May Sacramento Update
After a brief spring recess, legislators returned to Sacramento on April 21 and kicked off a flurry of committee hearings to pass bills ahead of the May 2nd policy committee deadline. Numerous bills have been introduced this year that put community banks and their customers at a disadvantage, and CCBN has been working hard to mitigate these onerous proposals along with other financial services industry stakeholders.
One of the highest-profile bills opposed by the banking industry this year was AB 1065 (Ortega) which would have eliminated interchange fees on taxes. CCBN testified in opposition to the bill in Assembly Judiciary Committee and also voiced concerns in the Assembly Banking and Finance Committee because federally chartered financial institutions would likely be preempted from the bill should it be signed into law. The preemption argument and disproportionate impact on state-chartered community banks and credit unions resonated with Assembly Banking Committee members, where the bill died with no “aye” votes on April 21. AB 1065 was part of a national effort to enact interchange fee prohibitions across the country.
Equally bad, if not worse than AB 1065 was AB 909 (Schiavo) which would have added “induced transactions” to the coerced debt statute and limited 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. CCBN and other financial services industry stakeholders lobbied in opposition to the bill and due to these efforts, the Assembly Banking & Finance Committee chair tabled it for the year. It will be eligible to be considered in 2026.
We have had some significant victories already this session, but our work is still cut out for us. Problematic bills that we are opposing are still moving, including:
-AB 801 (Bonta), which 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 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 is advocating to be carved out of this legislation and make credit unions subject to the CRA.
-AB 1365 (Garcia), which would establish the CalAccount program which would provide all Californians access to free, voluntary, zero-fee, zero-penalty, federally insured bank accounts. CCBN provided lead opposition testimony on this bill in both the Assembly Banking and Finance Committee and the Assembly Labor and Employment Committee.
-SB 825 (Limon), which 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. CCBN has vocalized opposition to this bill and will continue to do so.
Beyond legislation, the Governor will release his revised budget (“May Revise”) in mid-May. There are rumors that the state is projected to have a $20 billion deficit, so cuts could be on the table this year. The Legislature must pass a budget by June 15th.