Senate Banking and Financial Institutions Committee
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Senate Banking and Financial Institutions Committee California State Senate
Follow its sittingsSpeaker 5
I will do my best impersonation here today, though. I wanna thank the chair and the committee staff for their work on the bill and for allowing me to stand in. Senator Jones will be accepting all of the committee amendments. SB eleven thirty one updates the Debt Collection Licensing Act by requiring the Department of Financial Protection and Innovation to conduct examinations remotely unless an on-site review is needed for consumer protection. The bill also allows the department to rely on recent audits or examinations from other regulators or approved third parties so it does not duplicate work that has already been done.
With me is David Reed with Receivable Management Association International to testify in support of the bill.
Speaker 6
David, do want me to go first? I'm going to be brief. Hey, David will be next. Cliff Berg here for the California Association of Collectors. Just want to urge the committee to support this legislation.
I appreciate the work that your consultant and the chair have put in with us and your advice. And we continue to want to work with you on this legislation. As I think the chair is aware, but for the members of the committee, we and David's client were the primary sponsors of SB nine zero eight, Senator Wakowski's bill, which established a licensing program for debt collectors in California. Prior to that legislation, we didn't have a licensing program. It was our view that 34 other states had licensing programs, and that it was reasonable consumer protection for California to have a licensing program.
I would view this bill as being cleanup legislation to that. It's the first bill that has come along. As a result, as the department, DFPI, has ramped up the licensing program. We have seen several issues that relate to the ability of the industry to finance the program and to how the program operates. We are clearly recognize the fact that we have to work those issues out with the department.
Speaker 11
We are not interested in trying to jam the department with any particular issues that they are unhappy with. So we look forward to working with the department and the administration on those issues. But in order to do so, we feel we do have the need to move a vehicle along for those discussions. We'd appreciate your support today, the issues. And David will get into them briefly, relate to the exam process and the role of the advisory committee.
Speaker 6
And we will continue to work with the department, the governor's office, the legislature on those if this bill does move forward. Appreciate your support. Thank you.
Speaker 7
Okay. Good afternoon, Chair Grayson, and respected members of the Banking and Financial Institutions Committee. My name is David Reed, and I serve as General Counsel to the Receivables Management Association International. RMAI is a nonprofit trade association that represents the debt collection industry. Our apologies for not submitting a formal letter, but we are here because RMAI is in strong support of SB eleven thirty one.
The version of SB eleven thirty one before you today makes several refinements to the DCLA to create operational and administrative efficiencies while keeping the consumer protection functions in place. RMAI was a sponsor of the original 2020 licensing statute. With all new comprehensive laws, everyone knew there would be growing pains, consequences, and the need for statutory refinement. The first refinement contained in the bill relates to examinations. The FBI first began examinations in 2025.
As part of the examination process, the FBI began sending three auditors for two to three weeks on-site for each examination at an average cost of $30,000 to be paid by the licensee. This bill adopts standards of best practice used by other states, the federal government, and the financial services industry, which begins examinations remotely with off ramps to an on-site audit based on findings, observations, and actions. These audits tend to cost 70 to 80% less than an on-site model without any degradation in quality. The second refinement relates to the professional advisory committee. This is the committee of industry experts that is charged with advising the commissioner.
Speaker 5
Because of a conflict between the licensing law governing the advisory committee and the state's open meeting law, the committee hasn't been able to fill its advisory role as the 2020 law intended. The changes in SB eleven thirty one addresses the conflict in a manner similar to other state advisory committees and will allow the FBI to better utilize the expertise of the committee. For these reasons, RMAI supports SB eleven thirty one.
Speaker 1
Excellent timing. Very good. With that, we will hear from the public. Anyone would like to add on as support? Name, organization, position?
Seeing none, we will now move to witnesses in opposition. Here's your chance. Those that are registered in opposition, please feel free to.
Speaker 4
Just briefly. Good afternoon, Chair and members. First, I want to thank the sponsors of the bill for engaging with us. And apologies for not submitting a letter.
Speaker 3
I'm here on behalf of Danny Cando Kaiser on behalf of the California Low Income Consumer Coalition. We still do have some concerns with the bill, but look forward to
Speaker 1
Thank you. And further members of the public in opposition like to add on name, organization, position? Seeing none, Thank you to all of our witnesses. We will bring the discussion back to our members of the committee. Any questions?
We have a motion to move the bill. Any other comments or questions? Seeing none, I want to start by thanking the author's staff or the author's office and sponsor for amending this bill down significantly last week, but I think the committee analysis raises important considerations for this bill moving forward. I do understand why any regulated industry would try to ease the cost burden of the licensing law, but proposed changes that are not well thought out could have the actual opposite effect. So we we want to make sure that those changes do not come with serious consequences to the underlying policy goal of the licensing program, which in this case is to ensure that consumers are treated fairly by people collecting on past due debts.
Now I know there are active conversations in the budget committees about this program, so I will encourage all stakeholders to engage on the issue in good faith, honesty, transparency. With that, Mr. Donald, you would you like to close?
Speaker 5
Mr. Chair, just to thank you and your staff again for allowing me to be here today and ask for an I vote.
Speaker 1
Thank you, sir. And, we do have a motion from Senator Strickland. Assistant, please call roll.
Speaker 2
Senate Bill eleven thirty one. Motion is due passed to re refer to the committee on appropriations. Senator Grayson?
Speaker 2
Nilo, aye. Cervantes? Aye. Cervantes, aye. Hurtado?
Aye. Hurtado, aye. Reyes? Richardson?
Speaker 1
will put that on call for absent members, and we will move on to the next bill. We will be patient on the next bill presentation, and we are waiting for the author to show up. The banking committee is going to enter into recess momentarily until we can get an author here. So we are in recess. Thirty seconds.
The Senate Committee on Banking and Financial Institutions will come to order. And we do have an author with us. Senator Gonzalez, you may present your bill, SB twelve ninety one.
Speaker 10
Good afternoon, Mr. Chair and members. I'm here to present Senate Bill twelve ninety one, which we're calling the SHINE Act, which will bring transparency and accountability to Mutual Water Company board operations. Unlike private utilities regulated by the PUC or public utilities subject to the Brown Act, MWCs or, mutual water companies are supposed to be accountable by two homeowners they serve. This bill makes that a reality by doing a few things.
Eliminating the 24 written notice for board meetings, making MWC governance fully accessible to the ratepayers they serve second, requiring MWCs to maintain a website with basic information, including consumer confidence reports so end users know what is in their water, which is important. And finally, SB twelve ninety one requires a comparative analysis of mutual water companies serving disadvantaged communities against other forms of water governance. The reason I brought this bill forward was actually because of my, constituents in in Cudahy and in Maywood in Southeast Los Angeles. Many of them have been served brown water for decades, with no understanding of who the mutual water company is, what they're doing, how to get to the office. In fact, the city manager has been to the mutual water company in Cudahy a couple times to no avail because no one answers the door.
And so all of our communities are left asking these questions. Who are they? What are they doing? And why aren't we getting information on this brown water? So testifying in support of the bill today, I have Michael Rincon on behalf of Physicians for Social Responsibility in Los Angeles, and Delia Ortega behalf of Communities for a Better Environment.
And I respectfully ask for my vote.
Speaker 11
Okay. Does red mean it's on? Oh, there we go. Yes. All right.
Good afternoon, chair and members of the committee. My name is Michael Rincon. I am with Physicians for Social Responsibility Los Angeles. We are a public health organization that works alongside EJ communities in Southern California to address barriers to the human right to water. I'm here today to express our strong support for SB twelve ninety one.
In our work, we engage with waters with water systems of different sizes and governance structures. While we recognize not all mutual water companies have acted this way, we've consistently seen mutuals create unnecessary barriers between them and the communities they serve. Too often, we've heard from residents, especially renters, that they are not treated as full participants in their mutuals decisions that directly affect their water. Many mutuals are not subject to the same transparency standards as other water systems like municipals or IOUs. We're aware of community members having struggled to access basic information such as water quality results, board decisions, rate increase details, or even when and how to attend a meeting.
And we have seen how this plays out in very real ways. In one case, a mutual in, Kern County, requires customers to pay their water bills by physically dropping off a check at a rusty mailbox with no option for electronic payment or receipts to confirm it was received. And we are seeing similar concerns today in places like Altadena where mutual water customers are being asked to absorb new costs like fire recovery fees without while struggling to understand how those decisions are being made. Community members have expressed frustration while many are already being displaced and rebuilding. These are not inconveniences.
These are structural failures in communication, accountability, and basic customer service. Over time, experiences like this don't just create frustration. They create deep distrust in the drinking water system and the institutions meant to provide it. From a public health perspective, that distrust matters when communities don't trust their tap water. They rely on other alternatives expensive alternatives like bottled water.
SB twelve ninety one does not dismantle mutuals nor impose unrealistic burdens. It ensures that communities can access information and understand how decisions about their water are being made. At its core, this bill is about aligning mutual water systems with California's human right to water, and SB twelve ninety one helps make that possible. For these reasons, we ask for your I vote. Thank you.
Speaker 9
Good afternoon. My name is Delia Ortega on behalf of Communities for a Better Environment, and I am here in support of SB twelve ninety one. For decades, CBE members in Southeast LA, including places like Karahe, Maywood, and Walnut Park, have been organizing for access to safe, clean, and affordable drinking water. These are communities that face multiple environmental burdens, yet still struggle to access basic information and accountability from their water providers. In partnership with DCF and the Public Health Institute, CBE conducted tap water testing across Southeast LA, including many mutual water systems.
And we found contaminants above maximum levels in multiple systems. These are serious public health concerns affecting families in their homes. What is even more concerning is how information is shared. In 2024, Walnut Park Mutual Water Company customers received an alarming notice stating that nearly a year earlier, VOCs had been detected above the maximum contaminant level in one of their three wells. The company failed to retest within forty eight hours or notified the state water board and sent an incorrect notice to the community, meaning residents did not receive clear information about what was in their water or what it meant for their health.
Speaker 6
When community members mobilized to attend the board meeting, they were met with disrespect, and the meeting was not accessible or community friendly, leaving many monolingual Spanish speaking residents unable to participate. This points to a bigger issue. Mutual water companies operate with limited oversight and rely heavily on self reporting. When that system breaks down, it is community like ours that pay the price. On top of that, many residents in Southeast LA are renters, and under the current structure, notices often go to property owners, so the people actually drinking the water may never receive critical health information.
Speaker 9
SB twelve ninety one improves transparency, strengthens access to information, and requires better communication with residents. It also asks the state water board to take a closer look at how these systems are serving disadvantaged communities and whether they are truly working. Our communities should not have to conduct their own testing or fight just to get basic information about their water. SB twelve ninety one helps move us towards a system that is more accountable and responsive to the people it serves. Thank you.
Speaker 1
Excellent timing. Thank you so very much. Any members of the public that would like to step up in support and add in support? You'd like to support? Okay.
That's okay. Come on up. Are you in support or yes. Please, if you would like to state your name, organization,
Speaker 1
Thank you. Thank you so very much. Any other members of the public step up in support? Seeing none, we will go to lead opposition. You have two minutes.
Please self introduce.
Speaker 12
Okay. Okay. My name is Ivan I'm executive director of the California Association of
Speaker 12
minutes. So chair and members of the committee, I'm Adan Ortega. I'm executive director of the California Association of Mutual Water Companies. We represent over 500 mutuals and small water systems across California, some serving as little as 15 connections, with others as many as 15,000. They're all nonprofits owned by the communities they serve, and those are the ratepayers.
We appreciate the conversations with the author's staff, as well as with the committee consultant. We share the goal of safe, clean, and affordable drinking water for every Californian, but we oppose SB twelve ninety one without amendments, not because of what it intends, but because of what it does and what it fails to do. Just as this committee distinguishes between large and small banks and financial institutions, we ask that the author do the same with the mutuals. SB twelve ninety one contains no dedicated funding source. It imposes regulatory requirements, compliance timelines, reporting burdens, operational mandate mandates, and leaves small systems to absorb those costs from rate bases already stretched thin in low income communities.
You cannot mandate your way to safe water without paying for it. And I might note that the county of Los Angeles has abandoned they've surrendered their primacy status over small water systems in Los Angeles County, primarily because they could not meet the responsibilities of oversight and verification of regulatory compliance. Second, this is a one size fits all solution designed for large urban utilities and force fitted into systems with some with as little as two employees serving a mountain community with 80 connections with no broadband access, which is still a problem in the state of California. The timelines, technical capacity assumptions, the consolidation triggers, all built around LADWP, not mutual water companies. And that brings me to the most troubling dimension of this legislation.
Speaker 2
It's part of a broader foundation driven consolidation agenda adopted by the state water board, not mandated by the legislature, that has created a vendor ecosystem problem for these small systems. Engineering and legal firms positioned to benefit from the consolidations have little economic incentive to serve small systems unless those systems are being absorbed. We are watching a policy environment that structures technical assistance out of the market for small systems while structuring it for the acquirers the state wants to absorb them into. The advocacy coalition behind this bill represents one vision for California consolidation as the prime as the primary policy tool, large utility scale and default standard, regulatory pressure as a mechanism to get there. We represent another that locally owned community governed water systems and appropriate with appropriate support and realistic timelines are worth preserving.
Speaker 12
This committee accounts for the needs of small banks and other financial institutions. We ask that you ask the author to do the same for small mutual water companies. We urge the committee to hold SB twelve ninety one until its sponsors can answer two questions: Where's the money and who can realistically comply? We were pleased with the committee analysis, for example, that notes that, for example, water pertinent land and homes that belong to mutual water companies do merit a higher level of transparency. We agree with that.
Because unlike a private share of a company, if you don't like the company, you've got to sell your home with the Mutual Water Company. So we hoped that the author would consider amendments that would require disclosure at the time of purchase of these properties, as well as requirements that renters also have disclosure of what kind of utility services their community. And one more item, and that is that these requirements should include all kinds of utilities. I'll give you an example. Okay.
Well, may I just Go ahead. In Senator Gonzales's district, the state water board is already in the process of consolidating the two small mutual water companies in Cudahy. And they've indicated at a community meeting that they wanna consolidate them into an investor owned utility where they would lose these benefits. Thank you.
Speaker 1
Members of the public that would like to also step up and add on to opposition? Seeing none, we're going to bring this back to committee for questions and comments. We have a motion by Senator Richardson to move the bill. Any questions or comments? Yes, Senator Neeler, Vice Chair.
Speaker 10
Thank you, Mr. Chair. California is the land of special districts. We have arguably too many special districts throughout the state, and some of them are pretty small, not typically mutual districts, which is I didn't even know that there were mutual water districts, but they all have elected boards, and they all are largely ignored on election day. People don't seem not to be quite as engaged in these smaller districts than they are in statewide races, as an example.
Speaker 3
That's I think part of the challenge. So I understand what you're trying to do and I think that it generally it makes sense. It's trying to help the community with better governance and a more effective addressing of the fundamental mission of the district. It would be nice if, frankly, if somebody if people who were sufficiently concerned were to run for the board and take over the board.
Speaker 3
That would be great. Yeah. And I know you agree with that. The argument of the opposition is not so much what you're doing, but that maybe it's a little bit too much. I think if I could summarize it that way.
So, again, I agree with what you're trying to do, but I'm wondering how you would address that concern.
Speaker 10
Yeah. And I thank you so much for the question. And I look forward to continuing the work with Mr. Ortega. But, you know, I had I think we've had hundreds of residents that have come to us.
We've had town halls. I wish they could run. I think many of them would like to run-in these mutual water districts, but they don't have the ability to because you go to these offices and no one answers the door. There's no posting. There's no information.
Where are the meetings? We don't even know who serves on the board. That's the problem. And so if this isn't like the replenishment district where there are you know, there's a lot of public notices. You see the website.
It shows you all of the details. This is not that, senator, and I wish it was. When the city manager of Cudahy has gone to the the water mutual water company multiple times and has pleaded to me, can you do something? Can you step in? Because I can't even get an answer to the door.
That's a problem. There's continue and this is a very low income community, monolingual Spanish speakers. So I think there's a feeling that, you know, no one cares. They absolutely care. They've come out multiple times.
In fact, we just had I had to host a meeting because the Mutual Water Company wasn't hosting a meeting just this January with the state water board because there was no one again, answering the door, no notices, and there's brown water being served. And they have no idea that manganese is in this brown water, and it's a secondary contaminant, but they don't know that. So I've had to do, along with CBE and my friends in the environmental community and nonprofits, to put information out from my own office in English and in Spanish. That's my own staff time. I'm happy to do this.
Speaker 8
This what I was elected to do, but it shouldn't have to be my responsibility solely to do that. And this is why it it seems robust, but when you go to these communities and you really listen to the individuals pleading that they have to buy water bottles every single day to cook and to do things, that's just unacceptable. The transparency needs to be brought forward. And on top of it, many of these mutual water companies, are surpassing their revenues but yet providing themselves, you know, salary increases upwards of 50%, 60%. No transparency.
Speaker 10
And that's also a problem. You know, it truly is. But I don't know if my witnesses would like to add anything else. They've been at many of these meetings as well.
Speaker 12
There we go. So I have, in the past, worked with academic institutions like UCLA, Luskin Center of Innovation, who's done a lot of work around providing data tools and, for example, like an ArcGIS map that actually shows, like, the water systems in Los Angeles County. And for a couple of the mutuals in Southeast L. A, for example, they UCLA wasn't even able to collect any information because they weren't able to find the website or get information from the website that provides information around, like, who's on the board, how how long are the terms, when are the elections, water quality information. Like, it's a consistent problem.
Speaker 11
And then even when they've reached out to mutuals, like, they don't get a response. So this has been going on for quite some time. So yeah.
Speaker 12
Well, I believe that there are always issues in all kinds of government where you have these issues. For example, there was a major consolidation with the Sativa Water System that was a county water district that had worse problems that are being described here today. And the LAFCO stepped in, and they reallocated that water district. My point today is not to debate the issues on Cudahy. What I'm trying to persuade you of is that these laws would apply to every county in the state.
There's about a thousand mutual water companies in California, some in the most remote parts of the state where broadband access is still an issue. I think it's been well documented that there hasn't been a lot of progress in expanding broadband in California since 2019. There's a lot of remote communities. The federal subsidy for low income residents, including in these communities that we're talking about in Southeast Los Angeles, has expired. It was a $30 a month subsidy for internet access.
That's gone away. So there is prior legislation that provides hardship exemptions for some of these small communities. And I think that to do a blanket application of these rules to communities that are very small, they're run by volunteer systems, as you have with HOAs and other types of community ownership structures, is highly unfair. So we would like to work with the author in scaling the compliance with this to fit the circumstance. Because it doesn't make sense to put Prop two eighteen type rules that are appropriate to LADWP.
I'm chairman of the Metropolitan Water District of Southern California. I represent the small city of San Fernando. Appropriate. But for some of these small rural communities and these low income communities that really need the assistance, it would be an unfair application.
Speaker 3
Senator Gonzalez, you indicated that you've spoken with the opposition. Are you willing to continue talking with them with regard to unique circumstances that might exist around the state? Absolutely. I think that's important. And I think as an association, you would be well served to try to communicate with districts that are like the one that has been referenced to get them to at least answer the door and address some of these these other issues.
I think this is probably a a two way street.
Speaker 12
May I respond, senator, briefly? We we have been working with the mutuals in Cudahy, and in fact, they're the two mutuals are in the process of consolidating through a state process that would consider various strategies so that they can gain greater economies of scale. That process is underway. The issue of water quality is a true issue, and the consolidation isn't addressing it. I might note that in San Bernardino County, on the border with Riverside, there's a community that had similar problems.
There was a consolidation. The state funded $10,000,000 to give this community that had problems with nitrate a line through the state water project. The people in Cudahy, since 1952, have been paying taxes to the Central Basin Municipal Water District and to the Metropolitan Water District, and they don't have a connection. If the State Water Board were serious about solving the problem of the brown water, what would happen is that they would apply $10,000,000 to provide a connection so that the residents could have water that's free of manganese. That's not on the table.
Instead, we're in this seven year long process to see if these systems, in fact, are gonna be consolidated.
Speaker 4
Thank you. So I I do just wanna mention I had committed my support to the author today, so I will, be voting in support, but I do have some concerns just based off of what the opposition has stated and shared today. So just interested to see where that conversation goes should this bill get out of committee. But I do have some reservation, but I will support the bill moving forward.
Speaker 10
Thank you. And I would say, I mean, we're gonna continue to talk to the opposition, of course. And I know there are unique circumstances depending on where you're at, but it's also not unique to have, the lack of transparency. You know, whether you're in Bakers field, the MWC failed to inform the Fuller Acres community of arsenic contamination. I mean, why is that happening in the state of California?
In addition to Cudahay and Maywood and, as been mentioned, San Bernardino. There, I think, needs to be an this is asking for a report, a comparative analysis. What is the mutual water what are they doing right? What are they doing incorrectly? How can they be become more transparent in offering these options for transparency so people know what is happening.
I don't think it's a it's a lot to ask for a a website and a a sufficient notice on how to be connected with. I I don't think that's a lot to ask regardless of where you're at in the state. But I I hear you loud and clear, I appreciate the support. We'll continue working with the opposition.
Speaker 1
Thank you. Are there any other questions or concerns? May I take that as your close?
Speaker 2
Senate Bill twelve ninety one. Motion is due, pass, and re referred to the Committee on Environmental Quality. Senator Grayson?
Speaker 3
That is what? Six. That has six votes, and we will put that on call waiting for the absent member. Committee on Senate Banking and Finance will go to recess for just a few minutes. Senate Committee on Banking and Financial Institutions will come back to order.
Speaker 1
We do have two bills on call. Assistant, please call the absent members on SB eleven thirty one.
SB eleven thirty one, motion is due pass and re refer to the committee on appropriations with the chair voting aye. Senator Reyes? Reyes, aye. We have seven.
That bill has seven votes and is out of committee. We will now move to the second bill on call, SB twelve ninety one. Assistant, please call roll.
Speaker 2
SB twelve ninety one, motion is due, pass, and we refer to the committee on environmental quality. The chair voting, aye. Senator Reyes? Aye. Reyes, aye.
We have seven.
Speaker 1
That bill has seven and is out of committee as well. This concludes our bill presentations for the day. The committee is adjourned.
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