BILL NUMBER: AB 485 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 21, 2003
INTRODUCED BY Assembly Member Ridley-Thomas
FEBRUARY 14, 2003
An act to amend Section 4979.7 of add
Sections 4971 and 4972 to the Financial Code , and to
repeal Section 1916.12 of the Civil Code , relating to consumer
loans.
LEGISLATIVE COUNSEL'S DIGEST
AB 485, as amended, Ridley-Thomas. Consumer loans.
(1) Existing law authorizes the Secretary of the Business,
Transportation and Housing Agency, or the secretary's designee, to
prescribe rules and regulations that apply to lenders making loans
upon the security of residential real property that are equivalent to
federally regulated financial institutions.
This bill would repeal these provisions.
(2) Existing law imposes various restrictions on certain consumer
loans defined as "covered loans," including prohibiting a covered
loan from including a prepayment fee or penalty after the first 36
months after the date of consummation of the loan and requiring a
specified disclosure notice to be provided to a consumer before a
covered loan is made.
This bill would authorize counties and cities that have a
specified population and that have adopted findings indicating the
presence of significant predatory lending practices in their
jurisdictions to adopt ordinances providing protection greater than
existing state law.
Existing law prohibits a person who originates a consumer loan
from financing, directly or indirectly, into a consumer loan or
financing to the same borrower within 30 days of a consumer loan
certain insurance premiums and debt cancellation or suspension
agreement fees.
This bill would extend the 30-day time period for the prohibition
to 90 days.
Vote: majority. Appropriation: no. Fiscal committee:
no yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 4979.7 of the Financial Code is
SECTION 1. Section 1916.12 of the Civil Code is repealed.
1916.12. (a) The Legislature finds that the economic environment
of financial institutions has become increasingly volatile as a
result of regulatory revisions enacted by the United States Congress
and federal agencies such as, but not necessarily limited to, the
Comptroller of the Currency, the Federal Home Loan Bank Board,
Federal Reserve Board, and the Depository Institutions Deregulation
Committee. The Legislature further finds that deposit rate ceilings
are being phased out while the cost of and competition for funds have
escalated. It is the purpose of this section to maintain the
quality of competition between state-licensed and federally regulated
financial institutions in the field of mortgage lending, as well as
promote the convenience, advantage and best interests of California
residents in their pursuit of adequate and available housing. In
order to remain competitive and provide the optimum housing
environment for the citizens of California, state institutions
require the ability to respond in a timely manner to changes in
mortgage lending parameters initiated at the federal level. Local
regulatory guidelines must promote continued parity between the state
and federal levels in order to avoid creation of discriminatory
burdens upon state institutions and to protect interests held by
California citizens. It is the intent of the Legislature to eliminate
past and prevent future inequities between state and federal
financial institutions doing business in the State of California by
creating a sensitive and responsive mortgage parity procedure.
(b) The Secretary of the Business, Transportation and Housing
Agency, or the secretary's designee as defined by subdivision (c) of
Section 1918.5 of the Civil Code, shall have the authority to
prescribe rules and regulations extending to lenders who make loans
upon the security of residential real property any right, power,
privilege or duty relating to mortgage instruments that is equivalent
to authority extended to federally-regulated financial institutions
by federal statute or regulation.
(c) In order to grant equivalent mortgage lending authority to
state financial institutions to that which has been extended to
federal financial institutions, the secretary or the secretary's
designee shall adopt such regulations within 60 days of the effective
date of the statute or regulation extending the comparable right,
power, privilege or duty to federally regulated financial
institutions.
(d) The provisions of Sections 1916.5, 1916.6, 1916.7, 1916.8,
1916.9, and Chapter 5 (commencing with Section 1918) of the Civil
Code, and any other provisions of law relating to the requirements
for changes in the rate of interest on loans, shall not be applicable
to loans made pursuant to the provisions of this section and
regulations promulgated thereunder.
(e) Any regulations adopted pursuant to this section shall expire
on January 1 of the second succeeding year following the end of the
calendar year in which the regulation was promulgated. Subsequent
amendments to these regulations cannot extend this expiration date.
(f) This section shall become operative on December 31, 1983.
SEC. 2. Section 4971 is added to the Financial Code, to read:
4971. The Legislature finds and declares the following:
(a) Predatory lending practices are disproportionately inflicted
upon the most vulnerable classes of people including seniors,
low-income families, and monolingual residents.
(b) Predatory lending practices are detrimental to communities and
neighborhoods throughout California and negatively impact the
economic and social stability of impacted areas.
(c) The purpose of this division is to curtail predatory lending
practices and to provide a baseline of protection for California's
residents.
(d) It is the intent of the Legislature to authorize certain large
cities and counties within California that have established findings
of significant predatory lending practices within their jurisdiction
to adopt ordinances providing protections that are in addition to
the protections provided in this division.
SEC. 3. Section 4972 is added to the Financial Code, to read:
4972. Upon adopting findings indicating the presence of
significant predatory lending practices within their respective
jurisdiction, any city with a population of more than 300,000, and
any county with a population of more than 750,000, may adopt
ordinances providing its residents with protection that is greater
than the protection provided in this division. amended
to read:
4979.7. On or after July 1, 2002, a person who originates a
consumer loan shall not finance, directly or indirectly, into a
consumer loan or finance to the same borrower within 90 days of a
consumer loan any credit life, credit disability, credit property, or
credit unemployment insurance premiums, or any debt cancellation or
suspension agreement fees, provided that credit insurance premiums,
debt cancellation, or suspension fees calculated and paid on a
monthly basis shall not be considered financed by the person
originating the loan. For purposes of this section, credit insurance
does not include a contract issued by a government agency or private
mortgage insurance company to insure the lender against loss caused
by a mortgagor's default.