CSLB signals legislative push to tighten lender payments to contractors

CSLB staff briefed the board on recurring problems where lenders pay contractors or subcontractors directly, leaving consumers with limited leverage when contractors fail to complete work. Staff said this pattern has emerged in solar projects and credits, and is appearing in accessory dwelling unit (ADU) projects too.

Why it matters: When a contractor has already been paid by the lender, homeowners can face uphill battles to secure completion or recover funds. Staff told the board they have compiled a legislative proposal that would tighten lending processes tied to construction financing and are meeting with the Department of Financial Protection and Innovation and other partners to explore options.

What staff proposed: among ideas discussed were requiring more robust documentation at signature (hard copies or notarization) to reduce fraudulent enrollments via electronic signatures, and clarifying how progress payments tie to verified work. Staff also said they will pursue coordination with the DFPI and law-enforcement partners where appropriate and will return with a specific bill text if consensus emerges.

Next steps: staff will continue meetings with DFPI and report back to the board on potential statutory language and stakeholder feedback.