[Karen37a]

You can use this as a templete

September 25th, 2018

The Honorable Edmund G. Brown Jr.
Governor, State of California
Sacramento, CA 95815
Via email: leg.unit@gov.ca.gov




RE: Please Veto SB 1235 because it will cause irreparable harm and cause more confusion rather than transparency


Dear Governor Brown,

We respectfully urge you to Veto SB 1235 [Description of you or your organization, e.g." I am in the business of helping merchants get much-needed capital when they are denied from tradtional soruces like the bank" “XYZ is…, I ” If you like, can add why your organization, in particular, cares about transparency standards but recognize this isnt the solution]

In response to widespread calls for small business financing, this bill as constructed would not help with transparency standards, it will add to the confusion.SB 1235 would make numerous changes to the lending landscape the most important one being that lending or funding to California Small to mid-size business can become a criminal offence with additional litigation costs and risks. This additional risk and cost cannot be taken on by most Lenders and Funders because opportunistic litigators and Debt Relief will envelop the industry to take advantage of this legal loophole to help out unethical consumers from paying back borrowed money. These are non-secured and that adds more risk. If the Funders and Lenders have to use a standardized credit card or loan metric; this metric adds to confusion to borrowers because it does not represent accurately the cost of finance on Lending or funding vehicles that use factoring and a daily method of accrual for accounting and billing.

The California legislature has taken the lead on Regulation by passing SB 1235 in an effort to protect California’s small businesses and economy, but passing this will have negative consequences in regards to the economy. Lenders and Funders cannot allow the consumers or merchants to sign an illegal contract, or classify Cash advances or Factoring as Loans. Numerous cases have been won in court that based the decision on the language of the contract; If it resembles a loan it is considered a loan, therefore usurious in nature.

SB 1235 does not create any limits on what kind of financing can be provided. But it requires finance companies to disclose the true costs of that financing. The bill provides the Department of Business Oversight the flexibility to set disclosure standards based on an open regulatory comment process that includes all stakeholders. If the DBO has not finalized the regulations and until that happens this bill or law must respectively be tabled or vetoed.

SB 1235 would not correct the so-called advantage of financing companies, and the difficulty small businesses face today in comparing their options. Small to mid-size business have additional problems and business loans are not personal loans. For this reason and many more banks have chosen not to lend to the majority of Small to mid-size hard working American businesses who are the backbone of this country. Merchant cash advance companies have stepped in to help fill the gap in spite of the increased risks and costs associated with struggling business and huge default ratios. Holding Merchant cash advance companies to the same standards as banks will not empower California small business it will cause a mass exodus of Funding companies who cannot legally or fiscally lend into that landscape. Just like the banks, only the top tier of merchants will have access to much-needed Business Capital and success

On behalf of California’s small business owners, please Veto this bill


Sincerely,
[Signature]

__

California Residents Action Alert Veto Bill.jpg