BILL NUMBER: SB 1146	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 28, 2010
	AMENDED IN SENATE  APRIL 8, 2010
	AMENDED IN SENATE  MARCH 22, 2010

INTRODUCED BY   Senator Florez

                        FEBRUARY 18, 2010

    An act to amend Section 116.230 of the Code of Civil
Procedure, and   An act  to amend Sections 22165
and 22166 of, and to add and repeal Article 3.5 (commencing with
Section 22348) of Chapter 2 of Division 9 of, the Financial Code,
relating to finance lenders.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1146, as amended, Florez. Finance  lenders: finders:
small loans.   lenders.  
   (1) Existing 
    Existing  law, the California Finance Lenders Law,
provides for the licensure and regulation of finance lenders and
brokers by the Commissioner of Corporations and makes a willful
violation of its provisions a crime.  Existing law prohibits
a licensed finance lender or broker from using advertising copy after
its use has been disapproved by the commissioner and the licensee is
notified in writing of the disapproval. Existing law authorizes the
commissioner to require a licensee to maintain a file of all
advertising copy for a period of 90 days from the date of its use.
Existing law regulates the charges a licensee may impose or receive
on loans it makes and authorizes a licensee to contract for and
receive specified alternative charges and administrative and
delinquency fees.  
   This bill would authorize the commissioner to direct any licensee
to submit advertising copy for review by the commissioner prior to
its use. The bill would authorize the commissioner to require a
licensee to maintain a file of all advertising copy for a period of 2
years from the date of its use.  
    The 
    This  bill  , until January 1, 2015,  would
establish the Pilot Program for Affordable Credit-Building
Opportunities for the purpose of increasing the availability of
credit-building opportunities to underbanked individuals seeking
low-dollar-value loans. The bill would require licensees to file an
application with, and pay a fee to, the commissioner to participate
in the program. The bill would authorize a licensee approved by the
commissioner to participate in the program to impose specified
alternative interest rates and charges, including an administrative
fee and delinquency fees, on loans of less than $2,500, subject to
certain requirements  , and to use the services of finders,
defined as persons who bring a licensee and a prospective borrower
together for the purpose of negotiating a loan contract. The bill
would require a written agreement meeting specified requirements in
order for a licensee to use the services of a finder, would establish
the services a finder would be authorized to perform, and would
require a finder to comply with the laws applicable to the licensee
relative to information security. The bill would require a licensee
to notify the commissioner within 10 days of entering into a contract
with a finder, would require a licensee to pay an annual finder
registration fee to the commissioner, and would require a licensee to
submit an annual report to the commissioner on the licensee's
relationship and business arrangements with a finder, as specified.
The bill would authorize the commissioner to examine the operations
of a licensee and a finder to ensure that the activities of the
licensee and the finder are in compliance with these provisions. The
bill would make a licensee that uses a finder responsible for a
violation of these provisions by a finder or a finder's employee
  . The bill would require the commissioner to examine
the performance of each licensee in the program at least once every
24 months, and would require the costs of examination to be paid by
the licensee to the commissioner, as specified  . The bill would
require the commissioner to report to  the Legislature
  specified legislative committees  , by January 1,
2014, summarizing utilization of the Pilot Program for Affordable
Credit-Building Opportunities, as specified. 
    Existing law prohibits a licensed finance lender or broker from
using advertising copy after its use has been disapproved by the
commissioner and the licensee is notified in writing of the
disapproval. Existing law authorizes the commissioner to require a
licensee to maintain a file of all advertising copy for a period of
90 days from the date of its use. Existing law regulates the charges
a licensee may impose or receive on loans it makes and authorizes a
licensee to contract for and receive specified alternative charges
and administrative and delinquency fees.  
   This bill would authorize the commissioner to direct any licensee
to submit advertising copy for review by the commissioner prior to
its use. The bill would authorize the commissioner to require a
licensee to maintain a file of all advertising copy for a period of 2
years from the date of its use. 
    Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program. 
   (2) Existing law establishes specified filing fees the clerk of a
court is authorized to collect in small claims cases. 

   This bill would establish a $25-filing fee for any small claim
action filed relative to the alternative charges authorized by this
bill for loans made pursuant to the pilot program.  

   (3) The 
    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.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
   
  SECTION 1.    Section 116.230 of the Code of Civil
Procedure is amended to read:
   116.230.  (a) In a small claims case, the clerk of the court shall
charge and collect only those fees authorized under this chapter.
   (b) If the party filing a claim has filed 12 or fewer small claims
in the state within the previous 12 months, the filing fee is the
following:
   (1) Thirty dollars ($30) if the amount of the demand is one
thousand five hundred dollars ($1,500) or less.
   (2) Fifty dollars ($50) if the amount of the demand is more than
one thousand five hundred dollars ($1,500) but less than or equal to
five thousand dollars ($5,000).
   (3) Seventy-five dollars ($75) if the amount of the demand is more
than five thousand dollars ($5,000).
   (c) If the party has filed more than 12 other small claims in the
state within the previous 12 months, the filing fee is one hundred
dollars ($100).
   (d) (1) If, after having filed a claim and paid the required fee
under paragraph (1) of subdivision (b), a party files an amended
claim or amendment to a claim that raises the amount of the demand so
that the filing fee under paragraph (2) of subdivision (b) would be
charged, the filing fee for the amended claim or amendment is twenty
dollars ($20).
   (2) If, after having filed a claim and paid the required fee under
paragraph (2) of subdivision (b), a party files an amended claim or
amendment to a claim that raises the amount of the demand so that the
filing fee under paragraph (3) of subdivision (b) would be charged,
the filing fee for the amended claim or amendment is twenty-five
dollars ($25).
   (3) If, after having filed a claim and paid the required fee under
paragraph (1) of subdivision (b), a party files an amended claim or
amendment to a claim that raises the amount of the demand so that the
filing fee under paragraph (3) of subdivision (b) would be charged,
the filing fee for the amended claim or amendment is forty-five
dollars ($45).
   (4) The additional fees paid under this subdivision are due upon
filing. The court shall not reimburse a party if the party's claim is
amended to demand a lower amount that falls within the range for a
filing fee lower than that originally paid.
   (e) Each party filing a claim shall file a declaration with the
claim stating whether that party has filed more than 12 other small
claims in the state within the last 12 months.
   (f) Notwithstanding subdivisions (b), (c), and (d), for any action
filed to enforce a contract entered into pursuant to Section 22351
of the Financial Code, the filing fee shall be twenty-five dollars
($25).
   (g) The clerk of the court shall deposit fees collected under this
section into a bank account established for this purpose by the
Administrative Office of the Courts and maintained under rules
adopted by or trial court financial policies and procedures
authorized by the Judicial Council under subdivision (a) of Section
77206 of the Government Code. The deposits shall be made as required
under Section 68085.1 of the Government Code and trial court
financial policies and procedures authorized by the Judicial Council.

   (h) (1) The Administrative Office of the Courts shall distribute
six dollars ($6) of each thirty-dollar ($30) fee, eight dollars ($8)
of each fifty-dollar ($50) fee, ten dollars ($10) of each
seventy-five-dollar ($75) fee, and fourteen dollars ($14) of each one
hundred-dollar ($100) fee collected under subdivision (b) or (c),
and four dollars ($4) of each twenty-five dollar ($25) fee collected
under subdivision (f), to a special account in the county in which
the court is located to be used for the small claims advisory
services described in Section 116.940, or, if the small claims
advisory services are administered by the court, to the court. The
Administrative Office of the Courts shall also distribute two dollars
($2) of each seventy-five-dollar ($75) fee collected under
subdivision (b) to the law library fund in the county in which the
court is located.
   (2) From the fees collected under subdivision (d), the
Administrative Office of the Courts shall distribute two dollars ($2)
to the law library fund in the county in which the court is located,
and three dollars ($3) to the small claims advisory services
described in Section 116.940, or, if the small claims advisory
services are administered by the court, to the court.
   (3) Records of these moneys shall be available from the
Administrative Office of the Courts for inspection by the public on
request.
   (4) Nothing in this section precludes the court or county from
contracting with a third party to provide small claims advisory
services as described in Section 116.940.
   (i) The remainder of the fees collected under subdivisions (b),
(c), (d), and (f) shall be transmitted monthly to the Controller for
deposit in the Trial Court Trust Fund.
   (j) All money distributed under this section to be used for small
claims advisory services shall be used only for providing those
services as described in Section 116.940. Nothing in this section
shall preclude the county or the court from procuring other funding
to comply with the requirements of Section 116.940. 
   SEC. 2.   SECTION 1.   Section 22165 of
the Financial Code is amended to read:
   22165.  No advertising copy shall be used after its use has been
disapproved by the commissioner and the licensee is notified in
writing of the disapproval. The commissioner may by order direct any
licensee to submit advertising copy to the commissioner for review
prior to use.
   SEC. 3.   SEC. 2.   Section 22166 of the
Financial Code is amended to read:
   22166.  The commissioner may require licensees to maintain a file
of all advertising copy for a period of two years from the date of
its use. The file shall be available to the commissioner upon
request.
   SEC. 4.   SEC. 3.   Article 3.5
(commencing with Section 22348) is added to Chapter 2 of Division 9
of the Financial Code, to read:

      Article 3.5.  Pilot Program for Affordable Credit-Building
Opportunities


   22348.  (a) The Pilot Program for Affordable Credit-Building
Opportunities is hereby established and is intended to increase the
availability of affordable credit-building opportunities to
underbanked individuals seeking low-dollar-value loans and to help
those individuals move into the financial mainstream.
   (b) All references in this article to the program shall mean and
refer to the Pilot Program for Affordable Credit-Building
Opportunities.
   22349.  Any licensee wishing to participate in the program  ,
who is in good standing with the commissioner and has no outstanding
enforcement actions or deficiencies at the time of its application,
 shall file an application with the commissioner, in a manner
prescribed by the commissioner, and shall pay a fee to the
commissioner, in an amount calculated by the commissioner to cover
its costs to administer this article. 
   22350.  Nothing in this article shall exempt any licensee from any
of the provisions of this division or Section 1632 of the Civil
Code. 
    22350.   22351.   No licensee may offer
or make a loan, nor impose any charges or fees pursuant to Section
 22351, nor use a finder pursuant to Section  22352,
without prior approval from the commissioner to participate in the
program.
    22351.   22352.   (a) Any loan made
pursuant to this section shall comply with the following
requirements:
   (1) Interest on the loan accrues on a simple-interest basis,
through the application of a daily periodic rate to the actual unpaid
principal balance each day.
   (2) The licensee discloses the following to the consumer in
writing at the time of application:
   (A) The annual percentage rate, the periodic payment amount, and
the total finance charge, calculated as required by Federal Reserve
Board Regulation Z, as to a loan of an amount and term substantially
similar to the loan applied for by the consumer.
   (B) That the consumer shall have the right to rescind the loan by
notifying the licensee of the consumer's intent to rescind the loan
and returning the principal advanced by the end of the business day
following the date of the consummation of the loan.
   (3) The loan has a minimum principal amount upon origination of
two hundred fifty dollars ($250) and a term of not less than the
following:
   (A) Ninety days for loans whose principal balance upon origination
is less than five hundred dollars ($500).
   (B) One hundred twenty days for loans whose principal balance upon
origination is at least five hundred dollars ($500), but is less
than one thousand five hundred dollars ($1,500).
   (C) One hundred eighty days for loans whose principal balance upon
origination is at least one thousand five hundred dollars ($1,500).
   (b) As an alternative to the charges authorized by Section 22303
or 22304, a licensee approved by the commissioner to participate in
the program may contract for and receive charges for a loan made
pursuant to this section at a rate not exceeding the sum of the
following:
   (1) Two and one-half percent per month on that part of the unpaid
principal balance of the loan up to and including, but not in excess
of, one thousand dollars ($1,000).
   (2) Two and one-sixth percent per month on that portion of the
unpaid principal balance of the loan in excess of one thousand
dollars ($1,000).
   (c) Notwithstanding subdivision (b), a licensee approved by the
commissioner to participate in the program shall reduce the rate on
each subsequent loan to the same borrower by a minimum of one-twelfth
of 1 percent per month, if all of the following conditions are met:
   (1) The subsequent loan is originated no more than 180 days after
the prior loan is fully repaid.
   (2) The borrower was never more than 15 days delinquent on the
prior loan.
   (3) The prior loan was outstanding for at least one-half of its
original term prior to its repayment.
   (d) As to any loan made under this section, a licensee approved by
the commissioner to participate in the program may contract for and
receive an administrative fee, which shall be fully earned
immediately upon making the loan, in an amount not in excess of
either 5 percent of the principal amount, exclusive of the
administrative fee, or sixty-five dollars ($65), whichever is less. A
licensee shall not charge the same borrower more than one
origination fee in any six-month period. An administrative fee shall
not be contracted for or received in connection with the refinancing
of a loan unless at least one year has elapsed since the receipt of a
previous administrative fee paid by the borrower. Only one
administrative fee shall be contracted for or received until the loan
has been repaid in full. Section 22305 shall not apply to any loan
made under this section.
   (e) Notwithstanding subdivision (a) of Section 22320.5, a licensee
approved by the commissioner to participate in the program may
contract for and receive a delinquency fee not in excess of
    twenty dollars ($20), for a period in default of not less
than seven days.  one of the following amounts: 

   (1) For a period in default of not less than seven days, an amount
not in excess of fifteen dollars ($15).  
   (2) For a period in default of not less than 14 days, an amount
not in excess of twenty dollars ($20). 
   (f) The following shall apply to a loan made by a licensee
pursuant to this section:
   (1) Prior to disbursement of loan proceeds, the licensee shall
either (A) offer a credit education program or seminar to the
borrower that has been previously reviewed and approved by the
commissioner for use in complying with this section; or (B) invite
the borrower to a credit education program or seminar offered by an
independent third party that has been previously reviewed and
approved by the commissioner for use in complying with this section.
The borrower shall not be required to participate in either of these
education programs or seminars.
   (2) The licensee shall report each borrower's payment performance
to at least one of the three major credit bureaus in the United
States.
   (3)  (A)    The licensee shall underwrite each
loan  to determine a borrower's ability and willingness to repay
the loan pursuant to the loan terms  , and shall not make a loan
if it determines, through its underwriting, that the borrower's
total monthly debt service payments, at the time of origination,
including the loan for which the borrower is being considered, and
across all outstanding forms of credit  known to the licensee
  that can be independently verified  , exceed 50
percent of the borrower's gross monthly income. 
   (B) The licensee shall seek information pertaining to a borrower's
current debt service obligations and verify that information using a
credit report from at least one of the three major credit bureaus
and other commercially reasonable, electronic verification services.
The licensee shall also assess the borrower's income using
information from either of the following:  
   (i) Electronic means or services that provide reasonably reliable
evidence of a borrower's income.  
   (ii) Internal Revenue Service Form W-2, tax returns, payroll
receipts, bank statements, or other third-party documents that
provide reasonably reliable evidence of a borrower's income. 
   (g) This section shall not apply to any loan of a bona fide
principal amount of two thousand five hundred dollars ($2,500) or
more as determined in accordance with Section 22251. For purposes of
this subdivision, "bona fide principal amount" shall be determined in
accordance with Section 22251. 
   22352.  (a) A licensee who is approved by the commissioner to
participate in the program may use the services of one or more
finders as provided in this article.
   (b) For purposes of this article, a "finder" means a person who
brings a licensee and a prospective borrower together for the purpose
of negotiating a loan contract.  
   22353.  (a) A finder may perform one or more of the following
services for a licensee:
   (1) Distributing, circulating, using, or publishing preprinted
brochures, flyers, fact sheets, or other written materials relating
to loans that the licensee can make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their being
distributed, circulated, or published.
   (2) Providing written factual information about loan terms,
conditions, or qualification requirements to a prospective borrower
that has been either prepared by the licensee, or reviewed and
approved in writing by the licensee. A finder may discuss that
information with a prospective borrower in general terms, but may not
provide counseling or advice to a prospective borrower.
   (3) Notifying a prospective borrower of the information needed in
order to complete a loan application without providing counseling or
advice to a prospective borrower.
   (4) Entering information provided by the prospective borrower on a
preprinted or electronic application form or onto a preformatted
computer database without providing counseling or advice to a
prospective borrower.
   (5) Assembling credit applications and other materials obtained in
the course of a credit application transaction for submission to the
finance lender.
   (6) Contacting the licensee to determine the status of a loan
application.
   (7) Communicating a response that is returned by the licensee's
automated underwriting system to a borrower or a prospective
borrower.
   (8) Obtaining a borrower's signature on documents prepared by the
licensee and delivering final copies of the documents to the
borrower.
   (b) A finder shall not engage in any of the following activities:
   (1) Providing counseling or advice to a borrower or prospective
borrower.
   (2) Providing loan-related marketing material that has not
previously been approved by the licensee to a borrower or a
prospective borrower.
   (3) Interpreting or explaining the relevance, significance, or
effect of any of the marketing materials or loan documents the finder
provides to a borrower or prospective borrower.
   (c) Any person who performs one or more of the following
activities is a broker within the meaning of Section 22004 rather
than a finder within the meaning of this section:
   (1) Negotiating the price, length, or any other loan term between
a licensee and a prospective borrower.
   (2) Advising either a prospective borrower or a licensee as to any
loan term.
   (3) Offering information pertaining to a single prospective
borrower to more than one licensee, except that, if a licensee has
declined to offer a loan to a prospective borrower and has so
notified that prospective borrower in writing, the person may then
offer information pertaining to a single prospective borrower to
another licensee with which it has a finder's agreement.
   (d) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.  
   22354.  A finder may be compensated by the licensee pursuant to
the written agreement between the licensee and the finder, as
described in Section 22356. No licensee shall, directly or
indirectly, pass on to a borrower any fee, or any portion of any fee,
that the licensee pays to a finder in connection with that borrower'
s loan or loan application.  
   22357.  A licensee that utilizes the services of a finder shall do
all of the following:
   (a) Notify the commissioner within 10 days of entering into a
contract with a finder, on a form acceptable to the commissioner,
regarding all of the following:
   (1) The name and business address of the finder.
   (2) The name and contact information for an employee of the finder
who is knowledgeable about, and has the authority to execute, the
contract governing the business relationship between the finder and
the licensee.
   (3) The name and contract information for one or more employees of
the finder who is or are responsible for the activities of the
finder at each of its branch locations.
   (4) A list of the activities the finder shall perform on behalf of
the licensee.
   (5) Any other information requested by the commissioner.
   (b) Pay an annual finder registration fee to the commissioner in
an amount to be established by the commissioner by regulation for
each finder utilized by the licensee.
   (c) Submit an annual report to the commissioner including any
information pertaining to each finder and the licensee's relationship
and business arrangements with each finder as the commissioner may
by regulation require.  
   22358.  All arrangements between a licensee and a finder shall be
set forth in a written agreement between the parties. The agreement
shall contain a provision establishing that the finder agrees to
comply with all regulations that are established by the commissioner
pursuant to this article regarding the activities of finders and that
the commissioner shall have access to all of the finder's books and
records that pertain to the finder's operations under the agreement
with the licensee.  
   22359.  The commissioner may examine the operations of each
licensee and each finder to ensure that the activities of the
licensee and the finder are in compliance with this article. The
costs of the commissioner's examination of each finder shall be
attributed to the commissioner's examination of the licensee. Any
violation of this article by a finder or a finder's employee shall be
attributed to the finance lender with whom it has entered into an
agreement for purposes of determining the licensee's compliance with
this division.  
   22353.  Notwithstanding any other provision of law, the
commissioner shall examine each licensee that is accepted into the
program at least once every 24 months. The cost of each examination
of a licensee shall be paid to the commissioner by the licensee
examined, and the commissioner may maintain an action for the
recovery of the cost in any court of competent jurisdiction. In
determining the cost of the examination, the commissioner may use the
estimated average hourly cost for all persons performing
examinations of licensees or other persons subject to this division
for the fiscal year. 
    22360.   22354.    (a)  
 On or before January 1, 2014, the commissioner shall submit a
report to the  Legislature   Senate Committee on
Banking, Finance and Insurance, the Assembly Committee on Banking
and Finance, and the Senate and Assembly Committees on Judiciary
 , in compliance with Section 9795 of the Government Code,
summarizing utilization of the Pilot Program for Affordable
Credit-Building Opportunities and including recommendations regarding
whether the program should be continued after January 1, 2015.
 The report  
   (b) The information disclosed to the commissioner for the
commissioner's use in preparing the report described in this section
is exempted from any requirement of public disclosure by paragraph
(2) of subdivision (d) of Section 6254 of the Government Code. 
    (c)     The report required pursuant to
this section  shall include, but not be limited to, the
following: 
   (a) 
    (1)  The number of finance lender licensees who applied
to participate in the program. 
   (b) 
    (2)  The number of finance lender licensees accepted to
participate in the program. 
   (c) 
    (3)  The number of  program loan applications
received by   lenders participating in the program, the
number of  loans made pursuant to the program, and the
distribution of interest rates and principal amounts upon origination
among those loans. 
   (4) The number of borrowers who obtained more than one program
loan.  
   (5) Of the number of borrowers who obtained more than one program
loan, the percentage of those borrowers whose credit scores increased
between successive loans, based on information from at least one
major credit bureau, and the average size of the increase.  

   (6) The number of borrowers who obtained at least one program loan
and who resided in a low-to-moderate-income census tract at the time
of their loan application.  
   (7) The number of borrowers who obtained loans for the following
purposes, based on borrower responses at the time of their loan
applications indicating the primary purpose for which the loan was
obtained:  
   (A) Medical.  
   (B) Other emergency.  
   (C) Vehicle repair.  
   (D) Vehicle purchase.  
   (E) To pay bills.  
   (F) To consolidate debt.  
   (G) To build or repair credit history.  
   (H) To finance a purchase of goods or services other than a
vehicle.  
   (I) Other.  
   (8) The number of borrowers who have a bank account, the number of
borrowers who have a bank account and use check-cashing services,
and the number of borrowers who do not have a bank account. 

   (d) 
    (9)  Recommendations for improving the program. 

   (e) 
    (10)  Recommendations regarding whether the program
should be continued after January 1, 2015.
    22361.   22355.   This article shall
remain in effect only until January 1, 2015, and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2015, deletes or extends that date.
   SEC. 5.   SEC. 4.   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.