The California Legislature adjourned for the year on September 14 and they are now in interim recesses until January. Legislatively, CBA was successful in opposing SB 278 (Dodd). Sponsored by the Consumer Attorneys of California, this measure makes financial institutions liable for elder financial abuse if the institution should have known that the likely result of a transaction initiated by an accountholder would result in fraud, and the institution failed to stop it. We opposed this expanded liability, which fundamentally alters the relationship between banks and their senior accountholders. Under the measure, a bank employee could take the appropriate steps to warn an accountholder that the transaction they’ve initiated with the bank may result in fraud, but if the employee honors the transaction, the bank could be held liable. With no clear safe harbor for institutions to utilize to avoid liability, banks will be forced to reevaluate their customer relationship with accountholders over the age of 65. We launched a successful media campaign opposing SB 278 and worked with aging experts at Stanford University and the Milken Institute to publish and opinion editorial related to the measure. This legislation was ultimately held in the Assembly Banking Committee and will not advance this year but remains eligible for consideration next year. The legislature is highly focused on passing legislation in 2024 and we have committed to work with the committee during the fall to craft legislation intended to be an alternative to SB 278.

A CBA-sponsored measure adopting the Uniform Fiduciary Income and Principal Act has been signed by the governor. The Act recognizes modern portfolio theory by allowing trustees to invest for the maximum total return, whether the return is in the form of income or growth of principal and provides more flexible terms giving trustees discretion to accumulate income or access principal when advantageous to further the purposes of the trust. Another uniform measure headed to the governor and supported by CBA adopts the Uniform Directed Trust Act which provides a framework for allocating fiduciary power and duty between a trust director and a trustee by allocating the primary duty to the director while simultaneously maintaining a minimum core duty for the trustee to avoid willful misconduct.

We successfully negotiated several mortgage-related measures that are still active. We secured amendments requiring lender consent for borrowers that wish to separately convey an accessory dwelling unit from the parcel. We helped redraft a measure as a means to improve compliance that requires a transferor mortgage servicer to furnish to a transferee mortgage servicer material written records regarding damaged residential 1-4 property resulting from a disaster where a state of emergency has been called. A measure adopting remote online notarization in California, supported by CBA also passed out of the legislature.

On the labor and employment front, SB 399 (Wahab), a measure that would have restricted employer communications, was held and will not move forward this year. It is eligible to move forward on 2024 as a two-year bill. CBA opposed the measure on the basis that it would have restricted communications about pending or recently enacted legislation and regulations, which is highly concerning from a compliance perspective. This measure was the highest priority of CBA’s current engagement in labor and employment-related legislation.

Additionally, CBA was asked to join an opposition coalition to express concern about a package of water rights-related measures that are important to our agriculture lending community. CBA joined the coalition, and the package of measures were set aside for the remainder of the legislative year, though they will be eligible to move forward in 2024 as two-year measures.

Two important climate-related measures passed out of the legislature this year. SB 253 (Wiener) requires all entities that do business in California and earn an annual revenue of more than $1 billion to publicly disclose their greenhouse gas emissions, including scope 3 emissions associated with supply chains. SB 261 (Stern), the Climate-Related Risk Disclosure Act, is modeled on a framework proposed by the Task Force on Climate-Related Financial Disclosures (TCFD), mandating the report for entities doing business in California with more than $500 million in annual revenue.