Nondiscrimination.

The entire standalone Chapter 10 (Section 50710) for residential mortgage lender and servicer licensees was removed. That chapter had its own separate nondiscrimination examination requirements, fee structure, affiliate provisions, confidentiality rules, and enforcement authority. These are now consolidated into the existing Section 50302 CRMLA examination framework.

The nondiscrimination examination requirement for mortgage licensees is now embedded as paragraph (2)(A) of Section 50302, making it part of the regular CRMLA examination rather than a separate statutory chapter. The enforcement provision (violation of nondiscrimination law equals violation of the division) is now at paragraph (2)(B) of Section 50302.

In both the bank (Section 1915) and credit union (Section 16910) provisions, the commissioner's authority to align nondiscrimination exam schedules with other scheduled exams was changed from 'may alter' (optional) to 'shall align' (mandatory). This means the commissioner is now required to coordinate these exams with existing examination cycles rather than having discretion.

Bank fair lending examinations are now limited to banks meeting at least one criterion in 12 C.F.R. Section 1003.2(g)(1)(v) (a federal size/loan-volume threshold), rather than applying to all banks under the commissioner's examination authority. This excludes smaller banks from mandatory fair lending exams.

The separate new Chapter 10 (Section 50710) added to Division 20 of the Financial Code for residential mortgage lender and servicer licensees is eliminated entirely. Instead, the bill now amends existing Section 50302 to incorporate nondiscrimination examination as part of the already-required periodic CRMLA examination.

Amended Section 50302 now requires that as part of each CRMLA examination, the commissioner shall examine the licensee for compliance with nondiscrimination law applicable to mortgage lending, and a violation of such law is treated as a violation of Division 20 (CRMLA), enabling enforcement under existing CRMLA authority.

For both banks and credit unions, the examination schedule provision changed from 'may alter' to 'shall align' with other examinations administered by the commissioner, making alignment mandatory rather than optional.

New subparagraph (C)(ii) for both banks and credit unions explicitly preserves the commissioner's authority to conduct targeted or off-schedule examinations for due cause, including based on complaints or evidence of potential discrimination.

New subparagraph (E) for banks and credit unions, and new paragraph (2)(C) in Section 50302 for licensees, requires the commissioner to seek to enhance efficiency and effectiveness of examinations to reduce total exam costs billed to the regulated entities.

New confidentiality language added: examination reports prepared by the commissioner's duly designated representatives shall not be a public record. For credit unions, reports are additionally subject to Section 14257 (credit union examination report confidentiality).

The bill title and digest now reference 'amend Section 50302' in addition to the three new chapters, reflecting the shift from creating a standalone CRMLA fair lending chapter to amending existing law.

Credit union examination scope was narrowed. Previously any credit union subject to the commissioner's examination authority was covered. Now only credit unions meeting at least one criterion listed in Section 1003.2(g)(1)(v) of Title 12 C.F.R. are subject to examination, which likely limits coverage to credit unions engaged in certain mortgage lending activities.

The phrase 'law applicable to mortgage lending' was added alongside 'nondiscrimination law' in all three sections (banks, credit unions, and licensees), expanding the range of laws for which compliance is examined beyond just nondiscrimination statutes.

A new subsection (C) was added to all three entity sections allowing the commissioner to alter the examination schedule to align with scheduled examinations under other law, providing flexibility to coordinate timing with federal or other state exams.

A new subsection (D) was added to all three entity sections allowing the commissioner to exempt an entity from examination, or examine it less frequently than the four-year minimum, if the entity demonstrates full compliance with applicable nondiscrimination law in its most recent examination under this chapter.

The entire California Community Reinvestment Act (Division 27, Section 120000 et seq.) is removed. This eliminated: the requirement for covered financial institutions to meet community financial services needs; triennial assessments by the commissioner; a 5-tier rating system; restrictions on state contracts and deposit funds for poorly-rated institutions; administrative penalties up to $100,000; and the Community Reinvestment Fund within the State Treasury.

The California Fair Employment and Housing Act (Gov. Code Sec. 12900 et seq.) and the Holden Act (Health and Safety Code Sec. 35800 et seq.) are added to the list of applicable nondiscrimination laws that the commissioner must examine for compliance, in all three chapters covering banks, credit unions, and residential mortgage licensees.

The standard for identifying violations changes from 'disparate impact related to a characteristic listed in Section 51 of the Civil Code' to 'discriminatory effect under the California Fair Employment and Housing Act.' This shifts the legal framework from the Unruh Civil Rights Act's protected characteristics to the broader FEHA framework, which covers more protected categories and uses different analytical standards.

The state-mandated local program designation changes from 'no' to 'yes,' indicating the bill now imposes costs on local agencies or school districts that trigger reimbursement analysis under Article XIII B of the California Constitution.

The entire California Community Reinvestment Act (Division 27, Sections 120000-120030) was removed, including the affirmative obligation for covered financial institutions to meet community financial services needs, the 5-tier public rating system (Outstanding through Substantial Noncompliance), disparity study requirements, and detailed assessment factors covering branch distribution, mortgage lending, small business lending, board diversity, and more.

Added the California Fair Lending Examination Act, which requires the Commissioner to examine banks (Chapter 22, Division 1.1), credit unions (Chapter 13, Division 5), and residential mortgage lenders (Chapter 10, Division 20) at least once every four years for compliance with nondiscrimination laws including the federal Equal Credit Opportunity Act, Fair Housing Act, and the Unruh Civil Rights Act.

Removed the prohibition on covered financial institutions with poor ratings receiving state funds for deposit or being awarded state contracts to provide financial services, as well as the requirement that the Commissioner consider performance records when approving branch establishments, relocations, mergers, or changes in control.

Added authority for the Commissioner to examine officers, directors, employees, or agents under oath, to examine affiliates when evidence of unlawful activity is found, and to treat violations of nondiscrimination laws as violations of the Banking Law, Credit Union Law, or CRMLA with enforcement through Division 24.

Removed the Community Reinvestment Fund within the State Treasury and the authority to issue administrative penalties of up to $100,000 for regular failure to meet community reinvestment obligations.

Added a provision requiring the Commissioner to assess examination fees to each examined institution to cover reasonable expenses of the examination.

Added a confidentiality requirement that examination findings statements may not be disclosed to anyone other than the subject institution, law enforcement officials, or other state or federal regulatory agencies for further investigation and enforcement.

Added legislative findings under Section 5 justifying the confidentiality provisions as necessary to protect the privacy of compliant licensees and the safety and soundness of depository institutions, satisfying Article I, Section 3 of the California Constitution.

Credit unions are now only covered if they have assets exceeding $75 million. Previously, all credit unions subject to state licensing laws were covered regardless of size.

The catch-all provision allowing the commissioner to designate 'any other financial institution' as a covered entity was deleted, limiting coverage to the four specifically listed types: banks, large credit unions, residential mortgage lenders with 200+ loans, and money transmitters issuing stored value.

The legislative finding specifically naming the Eaton, Palisades, Bert, and Hurst Fires and their impact on Altadena was removed. The general reference to directing capital to disaster-impacted areas remains but without naming specific fires.

A downgrade factor for institutions that show 'an undue concentration and a systematic pattern of lending to employers with a history of wage theft or labor violations' was removed from the assessment criteria in Section 120010.

In the list of qualifying community programs for rating purposes, the word 'government' was removed before 'programs that provide disaster preparedness, recovery, and relief efforts,' potentially broadening which disaster-related programs count toward an institution's rating.

Covered financial institutions must now submit any documentation they filed to comply with the federal Community Reinvestment Act (12 U.S.C. 2901 et seq.) to the state commissioner alongside their initial community needs assessment.

Rating thresholds under Section 120014(b) must now be set 'by type of covered financial institution' rather than as a single uniform standard, meaning banks, credit unions, mortgage lenders, and money transmitters could face different performance benchmarks.

A new provision in Section 120008 requires the commissioner's assessment to be based on both the business activities of the institution and any limitations on membership in a credit union charter, tailoring expectations to each institution's structure.

Section 120010(h) adds 'low-cost education loans provided to low-income borrowers' as a specific community development factor and changes the elderly/disabled program criterion from programs that 'support' those populations to programs that 'accept private capital to support' them, narrowing what qualifies.

The commissioner must now notify a covered financial institution of its upcoming assessment before making the assessment schedule public, giving institutions advance warning.

Section 120010(h) adds a broader introductory phrase requiring consideration of 'programs designed specifically to meet the needs of low and moderate income communities' before listing specific program types.

The bill title and digest dropped the separate reference to 'residential mortgage loans,' reframing the entire bill as solely about financial institutions and the California Community Reinvestment Act. The standalone section expressing legislative intent to enact residential mortgage loan legislation was removed.

New legislative findings were added citing the federal CRA's limitations, seven other states with state CRAs, the Eaton/Palisades/Bert/Hurst Fires devastation in Altadena, and the need to direct private capital to disaster-impacted areas on an emergency basis.

The definition of 'covered financial institution' was narrowed for residential mortgage lenders by adding a threshold: they must originate 200 or more loans in the two most recent consecutive years. A new catch-all category was added: 'any other financial institution as determined by the commissioner.'

A new disparity study requirement was added (Section 120004(c)-(e)): by January 1, 2027, the commissioner in collaboration with the Civil Rights Department must conduct a study identifying geographies with significant disparities and financial policies with disparate impact on communities of color. By January 1, 2028, the commissioner must develop rules implementing the findings into the assessment process.

New assessment factors were added: lending to employers with a history of wage theft or labor violations triggers a rating downgrade; low-cost investments for community stabilization, antispeculation, and right-of-return after declared disasters trigger an upgrade; hiring/contracting/lending supporting above-technical-level employment opportunities triggers an upgrade if a legally enforceable mechanism exists; performance relative to local demographics and peer institutions are now considered.

Existing assessment factor (h) on community development participation was expanded to include workforce housing for low- and moderate-income workers near jobs, social housing, government programs supporting the elderly or disabled, disaster preparedness/recovery/relief efforts, and climate resiliency initiatives.

The board diversity assessment factor now includes the qualifier 'to the extent that information is available to the commissioner,' making it less absolute. The discriminatory practices factor was expanded to cover fair housing and fair lending laws and wage theft protection and labor laws in addition to consumer protection laws.

A new subdivision (b) was added to Section 120014 requiring the commissioner to adopt rules setting minimum thresholds or ranges of performance required for each of the five rating levels, adding objectivity to the rating process.

The initial community needs assessment deadline was set to January 1, 2029 (previously left blank as 'January 1, ____').

The examination authority in Section 120012(b) was broadened from 'fair lending laws' to 'consumer protection, fair housing, and fair lending laws,' giving the commissioner a wider legal basis for examinations.

Entirely new Division 27 (Sections 120000-120030) added to the Financial Code, establishing the California Community Reinvestment Act. The bill went from a one-line intent statement to a full regulatory framework.

Defines 'covered financial institution' to include banks, credit unions, residential mortgage lenders, and money transmitters that sell or issue stored value, all subject to state licensing laws.

Requires covered institutions to have a continuing and affirmative obligation to meet the financial services needs of communities including low- and moderate-income communities and communities of color. Digital-only institutions have a parallel obligation tied to their assessment area.

Institutions rated 'Needs to Improve' or 'Substantial Noncompliance' must submit a remediation plan within 180 days, updated quarterly until they reach 'Satisfactory' or better. They are also barred from receiving state funds for deposit or being awarded state contracts for financial services.

Adds detailed assessment factors including branch distribution across income geographies, mortgage origination data by race and ethnicity, small business lending to businesses with $1 million or less in revenue, board diversity, use of specialty consumer reporting agencies for account eligibility, Bank On National Account Standards compliance, and evidence of discriminatory practices.

The Commissioner of Financial Protection and Innovation must assess each covered institution at least once every three years, assign one of five ratings (Outstanding, High Satisfactory, Satisfactory, Needs to Improve, Substantial Noncompliance), and prepare a written evaluation with public and confidential sections.

The Commissioner must consider an institution's performance record when deciding applications for branch establishment, office relocation, license renewal, change in control, or mergers and acquisitions. The record can be the basis for denial.

Establishes the Community Reinvestment Fund within the State Treasury. Authorizes administrative penalties of up to $100,000 for institutions that regularly fail to meet obligations, with all penalty money deposited into the fund.

Fiscal committee designation changed from 'no' to 'yes,' reflecting the new fund establishment and penalty authority that have fiscal implications.