Assembly Speaker Robert Rivas visited the Santa Clarita Valley on Wednesday alongside Assemblywoman Pilar Schiavo, D-Chatsworth, on the heels of Gov. Gavin Newsom signing her bill to go after predatory lenders targeting small businesses.
Assembly Bill 2116, the Protect Small Businesses from Predatory Lending Act, which was authored by Schiavo and supported by the Santa Clarita Valley Chamber of Commerce, is intended to add transparency and oversight to merchant cash advances.
The bill requires finance companies operating in the commercial space to obtain licenses and requires that the rates of charge be stated fully and clearly in the manner that the commissioner deems necessary to prevent misunderstanding.
Between COVID recovery and the recent fires, the past half-dozen years have been some of the hardest on business owners in recent memory, Schiavo said, and merchant cash-advance services prey on that.
“We really wanted to step in and bring these businesses into the light, making sure we know who they are, how they can be held accountable and take some of the worst practices off the table,” she said.
A local child care facility that reached out to her office about the bill faced an interest rate of about 325%, Schiavo said.
Ivan Volschenk, president of the SCV chamber, said the challenges mentioned by Schiavo, as well as higher interest rates, have made these types of loans more appealing to some in recent years, which is one of the reasons the chamber hosted the roundtable and supported the legislation.
The bill is intended to add a layer of transparency and even the playing field, so good actors don’t have to worry about predatory ones, according to John Musella, the chamber’s chief advocacy officer.
In touting the regulation, Rivas, D-Salinas, said he was aware of the concerns from many California business owners about the cost of doing business, but he said affordable capital shouldn’t come at the expense of transparency.
“I’m not here to say we’ve done enough, because we certainly haven’t. That was the source of the discussion today — is understanding how we can continue to make progress to support our small businesses,” he said, referring to the invite-only roundtable that was not open to the press. “And I’m certainly not here to tell you everything that’s coming out of Sacramento is working, because it isn’t,” Rivas said. “The truth is in California, we cannot continue to lead the nation in entrepreneurship, while making it increasingly challenging for the next generation of entrepreneurs to succeed.”
