CA: AFC Letter to California Senate Judiciary Committee in Opposition of SB 784

California Senate Judiciary Committee
Senate Judiciary Committee
1021 O Street, Room 3240
Sacramento, CA 95814

RE: Opposition to Senate Bill 784

Dear Chair Umberg, Vice-Chair Niello, and members of the Senate Judiciary Committee:

I am writing on behalf of the American Fintech Council (AFC), to express our serious concerns with Senate Bill 784 (SB 784). This legislation, as drafted, will limit your constituents’ access to the safe, responsible and affordable capital they need for home improvement projects, including fireproofing measures, solar panel installations, and other capital projects that can add important value to their homes.

AFC is the premier trade association representing the largest financial technology (Fintech) companies, including fintech lenders and their innovative bank partners.  As a standards-based organization, our mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

AFC supports appropriate regulation for emerging financial services products and advocates strongly for pragmatic legislation that enables responsible innovation without compromising consumer protection or regulatory compliance. As drafted, SB 784 poses significant risks for the very consumers the bill is intended to protect by establishing requirements that increase the risks and costs associated with originating home improvement loans in the State. In turn, these requirements would limit consumers’ access to the responsible and affordable credit necessary to complete their home improvements.

Specifically, AFC is concerned with the bill’s provisions that require

• Lenders provide a printed hard copy of a dealer fee disclosure form and obtain customer signature, prior to execution of the loan agreement.  This provision hinders the very accessibility and convenience of responsible fintech loans, which are usually executed entirely online. This provision will limit borrower optionality and reduce competition which will lead to fewer choices and higher costs for borrowers.

• Lenders confirm projects have final permits, as well as oral and written consumer consent the project is "operational" prior to seeking repayment (2).  In short, this provision significantly increases lender risk and as a result, lenders may tighten their criteria, thus limiting opportunities for borrowers.

• Lenders to conduct a consumer confirmation call and take additional actions prior to the execution of a home improvement loan, including obtaining the home improvement contract and confirming all property owners have received a copy of the loan agreement (3).  This provision would particularly harm home improvement loans offered in an online context by creating an unnecessary analogue barrier that would decrease efficiency and significantly slow down access to the capital borrowers need to start making deposits and payments on the supplies for their home improvement projects in a short timeframe.

• An expansion of lender liability beyond the federal Holder Rule for misrepresentations related to the home improvement loan and "financial benefits" (4).  In turn, this liability expansion would increase lender risk and reduce competition severely limiting safe and responsible access for consumers.  

• A prohibition on consumer repayment obligations under a home improvement loan until the lender has taken specified actions (5).  This provision further disincentivizes lenders from taking the risk of making these loans.

AFC is a standards based organization and has worked with the California legislature in the past to develop pragmatic and responsible legislation to support innovation that enables access to safe and responsible credit. If passed, SB 784 would create significant barriers to responsible fintech lenders operating in California, and would severely limit borrowers’ access to certain loans.  Fintech lenders have democratized financial services by increasing competition and increasing access to affordable credit to families long forgotten by traditional financial institutions.

AFC respectfully requests that you not advance this bill out of the Judiciary Committee, and we commit to working with you to help protect California borrowers.

Sincerely,

Ashley Urisman
Director of State Government Affairs
American Fintech Council

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