AB 2501, CA Consumer Law, PPP, and Congressional Update

Gavel and law book

As the California Credit Union League remains committed to defeating Assembly Bill 2501 and protecting credit unions at all cost, the League worked to get the bill added to the Cal Chambers’ infamous Job Killer list. The annual list includes the worst of the worst when it comes to bills that will harm employers, and bills that are deemed a “job killer” have traditionally faced a steep uphill battle.

The COVID-19 Homeowner, Tenant and Consumer Relief Law of 2020 (AB 2501) passed the California Assembly Banking and Finance Committee and is headed to the Appropriations Committee. Assemblymember Monique Limón, chair of the Banking and Finance Committee and author of the bill, committed to working with stakeholders of the bill as it moves forward.

Assemblymembers Tim Grayson and Rebecca Bauer-Kahan spoke highly of credit unions, with Grayson reading some modeling that Patelco Credit Union provided him. Assemblymember Jesse Gabriel raised concerns with the bill, highlighting that if the bill passes in current form, it could cause job losses at credit unions. Assemblymember and Dr. Shirley Weber brought up the concern that credit unions always get lumped in with big banks.

Even though the bill passed through committee, it is important to highlight that four committee members specifically called out their concerns for credit unions on the record. This is because of credit union leaders’ incredible grassroots advocacy efforts over the past few days and years of hard work building key relationships.

CalMatters: Dykstra Spotlights AB 2501’s Harm to CUs
An opinion piece authored by Leagues President and CEO Diana Dykstra was published in CalMatters — "AB 2501 is an Ill-Conceived, One-Size-Fits-All Approach to Financial Relief for Californians”.

Dykstra spotlights how credit unions have delivered enormous financial relief to their members in the form of mortgage forbearance, loan payment extensions, and other means. She questions why the California Legislature would want to “weaken credit unions” through Assembly Bill 2501. Read more here.

Waiting for Language on CA Consumer Protection Law
Governor Gavin Newsom has released his May revised budget. Despite many cuts due to the COVID-19 pandemic, the budget included the California Consumer Protection Law, also referred to as the California CFPB.

The League had a call with Department of Business Oversight Commissioner Manuel Alvarez to hear about the proposal. Unfortunately, there were not a lot of details given during the call, and stakeholders were told to sit tight until the language was made public. The commissioner highlighted the heightened need for consumer protection during these troubling times and the need to have regulatory authority over unlicensed entities.

The League is awaiting the release of the language to see the impact it will have on credit unions.

Guidance from the Governor: Workers’ Comp Executive Order
On May 6, Newsom signed Executive Order N-62-20, which provides that under certain circumstances it is presumed that workers who contract a COVID-19-related illness between March 19 and July 5 have done so at work and are thus eligible for workers’ compensation benefits.

A new Q&A document provides guidance related to the implementation of the order. This Q&A may be updated as necessary to provide additional information.

PPP Processing Fee Payment and Reporting Procedures Released
The Small Business Administration has released procedures to inform Paycheck Protection Program (PPP) lenders of the reporting process through which PPP lenders will report on PPP loans and collect the processing fee on fully disbursed loans which they are eligible to receive. Included in the procedures is information on SBA Form 1502, which lenders will use to report fully disbursed loans to the SBA. SBA will begin accepting 1502 reports on fully disbursed or cancelled PPP loans on May 22.

Detailed information on how to process these loans is available from the SBA. For further updates, visit SBA.gov/PaycheckProtection or Treasury.gov/CARES.

Borrower PPP Loan Forgiveness Application Issued
The SBA has released the PPP Loan Forgiveness Application and detailed instructions for PPP borrowers. SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities. You can also read the SBA’s announcement and instructions here.

‘Paycheck Protection Flexibility Act’ Introduced
The bipartisan Paycheck Protection Flexibility Act (H.R. 6886) unveiled by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX) would allow businesses receiving forgivable loans to be able to use the aid on payrolls for more than the eight weeks under the original program, relaxing a rule that 75 percent of the loans be used for payroll expenses. It would also provide these businesses more than two years to pay back the loans and let businesses that receive PPP loans receive a payroll tax deferment.

The House has returned and will vote on H.R. 6886.

Congress: Where Things Stand
The House passed H.R. 6800, the HEROES Act. This is a massive $3 trillion package that encompasses the majority of the Democratic House agenda. Spending includes large amounts for state and local governments, an extension of unemployment benefits, and funds to battle the coronavirus.

There are some positives and negatives for all financial institutions. Nothing in this bill is specifically defined for credit unions, whether positive or negative. The positives include earmarked funds for the PPP specifically for financial institutions under $10 billion and CDFIs, and a fix to the federal instrumentality issue allowing federal chartered credit unions to take advantage of a payroll tax credit.

For financial institutions, the largest negative is a provision that would prohibit debt collection on a consumer’s obligations throughout the pandemic and for 120 days after.

President Donald Trump has issued a veto threat to this package.

The intention of this legislation is to initiate negotiations between the White House and the GOP-controlled Senate. As of Thursday afternoon, Senate Leader Mitch McConnell reported that his office was receiving requests from Senators in his caucus, which means they are considering their next move.

The California and Nevada Credit Union Leagues have not taken these issues lightly, regardless of the intention. On May 5, the Leagues sent a letter to the California and Nevada Congressional Delegations outlining credit union priorities for the package, most of which lined up with National Credit Union Administration (NCUA) Chairman Rodney Hood’s priorities in a letter he sent to Congress.

Since then, the Leagues have been in touch with each Congressional Office. Further, the Leagues have provided briefings for 24 of our delegations’ 61 Members of Congress, which was focused mostly on the New Democrats/Moderate leaning offices. Additionally, the Leagues have had three 1-hour conversations with the Financial Services Committee, including one with three of our CEOs that serves Chairwoman Maxine Waters’ district. The committee took our recommendations and considerations very seriously.

As the package came to life, the committee and the Speaker’s office felt enough pressure that they were in touch with us later to grant assurances, regardless of what is passed. While many Members of Congress were helpful in this process, the Leagues would like to acknowledge the following: Representatives Norma Torres, TJ Cox, Pete Aguilar, Lou Correa, Ami Bera, Adam Schiff, Scott Peters, Julia Brownley, Raul Ruiz, Salud Carbajal, and Harley Rouda.

As discussions move to the Senate, the Leagues have been engaged with all four offices. We have briefed Senator Feinstein’s economic team and held a roundtable with Senator Harris’s Banking Staff. The Nevada League Board has held conference calls with both Senator Cortez Masto and Rosen. Senator Cortez Masto is the only Senator of the four on the Senate Banking Committee and has been in constant contact with the Nevada League and credit unions statewide.

The future of this and other packages remains unclear. Timing of the negotiations remains unclear. While the House has started this discussion, it has in no way shape or form concluded, and the Leagues are an active part of the financial services/banking discussions. Both Speaker Pelosi and Leader McConnell have acknowledged that this will not be the last package as well.

Cease and Desist Letter
On behalf of its member credit unions, the California League’s legal counsel has sent the following cease and desist letter to a law firm that has made Facebook posts soliciting credit union members for class-action lawsuits based on alleged improper overdraft fees.

The firm’s allegations are false, misleading, or unsubstantiated. The League has demanded that the firm remove its statements on Facebook stating that certain credit unions generate a significant percentage of annual fee income from overdraft and NSF fees.

The League’s Advocacy Newsletter
The California League’s latest Advocacy Newsletter provides insight into developments in legislative and political advocacy with brief summaries and links to important political knowledge. Topics include updates on California’s state government affairs, the upcoming 2020 elections, California executive leadership, federal government affairs, and regulatory advocacy. For questions, email Leagues Advocacy Specialist Emily Udell.

Economic Forecast
During a weekly CEO Call, the Leagues were pleased to facilitate an economic presentation by Chris Thornberg of Beacon Economics. Thornberg provided a candid look at the current state of the economy and his predictions for how credit union members will experience recovery in the coming quarters.

Please find a copy of the slide deck for your reference and use. You may also click here for the recorded presentation.

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