Legislation from Sen. Monique Limón reinstating a California Financing Law exemption for certain commercial loans was signed into law by Gov. Gavin Newsom this week.
Gov. Newsom signed SB 577 which, among other things, reinstated what is called a de minimis exemption. This exemption covers people who make no more than one commercial loan in a 12-month period without the lender needing to become licensed under the California Financing Law.
The exemption was created in 1997 but expanded in 2013 to include five loans. A 2016 tweak to the exemption sunset at the beginning of this year.
Sen. Limón’s bill reenacted the de minimis exemption for no more than one commercial loan per 12-month period.
Accion Opportunity Fund, a nonprofit financial support organization, had argued the exemption allowed Community Development Entities to invest more easily in economically distressed areas through high-impact community projects.
The organization said the expiration of the exemption resulted in delays impacting potentially millions of dollars of investments in communities in California and jeopardized current and future New Market Tax Credits projects. The group estimated the expiration impacted $35.5 million of those tax credit transactions by delaying the closing of the financing and increasing legal costs and other project expenses.
Additionally, the Santa Barbara Democrat’s bill nixed a requirement for the California Department of Financial Protection and Innovation to submit annual summaries regarding the Bank on California Program to the chairs of the Senate Committee on Banking and Financial Institutions and the Assembly Committee on Banking and Finance.
“Bank On” voluntary programs can be utilized by local agencies to form coalitions with banks and credit unions to help individuals who might not otherwise have access or have limited access to banks.
But since it was created in 2005, active management has shifted from the state to the Cities for Financial Empowerment Fund. Thus, DFPI is no longer the right entity to report to the legislature on the program, according to an analysis of the bill.
The bill unanimously passed the Senate before it was approved by the Assembly. The governor signed it Thursday.
Sen. Limón chairs the Senate Committee on Banking and Financial Institutions.