California Gov. Gavin Newsom has signed a package of bills that will bolster consumer protection rules in areas such as debt collection for small-business owners and overdraft-related fees charged by credit unions.
The package of new state laws touches on certain topics that are also hot at the federal level, including how medical debt should be handled in credit reporting.
One of the bills extends rules against unfair debt collection practices to small business owners who have taken out personal debts, as consumers, to fund their businesses.
Louis Caditz-Peck, executive director of the Responsible Business Lending Coalition, which supported the bill, said the legislation's scope is fairly narrow, but it's still a "meaningful" step in the right direction.
"Ultimately, what we would like to see is a standard of fair debt collection apply to small businesses as well," Caditz-Peck said in an interview. "I think it shows that when legislators thought about it, they didn't really see any reason why it should be legal to be able to lie and harass and bully as part of a collections practice."
Other legislation signed by Newsom on Tuesday requires credit unions to give their customers notice to pay back declined transactions, instead of instantly charging them overdraft or nonsufficient funds fees. NSF fees are similar to overdraft fees, with the difference being that they're charged when transactions get declined, as opposed to when they go through.
The legislation will also prevent credit unions from charging more overdraft or NSF fees that exceed $14, beginning Jan. 1, 2026.
Many large banks have stopped charging NSF fees in recent years. But among the largest 20 U.S. credit unions, 80% still do, according to data from the Consumer Financial Protection Bureau. Four of those credit unions are based in California.
Aaron Klein, a senior fellow in the Brookings Institution,
California led the charge on requiring credit unions to report overdraft fee data. After the Golden State mandated the disclosures in 2023, the National Credit Union Administration followed suit earlier this year.
Scott Simpson, president and CEO of the California/Nevada Credit Union Leagues and the Utah Credit Union Association, wrote in an
"Despite the benefits of overdraft protection and the proactive measures our credit unions take to ensure appropriate use by their members, recent state legislation could have inadvertently limited our credit unions' members' access to this important service," Simpson wrote.
The Consumer Financial Protection Bureau issued guidance reminding banks that they must be able to prove that consumers have opted in to overdraft services in order to charge overdraft fees.
According to data that
One California credit union, Frontwave Credit Union in Oceanside, recently drew the ire of Sens. Elizabeth Warren, D-Mass., and JD Vance, R-Ohio, after a
Another bill signed by Newsom this week will prohibit medical debt from being included on Californians' credit reports. At the national level earlier this year, the CFPB issued a
"We're strengthening protections for Californians across the board and helping save consumers money," the Democratic governor said in a prepared statement.
