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

On July 9th, AB-539, which proposes to cap interest rates at 36% 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 10th, AB-642 failed to pass the in the Senate Banking and Finance Committee. Minor amendments were made to the bill on July 11th and the bill was re-referred to the Banking and Finance Committee, which is on recess until August 12th. September 13th is the last day for a bill to be passed during in the 2019 year. 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 persons 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.