The Assembly Banking and Finance Committee sent AB 2116 to Appropriations on April 23 after hearing from consumer advocates, small-business owners and financing companies.
Assemblymember Anamarie Avila Farias, the bill’s author in the committee transcript, said AB 2116 would close what she described as an oversight gap in a growing segment of the small-business finance market. She said the measure would not eliminate access to capital or ban merchant cash advances, but would require certain financing providers to register with the California Department of Financial Protection and Innovation, follow basic conduct standards and stop using confessions of judgment and power-of-attorney provisions before default.
Supporters said the bill is meant to address products that can obscure the true cost of borrowing. Bianca Blomquist of Small Business Majority read testimony from Paloma Corona, who said she found what looked like a 13% loan for her Los Angeles preschool but later learned the APR was actually 235% after she signed. Robert Hurrell, executive director of Consumer Federation, California, said APRs of hundreds of percentage points are wrong and should be outlawed.
Not everyone was fully on board. Nico Molina, speaking for Capitus and Rapid Finance, said the companies were neutral and appreciated talks with the author’s office. Carolyn Ville Hunter, speaking for the Revenue Based Finance Coalition, said the group backed the ban on pre-default confessions of judgment but wanted changes to the bill’s definitions and registration framework, arguing the measure could blur the line between consumer and commercial lending and make it harder for small businesses to get capital.
The committee approved the bill and sent it to Appropriations.
