Business
New services for financially struggling Californians to come under more scrutiny by state regulators
Concerned that Californians were being victimized by novel types of lenders, state lawmakers gave regulators broad power in 2021 to guard against unfair, deceptive and abusive practices in the financial services industry.
On Tuesday, the California Department of Financial Protection and Innovation announced its first new regulatory targets: earned wage access, debt settlement and student loan relief services, as well as private loans with income-based repayment plans for college or trade school students. Starting in February, these services will have to register with and provide data to the department if they want to operate in California, making it easier for regulators to identify debt traps and other troublesome practices.
According to the DFPI, providers of earned wage access in California “have generally maintained that they are not subject to any existing consumer credit laws or regulations.” The rule announced Tuesday holds that these services can either be licensed and regulated as lenders subject to the California Financing Law, which limits interest rates and other terms, or register as credit providers under the 2021 law. If they choose the latter, they’ll have to submit data every month to the state about their fees, the percentage of advances repaid, the duration of the advances and the total number of advances made.
Tuesday’s rule doesn’t set any new limits on the fees charged, the amount of credit offered or other key features of the four types of services — the 2021 law doesn’t give the department that authority. What the rule will do is gather information about how these services operate and their effect on consumers, something that could lead legislators to impose new restrictions, said Suzanne Martindale, the DFPI’s senior deputy commissioner for consumer financial protection.
“The goal is to get the data,” Martindale said. “Let’s see the trends, let’s identify the risks for consumers, and then let’s have a conversation on where to go from here. … We are simply saying, come register and give us more information about your business.”
Some consumer advocates say more limits are needed on earned wage access services (also known as paycheck advances or income-based advances), which allow employees to borrow against their next paycheck based on the hours they’ve already worked. The state’s move is necessary, they say, but not sufficient.
“We really see it as the new frontier in payday lending,” Andrew Kushner, senior policy counsel for the Center for Responsible Lending, said of the services offered for a fee through employers or directly to consumers. “The problem is just like with a payday loan. It effectively creates its own ongoing demand. … It traps borrowers in a cycle of reborrowing.”
Earned wage access companies say their services give workers more control over the timing of their pay, while also helping employers reduce turnover. “Accessing accrued wages before the pay cycle ends becomes a financial lifeline, offering flexibility and confidence in financial wellness,” one provider, Rain Technologies, says on its website.
Typically, earned wage access services impose a per-use fee, a subscription charge or, in some cases, a voluntary “tip.” Two basic types of these services are covered by the rule: one that third parties offer through employers, which automatically withhold the repayment from the borrower’s next check, and one they offer directly to consumers, where the repayment is withdrawn from the borrower’s bank account.
The vast majority of those who take out advances repay them in full, the DFPI said. But the cost can be high — according to the DFPI, the fees or tips collected by the services translated to an annual interest charge of more than 330% on average in 2021 — and the repayments may lead to more borrowing.
Kushner said the earned wage access industry depends on a relatively small number of users who take out advances repeatedly. The fees they pay for the advances eat into their paychecks, deepening their financial struggles.
Lucia Constantine, a senior researcher at the Center for Responsible Lending, said the center’s research found that one-third of the people who used wage advance apps reborrowed within two weeks at least 80% of the time they used the app. Almost 40% of the users had at least six advances in one or more months, she said, and in California, those users accounted for 85% of all advances.
The center also found that more than 30% of the Californians who use wage advance apps have taken out advances from three or more different apps in a month. State residents had significantly more overdrafts from their checking accounts in the three months after using these services than before using them, the center said.
The federal Consumer Financial Protection Bureau is stepping up oversight of earned wage access services too. In July, it proposed an interpretive rule that would require these services to disclose their costs and terms more clearly, as required by the federal Truth in Lending Act.
Disclosure is important, Kushner said, but the federal government leaves it to the states to regulate the terms and conditions that lenders offer. Advance wage access products “are loans under any definition,” he said, and states should regulate the providers the same way they regulate other lenders — with caps on the fees, interest charges and other costs imposed on borrowers.
Those providers, he conceded, “are really opposed to being treated as lenders.” A number of them pushed the DFPI to ease the registration and reporting requirements, arguing they weren’t necessary to protect California consumers.
Martindale said the state’s approach to earned wage access services is a lighter regulatory touch than treating them the same as lenders under the California Financing Law. “I think we landed in a place where no one, no stakeholder got everything they wanted,” she said.
Once the registration requirement goes into effect next year, it will offer one immediate benefit for consumers: Before signing up for one of these services, they will be able to check the DFPI website to see whether the company behind it is registered and can legally operate in California.
Regardless of whether companies are licensed or registered in the state, Martindale said, the 2021 law empowers the DFPI to bring enforcement actions against them if they offer credit in unfair, deceptive and abusive ways. So far, the agency has used that power to bring more than 300 enforcement actions against financial service companies and executives.
Business
U.S. Space Force awards $1.6 billion in contracts to South Bay satellite builders
The U.S. Space Force announced Friday it has awarded satellite contracts with a combined value of about $1.6 billion to Rocket Lab in Long Beach and to the Redondo Beach Space Park campus of Northrop Grumman.
The contracts by the Space Development Agency will fund the construction by each company of 18 satellites for a network in development that will provide warning of advanced threats such as hypersonic missiles.
Northrop Grumman has been awarded contracts for prior phases of the Proliferated Warfighter Space Architecture, a planned network of missile defense and communications satellites in low Earth orbit.
The contract announced Friday is valued at $764 million, and the company is now set to deliver a total of 150 satellites for the network.
The $805-million contract awarded to Rocket Lab is its largest to date. It had previously been awarded a $515 million contract to deliver 18 communications satellites for the network.
Founded in 2006 in New Zealand, the company builds satellites and provides small-satellite launch services for commercial and government customers with its Electron rocket. It moved to Long Beach in 2020 from Huntington Beach and is developing a larger rocket.
“This is more than just a contract. It’s a resounding affirmation of our evolution from simply a trusted launch provider to a leading vertically integrated space prime contractor,” said Rocket Labs founder and chief executive Peter Beck in online remarks.
The company said it could eventually earn up to $1 billion due to the contract by supplying components to other builders of the satellite network.
Also awarded contracts announced Friday were a Lockheed Martin group in Sunnyvalle, Calif., and L3Harris Technologies of Fort Wayne, Ind. Those contracts for 36 satellites were valued at nearly $2 billion.
Gurpartap “GP” Sandhoo, acting director of the Space Development Agency, said the contracts awarded “will achieve near-continuous global coverage for missile warning and tracking” in addition to other capabilities.
Northrop Grumman said the missiles are being built to respond to the rise of hypersonic missiles, which maneuver in flight and require infrared tracking and speedy data transmission to protect U.S. troops.
Beck said that the contracts reflects Rocket Labs growth into an “industry disruptor” and growing space prime contractor.
Business
California-based company recalls thousands of cases of salad dressing over ‘foreign objects’
A California food manufacturer is recalling thousands of cases of salad dressing distributed to major retailers over potential contamination from “foreign objects.”
The company, Irvine-based Ventura Foods, recalled 3,556 cases of the dressing that could be contaminated by “black plastic planting material” in the granulated onion used, according to an alert issued by the U.S. Food and Drug Administration.
Ventura Foods voluntarily initiated the recall of the product, which was sold at Costco, Publix and several other retailers across 27 states, according to the FDA.
None of the 42 locations where the product was sold were in California.
Ventura Foods said it issued the recall after one of its ingredient suppliers recalled a batch of onion granules that the company had used n some of its dressings.
“Upon receiving notice of the supplier’s recall, we acted with urgency to remove all potentially impacted product from the marketplace. This includes urging our customers, their distributors and retailers to review their inventory, segregate and stop the further sale and distribution of any products subject to the recall,” said company spokesperson Eniko Bolivar-Murphy in an emailed statement. “The safety of our products is and will always be our top priority.”
The FDA issued its initial recall alert in early November. Costco also alerted customers at that time, noting that customers could return the products to stores for a full refund. The affected products had sell-by dates between Oct. 17 and Nov. 9.
The company recalled the following types of salad dressing:
- Creamy Poblano Avocado Ranch Dressing and Dip
- Ventura Caesar Dressing
- Pepper Mill Regal Caesar Dressing
- Pepper Mill Creamy Caesar Dressing
- Caesar Dressing served at Costco Service Deli
- Caesar Dressing served at Costco Food Court
- Hidden Valley, Buttermilk Ranch
Business
They graduated from Stanford. Due to AI, they can’t find a job
A Stanford software engineering degree used to be a golden ticket. Artificial intelligence has devalued it to bronze, recent graduates say.
The elite students are shocked by the lack of job offers as they finish studies at what is often ranked as the top university in America.
When they were freshmen, ChatGPT hadn’t yet been released upon the world. Today, AI can code better than most humans.
Top tech companies just don’t need as many fresh graduates.
“Stanford computer science graduates are struggling to find entry-level jobs” with the most prominent tech brands, said Jan Liphardt, associate professor of bioengineering at Stanford University. “I think that’s crazy.”
While the rapidly advancing coding capabilities of generative AI have made experienced engineers more productive, they have also hobbled the job prospects of early-career software engineers.
Stanford students describe a suddenly skewed job market, where just a small slice of graduates — those considered “cracked engineers” who already have thick resumes building products and doing research — are getting the few good jobs, leaving everyone else to fight for scraps.
“There’s definitely a very dreary mood on campus,” said a recent computer science graduate who asked not to be named so they could speak freely. “People [who are] job hunting are very stressed out, and it’s very hard for them to actually secure jobs.”
The shake-up is being felt across California colleges, including UC Berkeley, USC and others. The job search has been even tougher for those with less prestigious degrees.
Eylul Akgul graduated last year with a degree in computer science from Loyola Marymount University. She wasn’t getting offers, so she went home to Turkey and got some experience at a startup. In May, she returned to the U.S., and still, she was “ghosted” by hundreds of employers.
“The industry for programmers is getting very oversaturated,” Akgul said.
The engineers’ most significant competitor is getting stronger by the day. When ChatGPT launched in 2022, it could only code for 30 seconds at a time. Today’s AI agents can code for hours, and do basic programming faster with fewer mistakes.
Data suggests that even though AI startups like OpenAI and Anthropic are hiring many people, it is not offsetting the decline in hiring elsewhere. Employment for specific groups, such as early-career software developers between the ages of 22 and 25 has declined by nearly 20% from its peak in late 2022, according to a Stanford study.
It wasn’t just software engineers, but also customer service and accounting jobs that were highly exposed to competition from AI. The Stanford study estimated that entry-level hiring for AI-exposed jobs declined 13% relative to less-exposed jobs such as nursing.
In the Los Angeles region, another study estimated that close to 200,000 jobs are exposed. Around 40% of tasks done by call center workers, editors and personal finance experts could be automated and done by AI, according to an AI Exposure Index curated by resume builder MyPerfectResume.
Many tech startups and titans have not been shy about broadcasting that they are cutting back on hiring plans as AI allows them to do more programming with fewer people.
Anthropic Chief Executive Dario Amodei said that 70% to 90% of the code for some products at his company is written by his company’s AI, called Claude. In May, he predicted that AI’s capabilities will increase until close to 50% of all entry-level white-collar jobs might be wiped out in five years.
A common sentiment from hiring managers is that where they previously needed ten engineers, they now only need “two skilled engineers and one of these LLM-based agents,” which can be just as productive, said Nenad Medvidović, a computer science professor at the University of Southern California.
“We don’t need the junior developers anymore,” said Amr Awadallah, CEO of Vectara, a Palo Alto-based AI startup. “The AI now can code better than the average junior developer that comes out of the best schools out there.”
To be sure, AI is still a long way from causing the extinction of software engineers. As AI handles structured, repetitive tasks, human engineers’ jobs are shifting toward oversight.
Today’s AIs are powerful but “jagged,” meaning they can excel at certain math problems yet still fail basic logic tests and aren’t consistent. One study found that AI tools made experienced developers 19% slower at work, as they spent more time reviewing code and fixing errors.
Students should focus on learning how to manage and check the work of AI as well as getting experience working with it, said John David N. Dionisio, a computer science professor at LMU.
Stanford students say they are arriving at the job market and finding a split in the road; capable AI engineers can find jobs, but basic, old-school computer science jobs are disappearing.
As they hit this surprise speed bump, some students are lowering their standards and joining companies they wouldn’t have considered before. Some are creating their own startups. A large group of frustrated grads are deciding to continue their studies to beef up their resumes and add more skills needed to compete with AI.
“If you look at the enrollment numbers in the past two years, they’ve skyrocketed for people wanting to do a fifth-year master’s,” the Stanford graduate said. “It’s a whole other year, a whole other cycle to do recruiting. I would say, half of my friends are still on campus doing their fifth-year master’s.”
After four months of searching, LMU graduate Akgul finally landed a technical lead job at a software consultancy in Los Angeles. At her new job, she uses AI coding tools, but she feels like she has to do the work of three developers.
Universities and students will have to rethink their curricula and majors to ensure that their four years of study prepare them for a world with AI.
“That’s been a dramatic reversal from three years ago, when all of my undergraduate mentees found great jobs at the companies around us,” Stanford’s Liphardt said. “That has changed.”
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