- 1AB2116 would extend consumer financial protections to small businesses
- 2Threshold is $16M or the DGS-adjusted level, whichever is greater, now $18M
- 3The bill says small business owners are similarly situated to consumers
California's AB2116 proposes to amend the state's Consumer Financial Protection Law so that small businesses with revenue under about $18 million a year are treated as consumers for purposes of consumer financial protections.
How the bill defines small
The bill defines a small business as a for-profit entity with annual gross receipts of no more than $16,000,000, or the receipt level as biennially adjusted by the Department of General Services under Section 14837 of the Government Code, whichever is greater. The DGS figure now stands at $18 million, making that the operative baseline today.
The rationale
The bill's findings say small business owners are often similarly situated to consumers in sophistication and bargaining power relative to financial providers. It says many rationales for consumer protections apply to them too, and that small businesses have a better chance to survive and grow when they can access safe products and are shielded from unfair, deceptive or abusive practices.
What it could capture
One illustration of how broad the threshold is: an online small business lender that originated $200 million in business loans while generating just $14.3 million in revenue would also fall under the bill's definition and be treated as a consumer.
Source reporting: deBanked.
