Banking committee advances bill to apply consumer debt-settlement rules to small businesses

The Senate Committee on Banking and Financial Institutions on Oct. not specified advanced Assembly Bill 1166, a measure by Assemblymember Valencia that would expand the Fair Debt Settlement Practices Act to cover commercial financing. The committee voted to “do pass, but first amend and re-refer to Judiciary,” then moved the bill out of committee by a recorded majority.

AB 1166 would apply the same guardrails created by AB 1405 in 2021 — including prohibitions on collecting upfront payments and a consumer’s right to cancel certain contracts without penalty — to debt settlement services offered to businesses, the author said. “AB 1166 expands the Fair Debt Settlement Practices Act to cover commercial financing, ensuring that debt settlement providers must follow the same rules for business customers as they do for individual customers,” Assemblymember Valencia said.

Why it matters: Supporters said small business owners often confront complex, nonbank financing and can be vulnerable to deceptive…