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 five days 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 than three such fees per month.

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, wrote in an American Banker BankThink opinion piece last week that data on credit unions' overdraft fee income shows that "many credit unions are exemplary," but "more than a handful of credit unions have become what I call 'overdraft addicts,' earning a majority of profits from overdraft."

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 American Banker editorial this week that his organization brokered "critical amendments" to the California overdraft-fee legislation to make it more palatable to credit unions.

"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.

According to data that Simpson cited from the trade group America's Credit Unions, 98% of credit unions waive overdraft fees on a case-by-case basis, and 71% of them provide targeted outreach or education to members who miss payments.

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 KPBS investigation showed that it utilized an exclusive agreement with the Marine Corps to charge overdraft fees to recruits going through boot camp. The $1.5 billion-asset credit union made nearly $8 million from overdraft and NSF fees in 2022, the news organization reported.

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 similar proposal, which the White House backs.

"We're strengthening protections for Californians across the board and helping save consumers money," the Democratic governor said in a prepared statement.