Senators gathered on July 2, 2025, to discuss AB 1166, a bill aimed at expanding the Fair Debt Settlement Practices Act to include commercial financing. This legislation seeks to ensure that debt settlement providers adhere to the same regulations for business customers as they do for individual consumers. The original act, established in 2021, was designed to protect consumers from exploitative practices by prohibiting upfront payments and allowing contract cancellations without penalties.

During the meeting, supporters emphasized the need for these protections in a complex lending market where even seasoned business owners can struggle to understand the terms of their financing. Desiree Nguyen Orth, a technical expert present at the meeting, supported the bill's intent to safeguard small businesses.

However, some stakeholders raised concerns about the bill's implications. Margaret Gladstein, representing the Association for Consumer Debt Relief, acknowledged the importance of protecting small businesses but argued that the legislation should be distinctly separate from consumer debt laws. She highlighted that applying consumer-based rules to commercial financing does not adequately reflect the unique challenges faced by businesses, especially those on the brink of insolvency.

Senator Nelof echoed these concerns, stating that the borrowing needs and strategies of consumers and businesses differ significantly. He questioned whether the bill was necessary, suggesting that the complexities of business debt might require a separate legislative approach.

As the discussion progressed, it became clear that while there is broad support for protecting small businesses, there is also a strong call for careful consideration of how these protections are structured. Stakeholders expressed a desire to collaborate with the bill's author to ensure that the final legislation accurately reflects the realities of the commercial finance landscape.

The committee's deliberations signal a critical moment for small business financing in California, with potential changes that could reshape how debt settlement is approached in the commercial sector. As the bill moves forward, the outcome will likely influence the financial landscape for many small business owners across the state.