By: Jason Lane, SVP, Director of Government Relations

During this past legislative session, CBA advocated on a myriad of legislative measures, and while important proposals related to automated decision making, privacy and elder financial abuse failed to advance, we attempted to negotiate compromises on several measures that will become law next year. In all, legislators introduced 4,821 bills this session and sent 2,252 to Gov. Gavin Newsom. We have highlighted a few measures that may require new compliance obligations.

AB 2067 (Dixon): Financial Institutions: Service of Process

Existing law permits financial institutions to designate a third-party agent as a central location for service of legal process. AB 2067 specifies that if the financial institution designates a third-party agent as a central location, the financial institution is also required to designate another central location. The measure prohibits each central location from being located in the same county as another designated central location. Some institutions may need to submit their second location to the Department of Financial Protection and Innovation.

AB 2837 (Bauer-Kahan): Civil Actions: Enforcement of Money Judgments

This measure places a number of new timelines and specific parameters on bank levies, wage garnishment, and claims of exemption. For example, among other provisions, AB 2837 requires a judgment creditor to take additional steps to verify a judgment debtor’s address and provide notice of enforcement to a judgment debtor, by requiring a court to order the return of exempt property that has been levied upon, and limiting the time period during which an earnings withholding order may be enforced and the frequency with which such an order may be sought.

With a coalition of original lenders, debt collectors and debt buyers, CBA opposed AB 2837 and sought amendments that would remove our opposition by addressing our concerns related to the burden of proof of good cause in backdating of exemptions, allowing legal pleadings to be used to verify a debtor’s address in the instance where they have signed up for a cease and desist list, and eliminate the requirement for a judgment creditor to file with the court. Because the author was unwilling to address our concerns, our coalition remained opposed to the measure, which was signed.

SB 1286 (Min): Rosenthal Fair Debt Collection Practices Act: Covered Debt: Commercial Debts.

This measure proposes to add commercial debts of up to $500,000 that are entered into, renewed, sold or assigned on or after July 1, 2025, to the Rosenthal Fair Debt Collection

CBA advocated that the threshold in should be lowered from $500,000 to $100,000; that issues around floor plan financing should be clearly addressed; and that a collector should be able to file a judicial proceeding in the county in which collateral that secures a commercial debt is located. Because proponents ultimately did not address those concerns, CBA remained opposed to the measure.

SB 399 (Wahab): Employer Communications: Intimidation

SB 399 prohibits an employer from subjecting, or threatening to subject, an employee to discharge, discrimination, retaliation, or any other adverse action because the employee declines to attend an employer-sponsored meeting or affirmatively declines to participate in, receive, or listen to any communications with the employer or its agents or representatives, the purpose of which is to communicate the employer’s opinion about religious or political matters and requires an employee who refuses to attend a meeting as to continue to be paid. The measure imposes a civil penalty of $500 on an employer who violates these provisions.

AB 2424 (Schiavo): Mortgages: Foreclosure  

This measure requires a notice be provided to specified parties that a third party, such as a family member, HUD-certified housing counselor, or attorney, may record a request to receive copies of any notice of default and notice of sale at specified times in the loan and foreclosure process and that receiving a copy of these documents may allow the third party to assist the borrower in avoiding foreclosure.

This measure prohibits a foreclosure sale until the expiration of 45 days if the trustee receives, at least five business days before the scheduled date of sale, a listing agreement for the sale of the property subject to the power of sale. If a scheduled date of sale has been postponed and the trustee receives, at least five business days before the scheduled date of sale, from the mortgagor or trustor a copy of a purchase agreement for the sale of the property, the measure requires the trustee to postpone the scheduled date of sale to a date that is at least 45 days after the date on which the purchase agreement was received by the trustee.

This measure requires the mortgagee, beneficiary, or authorized agent to provide to the trustee the fair market value of the property at least 10 days prior to the initially scheduled date of sale and prohibits the trustee from selling the property at the initial trustee’s sale for less than 67 percent of the amount of that fair market value of the property. If the property remains unsold after the initial trustee’s sale, the measure requires the trustee to postpone the sale for at least seven days and authorizes the property to be sold thereafter to the highest bidder.

AB 3100 (Low): Assumption of Mortgage Loans: Dissolution of Marriage  

This measure requires a conventional home mortgage loan originated on or after January 1, 2027, and secured by owner-occupied residential real property containing four or fewer dwelling units with multiple borrowers, to include provisions to allow for any of the existing borrowers to purchase the property interest of another borrower on the loan by assuming the seller’s portion of the mortgage under specified circumstances if the assuming borrower qualifies for the underlying loan, as determined by the lender.

AB 3279 (Committee on Judiciary): Client Trust Accounts (CTA)  

AB 3279 requires that on or after March 1, 2026, and annually on or before March 1 thereafter, a bank must electronically provide via secure file transport protocol or another format mutually acceptable to the financial institution and the State Bar, information for every client trust account actually known to the financial institution associated with an attorney’s State Bar license number.

This obligation to provide information is only for those CTAs associated with an attorney's State Bar license number.

In order to effectuate this new requirement, On or before January 1, 2026, the State Bar must create a standard form for use by an attorney licensed to practice in California wherein the attorney must submit the attorney’s license number and the name and account number of all applicable associated CTAs to the financial institution.

On or before March 1, 2026, and annually on or before March 1 thereafter, a bank must electronically provide via secure file transport protocol or another format mutually acceptable to the financial institution and the State Bar, the following for every client trust account known to the financial institution associated with an attorney’s State Bar license number:

(1) The name of the bank in which the CTA is held

(2) The name of the attorney or law firm associated with the CTA

(3) The account number of the CTA

(4) The attorney’s State Bar license number associated with the CTA

(5) The CTA balance as of December 31 of the previous year. If December 31 is a holiday, the account balance as of the preceding business day may be reported.

In 2023, Governor Newsom signed into law measures SB 253 and SB 261, both of which mandate climate-related disclosures. Both measures impact financial institutions that meet the qualifying factors for reporting entities. Note that one of the qualifying factors is doing business in the state of California (rather than, for example, being headquartered in California). The California state agency overseeing these mandates is the California State Air Resources Board (CARB), which is required to complete subsequent implementing regulations on or before January 1, 2025. Both measures also empower CARB with enforcement authority via administrative penalties.

SB 253 requires reporting entities to disclose on an annual basis its Scope 1, 2, and 3 greenhouse gas emissions. By 2026 entities are mandated to begin reporting scope 1 and scope 2 emissions on the prior fiscal year and obtain limited third-party assurance for these reports. By 2027, entities will begin reporting scope 3 emissions on the prior fiscal year. By 2023, companies will need to obtain reasonable, third-party assurance for their scope 1 and 2 emissions reporting and limited third-party assurance for their scope 3 emissions reporting. The measure does not contain exemptions for any sectors of scope 3 reporting, which indicates that Scope 3 Category 15 Financed Emissions will be required in a financial institution's report.

SB 261 requires reporting entities by January 1, 2026 and biennially thereafter to submit a climate-related financial risk report that is consistent with the recommendations of the Task Force on Climate-Related Financial Disclosure's (TCFD) framework in addition to its steps taken to reduce and adapt to the disclosed climate-related financial risk. Importantly, the measure allows for reporting entities to provide thorough explanations of gaps in reporting, in the event that the entity is unable to fulfill all of the recommended requirements and reports may be consolidated at the parent company level. This measure also states that a covered entity satisfies the reporting requirements if it prepares a publicly accessible, substantially similar report pursuant to another law or regulation.

When he signed SB 253 and SB 261 into law, California’s Governor Newsom instructed the legislature to work on subsequent legislation to address his concerns about cost and feasibility of timelines, for both covered entities as well as the state agency. Since convening the 2024 Legislative Session, neither author has introduced a measure to address such work.

In press statements, the author of SB 253 has vehemently defending the legislation, saying, “It’s both inexpensive and easy for corporations to make these disclosures … large corporations — particularly fossil fuel corporations and large banks — are absolutely terrified that if they have to tell the public how dramatically they’re fueling climate change, they’ll no longer be able to mislead the public and investors.”

Both measures will require a significant allocation from the state budget's general fund to CARB for the purpose of implementation and oversight. California is facing a sizable budget downfall – estimates range from approximately $30-$70 billion. As a result, the governor's draft state budget proposal, presented in January, delayed decisions on all recently enacted legislation; while not exclusive to SB 253 and SB 261, those measures were included in the decisioning delay. At that time, the governor announced that the administration would reexamine these funding allocations during the May Revise, a time when the state budget projections are updated with further data. Recently, the California Department of Finance posted its Budget Change Proposal to fully fund CARB for the implementation of SB 253 and SB 261. California lawmakers must approve a state budget by June 15, which is typically followed by Budget Trailer Bills that implement the language of the state budget.

The general practice of state agencies is to begin promulgation of regulations after the agency has received the funding to do so – CARB has confirmed that this practice will stand. In the event that the agency is not funded to implement the program, the statutory deadlines will still stand and would need to be updated, likely through a Budget Trailer Bill, which would happen sometime over the late weeks of summer in anticipation of the legislature’s final August 31 deadline.

Meanwhile, the U.S. Chamber of Commerce filed suit on both laws, based on a first amendment violation as well as a Dormant Commerce Clause violation. Most recently, the judge assigned to the case recused himself and a new judge was appointed. That case continues to move forward.

In this context it is also worth noting two measures that impact the voluntary carbon offset (VCO) space. Although it garnered less attention and the two aforementioned measures, AB 1305 was also signed into law last year and requires entities to disclose specified information in the event that the entity makes a net-zero or related claim. The measure also requires a number of disclosures associated with VCO transactions. This measure does not require implementing regulations by CARB. The author more recently asserted that he intended for reporting to begin January 1, 2025, and is pursuing a legislative path to codify that intent. Currently the legislature is also considering SB 1036, which adds claims made about VCOs to the False Advertising Law.

CBA continues to monitor these issues closely and will report on substantive updates

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