that constitute “brokering” under the CFL, which would then trigger licensing, disclosure, and other substantive requirements. The bill would prohibit the payment of certain referral fees, require brokers to affirmatively obtain express consent from a prospective borrower to act as such person’s broker, and would make entities falling under the newly expanded definition of broker subject to supervision by the California Department of Business Oversight.