BILL NUMBER: AB 2233 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 10, 2012
AMENDED IN ASSEMBLY MARCH 29, 2012
INTRODUCED BY Assembly Member Atkins
FEBRUARY 24, 2012
An act to amend Section 22361 add
Article 3.6 (commencing with Section 22370) to
Chapter 2 of Division 9 of the Financial Code, relating to
finance lending.
LEGISLATIVE COUNSEL'S DIGEST
AB 2233, as amended, Atkins. Finance lending: Pilot
Program for Affordable Credit-Building Opportunities.
Small Installment Consumer Loan Act.
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 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 licensed finance lenders and brokers to
make small installment consumer loans for a limited term, as
specified, of an amount of at least $750 and no more than $2,500. The
bill would authorize licensees to contract for and receive specified
alternative interest rates and charges, including an administrative
fee, an account service fee, and a returned check fee. The bill would
also specify that the borrower has a right to rescind a small
installment consumer loan, as specified, and would require the lender
to disclose this right to the borrower in the loan agreement.
Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program.
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.
Existing law provides for the licensure and regulation of finance
lenders and brokers by the Commissioner of Corporations. Existing
law, until January 1, 2015, establishes 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. Existing law
requires the commissioner to report to specified legislative
committees, by January 1, 2014, summarizing utilization of the Pilot
Program for Affordable Credit-Building Opportunities, as specified.
This bill would change the due date of the commissioner's report
to July 1, 2013.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 3.6 (commencing with Section
22370) is added to Chapter 2 of Division 9 of the
Financial Code , to read:
Article 3.6. Small Installment Consumer Loan Act
22370. The purpose of this article is to provide an economically
viable legal and regulatory framework for lenders to make small
installment consumer loans in a manner that benefits consumers.
22371. Any licensee may engage in lending under this article.
22372. Nothing in this article shall exempt any licensee from any
of the provisions of this division or Section 1632 of the Civil
Code.
22373. (a) Any loan made pursuant to this section shall comply
with the following requirements:
(1) The loan shall be closed-end, unsecured, and payable in
substantially equal, fully amortizing payments in accordance with
subdivision (b) of Section 22307.
(2) The term of the loan shall be no less than 180 days and no
greater than 18 months.
(3) The principal amount of the loan shall not be less than seven
hundred fifty dollars ($750) and shall not exceed two thousand five
hundred dollars ($2,500).
(4) The loan shall be underwritten in accordance with the
requirements of Section 1452 of Title 10 of the California Code of
Regulations.
(b) Notwithstanding Sections 22303 and 22304, a licensee may
contract for and receive the following amounts on any loan made
pursuant to this section:
(1) Notwithstanding Sections 22307 and 22308, interest not to
exceed 3 percent per month on the unpaid principal amount of the loan
during that month.
(2) As an alternative to simple interest, interest may be assessed
on a precomputed basis in compliance with Section 22400, provided
that the Rule of 78's is not used to calculate the refund of
precomputed interest upon prepayment in full. In the event that a
precomputed loan is prepaid in full by cash, refinancing, or
otherwise, the borrower shall receive a rebate of a prorated portion
of the precomputed interest equal to the ratio of the number of days
remaining in the scheduled loan term, not including the date of
prepayment in full, to the total number of days in the loan term had
all payments been made as scheduled.
(3) A nonrefundable administrative fee, fully earned at the time
the loan is made, equal to 7.5 percent of the principal amount of the
loan or one hundred fifty dollars ($150), whichever is less. If
interest on the loan is assessed on a precomputed basis and the loan
is prepaid in full, the administrative fee is not subject to rebate
under Section 22400.
(4) A monthly account service fee of no more than eighty-five
dollars ($85) per month, assessed each month. The monthly account
service fee shall be divided across all loan payments in a manner
that ensures all those payments are substantially equal. In the event
the loan term includes a partial month, the monthly account service
fee may be prorated for that partial month by using the ratio of the
number of days the loan is outstanding in that month to the total
number of days in that month. In the event a loan is repaid in full,
the monthly account service fee may be prorated in the same manner.
No monthly account service fee may be charged for any month beyond
the original term of the loan.
(5) A fee for a dishonored check, negotiable order of withdrawal,
or share draft, as permitted by Section 22320.
22374. The borrower shall have the right to rescind the loan by
notifying the licensee of the borrower's intent to rescind the loan
and returning the principal amount advanced by the end of the lender'
s business day following the date of the consummation of the loan.
The licensee shall disclose this right to the borrower in the loan
agreement.
SEC. 2. 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.
SECTION 1. Section 22361 of the Financial Code
is amended to read:
22361. (a) On or before July 1, 2013, the commissioner shall
submit a report to the Senate Committee on Banking, Finance and
Insurance, the Assembly Committee on Banking and Finance, and the
Senate and Assembly Committees on Judiciary 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.
(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) If there is more than one licensee approved to participate in
the program under this article, the report required pursuant to
subdivision (a) shall state information in aggregate so as not to
identify data by specific licensee.
(d) The report required pursuant to this section shall include,
but not be limited to, the following:
(1) The number of finance lender licensees who applied to
participate in the program.
(2) The number of finance lender licensees accepted to participate
in the program.
(3) The number of program loan applications received by lenders
participating in the program, the number of loans made pursuant to
the program, the total amount loaned, 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 income distribution of borrowers, including 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.
(9) The number and type of finders used by all licensees, the
amount of finder's fees paid by the type of finder, and the relative
performance of loans consummated by finders compared to the
performance of loans consummated without a finder.
(10) The number and percentage of borrowers who obtained one or
more program loans on which late fees were assessed, the total amount
of late fees assessed, and the average late fee assessed by dollar
amount and as a percentage of the principal amount loaned.
(11) The quality of underwriting and performance of loans under
this article consistent with the reporting standards applicable to
other loans and financial products, including, but not limited to,
credit cards and deferred deposit transactions.
(12) The number of times the commissioner found that a finder or
licensee had violated this article.
(13) The number of times that the commissioner disqualified a
finder from performing services, barred a finder from performing
services at one or more specific locations of the finder, terminated
a written agreement between a finder and a licensee, or imposed an
administrative penalty.
(14) Recommendations for improving the program.
(15) Recommendations regarding whether the program should be
continued after January 1, 2015.
(e) The commissioner shall conduct a random sample survey of
borrowers who have participated in the program to obtain information
regarding the borrowers' experience and licensees' compliance with
this article. The results of this survey shall be included in the
report required by this section.