How banks skirt CA interest cap + Killer bills of 2020 + That’s not a census form

By Hannah Wiley

February 6, 2020 4:55 AM

Happy Thursday, California! I got some birthday hiking boots I’m breaking out this weekend on the trails. I hope you get outside to enjoy the great weather. Have a great weekend!

‘RENT-A-BANK’

California last year passed a law to cap interest at 36 percent on mid-sized loans of $2,500 to $10,000. It was a big deal, one Assemblywoman Monique Limón, D-Goleta, called “decades in the making.”

Back it up — The signing of Assembly Bill 539 ended a longtime practice of charging borrowers who take out these loans with interest that can hit triple-digit rates. The new 36 percent cap is what’s considered a “compromise” between some lenders and consumer advocates, though other states have imposed both higher and lower restrictions.

Some lenders criticized the legislation as a roadblock to accessing credit for low-income and unreliable borrowers, the very population supporters of the bill said most needed protection. The lending companies argued the new law stripped them of a fair return rate and will run them out of business.

But then — Before the legislation ever earned Gov. Gavin Newsom’s signature, a handful of online companies said during earnings calls that they’ll partner with out-of-state banks to continue charging higher interest.

State banks aren’t bound by another state’s usury laws, meaning Legislatures have a hard time enforcing their rules over third-party vendors. Under the strategy, known as a “rent-a-bank” arrangement, banks originate the loan, then sell it to the lender, who can continue charging high interest to the consumer. It’s a legally dubious arrangement that Congress and the courts have tangled with for years.

Limón’s office said it had quickly alerted Attorney General Xavier Becerra and the Department of Business Oversight of the lenders’ plans.

When I followed this development in December, Becerra’s office declined to answer questions about potential investigations, or whether to confirm or deny their existence.

“However,” his office added, “we will aggressively enforce AB 539, including in the face of ‘rent-a-bank’ schemes and other efforts to evade California law.”

Now here we are — The Federal Deposit Insurance Corporation proposed a rule in December to allow out-of-state banks to charge interest at a rate allowed in their home states. It’s currently collecting comments on the proposal.

A collective “heck no” — rather, ”strong and bipartisan objections” — rang from a coalition of two dozen attorneys general on Tuesday, led in part by Becerra.

The bipartisan group documented a 19-page grievance against the rule, arguing it violates the law and is beyond the agency’s authoritative power.

“At a time when Americans of all political backgrounds are demanding that loans with triple-digit interest rates be subject to more, not less, regulation,” they wrote, “it is disappointing that the FDIC instead seeks to expand the availability of exploitative loans that trap borrowers in a never-ending cycle of debt.”

KILLER BILLS

It’s that time of year again, when the California Chamber of Commerce starts doling out “job killer” tags on bills unfavorable to the business sector.

This one comes as no surprise — Sen. Connie Leyva, D-Chino, introduced a bill early this year that would allow workers to still get paid if their boss abruptly cancels or reschedules their shift. Employers would also have to pay wages for “on-call” shifts, when employees are required to be available without the promise of getting called into work, and they’d have to hand out schedules at least a week in advance of the first shift on the calendar.

“CalChamber has identified (Senate Bill 850) as a job killer because it will eliminate flexibility in the workplace for both employers and employees, deny employees the opportunity to work additional hours if desired, limit employers’ ability to accommodate customer demands, and subject employers to unnecessary layers of penalties, investigative actions and costly litigation,” the chamber said in a press statement.

This one, too — A bill to ban pricing similar products based on gender marketing, called the “pink tax,” also earned killer status. Sen. Hannah-Beth Jackson, D-Santa Barbara, wrote the bill to dismantle an “unfair, unethical” practice that “harms women and families everywhere.”

The chamber marked the bill because “it includes a private right of action with a minimum of $4,000 in damages per alleged violation, which will expose small and large businesses to a flurry of costly litigation for claims that two products are substantially similar, even though they may be different, and that any price differential is based on gender, when it is actually based upon legitimate non-gender related reasons.”

THAT’S NOT A CENSUS DOCUMENT

Some Northern California voters are receiving documents that resemble U.S. Census forms, but they are in fact fundraising appeals from the Republican National Committee.

The document, printed on heavy paper, is labeled “2020 Congressional District Census,” with the words “DO NOT DESTROY OFFICIAL DOCUMENT” on the envelope.

“You have been selected to represent voters in California’s 6th Congressional District. Enclosed, please find documents registered in your name,” the document reads.

California’s 6th Congressional District is represented by Rep. Doris Matsui, D-Sacramento.

This is not the first time that Republicans have sent out mailers that look like official census documents, although this time the documents are hitting mailboxes just weeks before the federal government plans to begin sending notices inviting people to participate in the 2020 U.S. Census.

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