BILL NUMBER: AB 2921 CHAPTERED
BILL TEXT
CHAPTER 458
FILED WITH SECRETARY OF STATE SEPTEMBER 10, 2004
APPROVED BY GOVERNOR SEPTEMBER 10, 2004
PASSED THE ASSEMBLY AUGUST 17, 2004
PASSED THE SENATE AUGUST 11, 2004
AMENDED IN SENATE AUGUST 9, 2004
AMENDED IN SENATE JULY 19, 2004
AMENDED IN SENATE JULY 6, 2004
AMENDED IN SENATE JUNE 23, 2004
AMENDED IN SENATE JUNE 14, 2004
AMENDED IN ASSEMBLY APRIL 28, 2004
AMENDED IN ASSEMBLY APRIL 14, 2004
INTRODUCED BY Assembly Member Cox
FEBRUARY 20, 2004
An act to amend Sections 31001, 31119, 31125, 31300, 31402, 31403,
31405, 31410, and 31411 of, and to add Sections 31001.1, 31109,
31109.1, 31406, 31407, and 31408 to, the Corporations Code, and to
add Section 22063 to the Financial Code, relating to franchises, and
declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 2921, Cox. Franchises.
(1) Existing law, the Franchise Investment Law, provides that it
is unlawful for any person to offer or sell any franchise in this
state unless the offer has been registered or exempted. Existing law
makes it unlawful to solicit the agreement of a franchisee to a
proposed material modification of an existing franchise without first
delivering the franchisee a written disclosure. Existing law
exempts from registration modifications of a franchise agreement with
an existing franchisee of a franchisor if certain conditions are
satisfied. Existing law makes a person who offers or sells a
franchise in violation of specified provisions of the Franchise
Investment Law liable to the franchisee or subfranchisor, who is
authorized to sue for damages. A willful violation of the Franchise
Investment Law is a crime punishable by a specified fine or
imprisonment.
This bill, effective January 1, 2005, would revise the conditions
that are required to be satisfied for the exemption from registration
for a franchise agreement with an existing franchisee of a
franchisor. The bill would exempt from registration certain offers
and sales of a franchise that meet specified requirements. The bill
would increase the fines authorized for certain violations of the
Franchise Investment Law. The bill would make related changes.
Because a violation of the bill's requirements would be a crime,
it would impose a state-mandated local program.
(2) Existing law, the California Finance Lenders Law, provides for
regulation by the Department of Corporations of finance lenders
engaged in the business of making consumer or commercial loans.
Existing law exempts certain persons from the provisions regulating
finance lenders.
The bill would exempt certain franchise loans from the California
Finance Lenders Law.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(4) This bill would declare that it is to take effect immediately
as an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 31001 of the Corporations Code is amended to
read:
31001. The Legislature hereby finds and declares that the
widespread sale of franchises is a relatively new form of business
which has created numerous problems both from an investment and a
business point of view in the State of California. Prior to the
enactment of this division, the sale of franchises was regulated only
to the limited extent to which the Corporate Securities Law of 1968
applied to those transactions. California franchisees have suffered
substantial losses where the franchisor or his or her representative
has not provided full and complete information regarding the
franchisor-franchisee relationship, the details of the contract
between franchisor and franchisee, and the prior business experience
of the franchisor.
It is the intent of this law to provide each prospective
franchisee with the information necessary to make an intelligent
decision regarding franchises being offered. Further, it is the
intent of this law to prohibit the sale of franchises where the sale
would lead to fraud or a likelihood that the franchisor's promises
would not be fulfilled, and to protect the franchisor and franchisee
by providing a better understanding of the relationship between the
franchisor and franchisee with regard to their business relationship.
SEC. 2. Section 31001.1 is added to the Corporations Code, to
read:
31001.1. (a) To enhance the uniform and efficient administration,
and the effective enforcement, of this division, it is the intent of
the Legislature that the commissioner shall maintain a risk-based
process of reviewing franchise applications as described in this
section.
(b) Under the risk-based review process, the commissioner shall
focus on reviewing application information posing the most risk to
prospective franchisees in accordance with Section 31115, with
emphasis on risks associated with the franchisor's financial
condition, the franchisor's compliance record, and significant
deficiencies with the franchisor's application.
(c) When reviewing franchise filings under this section, the
commissioner shall concentrate on helping to prevent
misappropriation, mismanagement, and misrepresentation in connection
with the offer or sale of any franchise subject to this division.
(d) The commissioner shall consider guidelines, or other
information developed by the North American Securities Administrators
Association that are in effect, to assist in the implementation of
the risk-based review process. The risk-based review procedures
implemented by the commissioner shall be considered internal
management criteria and guidelines within the meaning of subdivisions
(d) and (e) of Section 11340.9 of the Government Code.
SEC. 3. Section 31109 is added to the Corporations Code, to read:
31109. Any offer or sale of a franchise that meets all of the
following requirements shall be exempt from Chapter 2 (commencing
with Section 31110):
(a) Each and every purchaser of the franchise is one of the
following:
(1) Any partner, executive officer, or director of the franchisor,
or any executive officer of its corporate general partner if the
franchisor is a partnership, or any manager if the franchisor is a
limited liability company.
(2) Any entity with total assets exceeding five million dollars
($5,000,000) according to its most recent financial statements and
not specifically formed for the purpose of acquiring the franchise
offered. For purposes of this section, "entity" shall mean an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, limited
liability company, or partnership. The financial statements
referred to in this paragraph shall meet both of the following
requirements:
(A) Be as of date not more than 90 days prior to the earlier of
either the date on which the first prospective purchaser signs any
binding franchise or other agreement with the franchisor in
connection with the award of the franchise, or the date on which the
franchisor receives any consideration from the first prospective
purchaser in connection with the award of the franchise.
(B) Be prepared in accordance with either of the following:
(i) Generally accepted accounting principles and, if the entity
has consolidated subsidiaries, on a consolidated basis.
(ii) The rules and requirements of the Securities and Exchange
Commission, whether or not required by law to be prepared in
accordance with those rules and requirements.
(3) Any natural person whose net worth, or joint net worth with
that person's spouse, exceeds one million dollars ($1,000,000) at the
time of his or her purchase of the franchise, excluding the value of
that person's personal residence, any and all retirement or pension
plan accounts or benefits, home furnishings, and automobiles.
(4) Any natural person whose gross income exceeds three hundred
thousand dollars ($300,000) per year in each of the two most recent
years, or whose joint gross income with that person's spouse exceeds
five hundred thousand dollars ($500,000) per year in each of those
years, and who reasonably expects to reach the same income level in
the current year.
(5) Any entity, in which all of the equity owners are persons or
entities described in either paragraph (1), (2), (3), or (4).
(b) Each and every purchaser of the franchise has knowledge and
experience in financial and business matters, either alone or with
professional advisers of the purchaser who are unaffiliated with, and
not directly or indirectly compensated by, the franchisor or an
affiliate or selling agent of the franchisor, such that the
franchisor reasonably believes, based on reasonable inquiry before
the sale, that each and every purchaser has the capacity to evaluate
the merits and risks of, and protect their own interests in, the
franchise investment.
(c) Each and every purchaser of the franchise purchases the
franchise for the purchaser's own account, or a trust account if the
purchaser is a trustee, for the purpose of conducting the business as
a franchise and not with a view to, or for a sale in connection
with, any resale or distribution of the franchise or any interest in
the franchise.
(d) The immediate cash payment required from a purchaser of the
franchise who is a natural person, upon the purchase of the
franchise, shall not exceed 10 percent of that person's net worth or
joint net worth with that person's spouse, exclusive of that person's
personal residence, any and all retirement or pension accounts or
benefits, home furnishings and automobiles.
(e) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 prior to any offer or sale of a franchise in this state for
which the exemption is claimed during any calendar year in which one
or more franchises are sold, excluding any material modification.
(f) No franchisor or any of its officers, directors, employees, or
agents shall form, organize, engage, or assist any person to
purchase a franchise for resale or distribution to avoid the
registration requirements of Chapter 2 (commencing with Section
31110).
SEC. 4. Section 31109.1 is added to the Corporations Code, to
read:
31109.1. (a) There shall be exempted from the provisions of
Chapter 2 (commencing with Section 31110) the offer and sale of a
franchise registered under Section 31111, 31121, or 31123 on terms
different from the terms of the offer registered thereunder if all of
the following requirements are met:
(1) The initial offer is the offer registered under Section 31111,
31121, or 31123.
(2) The prospective franchisee receives all of the following in a
separate written appendix to the offering circular:
(A) A summary description of each material negotiated term that
was negotiated by the franchisor for a California franchise during
the 12 month period ending in the calendar month immediately
preceding the month in which the negotiated offer or sale is made
under this section.
(B) A statement indicating that copies of the negotiated terms are
available upon written request.
(C) The name, telephone number, and address of the representative
of the franchisor to whom requests for a copy of the negotiated terms
may be obtained.
(3) The franchisor certifies or declares in an appendix to its
application for renewal that it has complied with all of the
requirements of this section, in the event this exemption is claimed.
(4) The negotiated terms, on the whole, confer additional benefits
on the franchisee.
(b) The franchisor shall provide a copy of the negotiated terms
described in subdivision (a) to the prospective franchisee within
five business days following the request of the franchisee.
(c) The franchisor shall maintain copies of all material
negotiated terms for which this exemption is claimed for a period of
five years from the effective date of the first agreement containing
the relevant negotiated term. Upon the request of the commissioner,
the franchisor shall make the copies available to the commissioner
for review. For purposes of this section, the commissioner may
prescribe by rule or order the format and content of the summary
description of the negotiated terms required by subdivision
suparagraph (A) of paragraph (2) of subdivision (a).
(d) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.
SEC. 5. Section 31119 of the Corporations Code is amended to read:
31119. (a) It is unlawful to sell any franchise in this state
which is subject to registration under this law without first
providing to the prospective franchisee, at least 10 business days
prior to the execution by the prospective franchisee of any binding
franchise or other agreement, or at least 10 business days prior to
the receipt of any consideration, whichever occurs first, a copy of
the offering circular, together with a copy of all proposed
agreements relating to the sale of the franchise.
(b) Nothing in this division shall be construed to prevent a
franchisor from providing copies of the offering circular documents
to prospective franchisees through electronic means pursuant to any
requirements or conditions that may be imposed by rule or order of
the commissioner.
SEC. 6. Section 31125 of the Corporations Code is amended to read:
31125. (a) An application for registration of a material
modification of an existing franchise or of existing franchises shall
be in a form and contain information as the commissioner may by rule
prescribe, and shall be accompanied by a proposed disclosure form as
specified in subdivision (b). The application may be included with
an application pursuant to Section 31111 or 31121.
(b) Except as provided in subdivisions (c) and (d), it is unlawful
to solicit the agreement of a franchisee to a proposed material
modification of an existing franchise without first delivering to the
franchisee a written disclosure, in a form and containing
information as the commissioner may by rule or order require,
identifying the proposed modification, either five business days
prior to the execution of any binding agreement by the franchisee to
the modification or containing a statement that the franchisee may,
by written notice mailed or delivered to the franchisor or a
specified agent of the franchisor within not less than five business
days following the execution of the agreement, rescind the agreement
to the material modification.
(c) Any modification of a franchise agreement with an existing
franchisee of a franchisor shall be exempted from the provisions of
this chapter, if all of the following are met:
(1) The franchisee receives the complete written modification at
least five business days prior to the execution of a binding
agreement, or providing that the franchisee may, by written notice
mailed or delivered to the franchisor or a specified agent of the
franchisor within not less than five business days following the
execution of the agreement, rescind the agreement to the material
modification; provided (A) the agreement is not executed within 12
months after the date of the franchise agreement, and (B) the
modification does not waive any right of the franchisee under the
California Franchise Relations Act (Chapter 5.5 (commencing with
Section 20000) of Division 8 of the Business and Professions Code),
but the modification may include a general release of all known and
unknown claims by a party to the modification.
(2) The modification meets one of the following:
(A) The proposed modification is in connection with the resolution
of a bona fide dispute between the franchisor and the franchisee or
the resolution of a claimed or actual franchisee or franchisor
default, and the modification is not applied on a franchise
systemwide basis at or about the time the modification is executed.
A modification shall not be deemed to be made on a franchise
systemwide basis if it is offered on a voluntary basis to fewer than
25 percent of the franchisor's California franchises within any
12-month period.
(B) The proposed modification is offered on a voluntary basis to
fewer than 25 percent of the franchisor's California franchises
within any 12-month period, provided each franchisee is given a right
to rescind the modification agreement if the modification is not
made in compliance with paragraph (1) of subdivision (c).
(d) Any modification of a franchise agreement with an existing
franchise of a franchisee shall be exempted from this chapter if the
modification is offered on a voluntary basis and does not
substantially and adversely impact the franchisee's rights,
benefits, privileges, duties, obligations, or responsibilities under
the franchise agreement.
(e) For purposes of this section, "California franchise" means:
(1) an existing franchise of a franchisee with any location in this
state from which sales, leases, or other transactions between the
franchised business and its customers are made or goods or services
are distributed, or (2) an existing franchise of a franchisee that is
a resident of this state and that owns, controls, or has an equity
interest in the franchise.
(f) A franchisor shall not make modifications in consecutive years
for the purpose of evading the 25 percent requirements set forth
above.
SEC. 7. Section 31300 of the Corporations Code is amended to read:
31300. Any person who offers or sells a franchise in violation of
Section 31101, 31110, 31119, 31200, or 31202, or in violation of any
provision of this division that provides an exemption from the
provisions of Chapter 2 (commencing with Section 31110) of Part 2 or
any portions of Part 2, shall be liable to the franchisee or
subfranchisor, who may sue for damages caused thereby, and if the
violation is willful, the franchisee may also sue for rescission,
unless, in the case of a violation of Section 31200 or 31202, the
defendant proves that the plaintiff knew the facts concerning the
untruth or omission, or that the defendant exercised reasonable care
and did not know, or, if he or she had exercised reasonable care,
would not have known, of the untruth or omission.
SEC. 8. Section 31402 of the Corporations Code is amended to read:
31402. If, in the opinion of the commissioner, the offer of any
franchise is subject to registration under this law and it is being,
or it has been, offered for sale without the offer first being
registered, the commissioner may order the franchisor or offeror of
that franchise to desist and refrain from the further offer or sale
of that franchise unless and until the offer has been duly registered
under this law. If, after that order has been made, a request for
a hearing is filed in writing within 60 days from the date of service
of the order by the person to whom the order was directed, a hearing
shall be held in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, and
the commissioner shall have all of the powers granted under that
chapter. Unless that hearing is commenced within 15 business days
after the request is made (or the person affected consents to a later
date), the order shall be deemed rescinded.
If that person fails to file a written request for a hearing
within 60 days from the date of service of the order, the order shall
be deemed a final order of the commissioner and shall not be subject
to review by any court or agency, notwithstanding Section 31501.
SEC. 9. Section 31403 of the Corporations Code is amended to read:
31403. If, in the opinion of the commissioner, the offer of any
franchise exempt from registration under this law is being or has
been offered for sale without complying with Section 31201, or any
other provision that provides an exemption from Chapter 2 (commencing
with Section 31110) of Part 2, the commissioner may order the
franchisor or offeror of the franchise to desist and refrain from the
further offer or sale of the franchise unless and until the offer is
made in compliance with this law. If, after that order has been
made, a request for a hearing is filed in writing within 60 days from
the date of service of the order by the person to whom the order was
directed, a hearing shall be held in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code and the commissioner shall have all of the
powers granted under that chapter. Unless that hearing is commenced
within 15 business days after the request is made, or the person
affected consents to a later date, the order shall be deemed
rescinded.
If that person fails to file a written request for a hearing
within 60 days from the date of service of the order, the order shall
be deemed a final order of the commissioner and shall not be subject
to review by any court or agency, notwithstanding Section 31501.
SEC. 10. Section 31405 of the Corporations Code is amended to
read:
31405. (a) Any person who violates any provision of this law, or
who violates any rule or order made under this law, shall be liable
for a civil penalty not to exceed ten thousand dollars ($10,000) for
each violation, which shall be assessed and recovered in a civil
action brought in the name of the people of the State of California
by the commissioner in any court of competent jurisdiction.
(b) As applied to the penalties for acts in violation of this
division, the remedies provided by this section and by other sections
of this division are not exclusive, and may be sought and employed
in any combination to enforce the provisions of this division.
(c) No action shall be maintained to enforce any liability created
under subdivision (a) unless brought before the expiration of four
years after the act or transaction constituting the violation.
SEC. 11. Section 31406 is added to the Corporations Code, to read:
31406. (a) If, upon inspection or investigation, based upon a
complaint or otherwise, the commissioner has cause to believe that a
person is violating any provision of this division or any rule or
order promulgated pursuant to this division, the commissioner may
issue a citation to that person in writing describing with
particularity the basis of the citation. Each citation may contain
an order to desist and refrain and an assessment of an administrative
penalty not to exceed two thousand five hundred dollars ($2,500) per
violation and shall contain reference to this section, including the
provisions of subdivision (c). All penalties collected under this
section shall be deposited in the State Corporations Fund.
(b) The sanctions authorized under this section shall be separate
from, and in addition to, all other administrative, civil, or
criminal remedies.
(c) If within 60 days from the receipt of the citation, the
person cited fails to notify the commissioner that the person intends
to request a hearing as described in subdivision (d), the citation
shall be deemed final.
(d) Any hearing under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code.
(e) After the exhaustion of the review procedures provided for in
this section, the commissioner may apply to the appropriate superior
court for a judgment in the amount of the administrative penalty and
order compelling the cited person to comply with the order of the
commissioner. The application shall include a certified copy of the
final order of the commissioner and shall constitute a sufficient
showing to warrant the issuance of the judgment and order.
SEC. 12. Section 31407 is added to the Corporations Code, to read:
31407. (a) If, after examination or investigation, the
commissioner has reasonable grounds to believe that any person is
conducting business in violation of any provision of this division or
related rule or order binding upon it, the commissioner may, by
written order addressed to the person, direct the discontinuance of
the violation. The order shall be effective immediately, but shall
not become final except in accordance with subdivision (b).
(b) An order issued pursuant to this section shall not become
final except after notice to the affected person of the commissioner'
s intention to make the order final and of the reasons for the
finding. The commissioner shall also notify the person that upon
receiving a request the matter shall be set for hearing to commence
within 15 business days after receipt of the request. The person
may consent to have the hearing commence at a later date. If no
hearing is requested within 60 days after the mailing or service of
the required notice, and none is ordered by the commissioner, the
order may become final without a hearing and that person shall
immediately discontinue the practices named in the order. If a
hearing is requested or ordered it shall be held in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, and the commissioner shall have all
of the powers granted under that chapter. If, upon the conclusion of
the hearing, it appears to the commissioner that the person is
violating any provision of this division or any related rule or order
binding upon it, the commissioner shall make the order of
discontinuance final and the person shall immediately discontinue the
practices named in the order.
SEC. 13. Section 31408 is added to the Corporations Code, to read:
31408. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this division, including a stop order, a claim for
ancillary relief, including, but not limited to, a claim for
rescission, restitution or disgorgement or damages on behalf of the
persons injured by the act or practice constituting the subject
matter of the action, and the administrative law judge shall have
jurisdiction to award additional relief. The person affected may be
required to attend remedial education, as directed by the
commissioner.
(b) In an administrative action brought under this part the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include any amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
SEC. 14. Section 31410 of the Corporations Code is amended to
read:
31410. Any person who willfully violates any provision of this
law, or who willfully violates any rule or order under this law,
shall upon conviction be fined not more than one hundred thousand
dollars ($100,000) or imprisoned in the state prison, or in a county
jail for not more than one year, or be punished by both that fine and
imprisonment; but no person may be imprisoned for the violation of
any rule or order if he or she proves that he or she had no knowledge
of the rule or order.
SEC. 15. Section 31411 of the Corporations Code is amended to
read:
31411. Any person who willfully employs, directly or indirectly,
any device, scheme, or artifice to defraud in connection with the
offer or sale of any franchise or willfully engages, directly or
indirectly, in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person in
connection with the offer, purchase, or sale of any franchise shall
upon conviction be fined not more than one hundred thousand dollars
($100,000) or imprisoned in the state prison, or in a county jail for
not more than one year, or be punished by both that fine and
imprisonment.
SEC. 16. Section 22063 is added to the Financial Code, to read:
22063. (a) This division does not apply to a franchise loan made
by a franchisor to a franchisee or a subfranchisor or by a
subfranchisor to a franchisee.
(b) For purposes of this section:
(1) "Franchise" means "franchise," as defined in Section 31005 of
the Corporations Code.
(2) "Franchisee" means "franchisee," as defined in Section 31006
of the Corporations Code.
(3) "Franchisor" means "franchisor," as defined in Section 31007
of the Corporations Code.
(4) "Area franchise" means "area franchise," as defined in Section
31008 of the Corporations Code.
(5) "Subfranchise" means "subfranchise," as defined in Section
31008.5 of the Corporations Code.
(6) "Subfranchisor" means "subfranchisor," as defined in Section
31009 of the Corporations Code.
(7) "Franchised business" means a business operated pursuant to a
franchise or area franchise by a franchisee or pursuant to a
franchise, area franchise or subfranchise by a subfranchisor.
(8) "Franchise loan" means a commercial loan, as defined in
Section 22502, made by a franchisor to a current or prospective
franchisee or subfranchisor or a commercial loan by a subfranchisor
to a current or prospective franchisee for the acquisition,
construction, operation, development, equipping, expansion,
contraction, consolidation, merger, recapitalization, reorganization,
or termination of a franchised business provided that the following
conditions are satisfied:
(A) The franchisor or subfranchisor making the franchise loan
shall comply with all applicable federal and state franchise
disclosure and registration laws, regulations, rules and orders,
including, but not limited to, the California Franchise Investment
Law (Division 5
(commencing with Section 31000) of Title 4 of the Corporations Code)
and the Federal Trade Commission Franchise Rule: Disclosure
Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures (Code of Federal Regulations, Title 16, Chapter
1, Subchapter D, Part 436 (16 CFR 436), as amended) in connection
with the offer or sale of any franchise, area franchise, or
subfranchise to which the franchise loan relates.
(B) The proceeds of the franchise loan are intended by the
borrowing franchisee or subfranchisor for use primarily for other
than personal, family, or household purposes.
(C) The loan, if secured, is secured solely by the assets of the
franchised business to which the franchise loan relates. Property
used by the borrower primarily for personal, family, or household
purposes, including the borrower's personal residence, shall not be
taken as security for the loan.
(D) The loan is subject to the implied covenant of good faith and
fair dealing under Section 1655 of the Civil Code.
(E) The lender shall fully and clearly disclose to the borrower,
at or before the time the loan is made, the rates of interest,
charges, and costs of the loan.
(c) For purposes of subparagraph (B) of paragraph (8) of
subdivision (b), a lending franchisor or subfranchisor may rely on
any written statement of intended purposes by the borrowing
franchisee or subfranchisor. The statement may be a separate
statement signed by the borrowing franchisee or subfranchisor or may
be contained in another document signed by the borrowing franchisee
or subfranchisor. The lending franchisor or subfranchisor may not be
required to ascertain that the proceeds of a franchise loan are used
in accordance with the statement of intended purposes.
(d) Nothing in this section is intended to abrogate or diminish
the application of any other laws that are designed to protect
borrowers, including, but not limited to, laws pertaining to
licensing, unfair competition, usury and conflicts of interest.
SEC. 17. The Legislature finds and declares that it is not
necessary or appropriate in the public interest or for the protection
of borrowers to regulate franchise loans made by franchisors to
franchisees or subfranchisors or by subfranchisors to franchisees
under the limited circumstances described in Section 16 of this act.
SEC. 18. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 19. Sections 1 to 15, inclusive, of this act shall become
operative January 1, 2005.
SEC. 20. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
In order for the provisions of this act to take effect at the
earliest possible time, it is necessary that this act take effect
immediately.