Amended in Assembly May 6, 2013

Amended in Assembly April 18, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1091

Introduced by Assembly Member Skinner

February 22, 2013

An act to amend Section 22050 of, and to add Sections 22173, 22707.5, 22709.5, and 50501.5 to, the Financial Code, relating to lending.

LEGISLATIVE COUNSEL’S DIGEST

AB 1091, as amended, Skinner. Finance and mortgage lenders.

Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers. Existing law, the California Residential Mortgage Lending Act, provides for the regulation and licensure of residential mortgage lenders, servicers, and originators. Existing law makes the Commissioner of Corporations responsible for administering the law and act until July 1, 2013, and thereafter the Deputy Commissioner of Business Oversight for the Division of Corporations will be responsible, pursuant to the Governor’s Reorganization Plan No. 2 of 2012. A willful violation of the law or act is a crime.

Existing law exempts, among others, California business and industrial development corporations, licensed pawnbrokers, and persons making no more than one commercial loan in a 12-month period from the California Finance Lenders Law.

This bill would exempt from the California Finance Lenders Law California business and industrial development corporations when acting under federal law or other state authority, licensed pawnbrokers when acting under the authority of that license, and persons making no more than 5 commercial loans in a 12-month period as long as the loans are incidental to the business of the person relying on the exemption. The bill would, among other things, prohibit a finance lender or broker from knowingly misrepresenting any material information regarding a transaction and committing any act that constitutes fraud or dishonest dealings. By expanding the definition of a crime, the bill would impose a state-mandated local program.

Upon inspection, examination, or investigation, if the commissioner has cause to believe that a licensee under the California Finance Lenders Law or the California Residential Mortgage Lending Act is violating begin insert or has violated end insert the respective law applicable to the licensee, or that any other person is violating those laws, the bill would authorize the commissioner begin insert or his or her designee end insert to issue a begin insert written end insert citation to the licensee or person that may contain an order to begin delete desist and refrain end delete begin insert correct the violation or violations end insert and an assessment of an administrative begin delete penalty end delete begin insert fine end insert not to exceed $2,500 begin delete per violation end delete . The bill would require the commissioner, if the commissioner after investigation has reasonable grounds to believe that a finance lender or broker is conducting business in an unsafe or injurious manner, to issue a written order directing the discontinuance of the unsafe or injurious practice.

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 22050 of the Financial Code is amended
to read:

22050.  

(a) This division does not apply to any person doing
business under any law of any state or of the United States relating
to banks, trust companies, savings and loan associations, insurance
premium finance agencies, credit unions, small business investment
companies, community advantage lenders, California business and
industrial development corporations when acting under federal
law or other state authority, or licensed pawnbrokers when acting
under the authority of that license.

“Community advantage lender” means an entity authorized by
the United States Small Business Administration to deliver
community advantage loans.

(b) This division does not apply to a check casher who holds a
valid permit issued pursuant to Section 1789.37 of the Civil Code
when acting under the authority of that permit, and shall not apply
to a person holding a valid license issued pursuant to Section 23005
of the Financial Code when acting under the authority of that
license.

(c) This division does not apply to a college or university making
a loan for the purpose of permitting a person to pursue a program
or course of study leading to a degree or certificate.

(d) This division does not apply to a broker-dealer acting
pursuant to a certificate then in effect and issued pursuant to
Section 25211 of the Corporations Code.

(e) This division does not apply to any person who makes no
more than five loans in a 12-month period, these loans are
commercial loans as defined in Section 22502, and the loans are
incidental to the business of the person relying upon the exemption.

(f) This division does not apply to any public corporation as
defined in Section 67510 of the Government Code, any public
entity other than the state as defined in Section 811.2 of the
Government Code, or any agency of any one or more of the
foregoing, when making any loan so long as the public corporation,
public entity, or agency of any one or more of the foregoing
complies with all applicable federal and state laws and regulations.

SEC. 2.  

Section 22173 is added to the Financial Code, to read:

22173.  

A licensee shall not do any of the following:

(a) Commit an act in violation of Section 1695.13 of the Civil
Code.

(b) Engage in any acts in violation of Section 17200 or 17500
of the Business and Professions Code.

(c) Knowingly misrepresent, circumvent, or conceal, through
subterfuge or device, any material aspect or information regarding
a transaction to which the licensee is a party.

(d) Commit an act that constitutes fraud or dishonest dealings.

SEC. 3.  

Section 22707.5 is added to the Financial Code, to
read:

22707.5.  

(a) If, upon inspection, examination, or investigation,
the commissioner has cause to believe that a licensee or begin insert other end insert
person is violating any provision of this division or any rule or
order thereunder, the commissioner begin insert or his or her designee, end insert may
issue a citation to the licensee or person in writing, describing with
particularity the basis of the citation. Each citation may contain
an order to begin delete desist and refrain and an assessment of an
administrative penalty end delete begin insert correct the violation or violations identified
and provide a reasonable time period or periods by which the
violation or violations must be corrected. In addition, each citation
may assess an administrative fine end insert not to exceed two thousand five
hundred dollars ($2,500) begin delete per violation. All penalties collected
under this section end delete begin insert that end insert shall be deposited in the State Corporations
Fund. begin insert In assessing a fine, the commissioner shall give due
consideration to the appropriateness of the amount of the fine with
respect to factors including the gravity of the violation, the good
faith of the person or licensees cited, and the history of previous
violations. A citation issued or a fine assessed pursuant to this
section, while constituting punishment for a violation of law, shall
be in lieu of other administrative discipline by the commissioner
for the offense or offenses cited, and the citation and fine payment
thereof by a licensee shall not be reported as disciplinary action
taken by the commissioner. end insert

(b)  begin delete The end delete begin insert Notwithstanding subdivision (a), nothing in this section
shall prevent the commissioner from issuing an order to desist and
refrain from engaging in a specific business or activity or activities,
or an order to suspend all business operations to a person or
licensee who is engaged in or who has engaged in continued or
repeated violations of this division. In any of these circumstances,
the end insert sanctions authorized under this section shall be separate from,
and in addition to, all other administrative, civil, or criminal
remedies.

(c) If, within 30 days from the receipt of the citation, the licensee
or person cited fails to notify the department that he or she 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 an order compelling the cited licensee or person to
comply with the order of the commissioner. The application, which
shall include a certified copy of the final order of the commissioner,
shall constitute a sufficient showing to warrant the issuance of the
judgment and order.

SEC. 4.  

Section 22709.5 is added to the Financial Code, to
read:

22709.5.  

If, after investigation, the commissioner has
reasonable grounds to believe that any licensee is conducting
business in an unsafe or injurious manner, the commissioner shall,
by written order addressed to the licensee, direct the discontinuance
of the unsafe or injurious practices. The order shall be effective
immediately, but shall not become final except in accordance with
the provisions of Section 22717.

SEC. 5.  

Section 50501.5 is added to the Financial Code, to
read:

50501.5.  

(a) If, upon inspection, examination, or investigation,
the begin delete department end delete begin insert commissioner end insert has cause to believe that a licensee
or person is violating begin insert or has violated end insert any provision of this division
or any rule or order thereunder, the commissioner begin insert or his or her
designee end insert may issue a citation to that begin insert licensee or end insert person in writing,
describing with particularity the basis of the citation. Each citation
may contain an order to begin delete desist and refrain and an assessment of
an administrative penalty end delete begin insert correct the violation or violations
identified and provide a reasonable time period or periods by
which the violation or violations must be corrected. In addition,
each citation may assess an administrative fine end insert not to exceed two
thousand five hundred dollars ($2,500) begin delete per violation. All penalties
collected under this section end delete begin insert that end insert shall be deposited in the State
Corporations Fund. begin insert In assessing a fine, the commissioner shall
give due consideration to the appropriateness of the amount of the
fine with respect to factors including the gravity of the violation,
the good faith of the person or licensees cited, and the history of
previous violations. A citation issued and a fine assessed pursuant
to this section, while constituting punishment for a violation of
law, shall be in lieu of other administrative discipline by the
commissioner for the offense or offenses cited, and the citation
and fine payment thereof by a licensee shall not be reported as
disciplinary action taken by the commissioner. end insert

(b)  begin delete The end delete begin insert Notwithstanding subdivision (a), nothing in this section
shall prevent the commissioner from issuing an order to desist and
refrain from engaging in a specific business or activity or activities,
or an order to suspend all business operations to a person or
licensee who is engaged in or who has engaged in continued or
repeated violations of this division. In any of these circumstances,
the end insert sanctions authorized under this section shall be separate from,
and in addition to, all other administrative, civil, or criminal
remedies.

(c) If, within 30 days from the receipt of the citation, the person
cited fails to notify the department 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 an order compelling the cited person to comply with
the order of the commissioner. The application, which shall include
a certified copy of the final order of the commissioner, shall
constitute a sufficient showing to warrant the issuance of the
judgment and order.

SEC. 6.  

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.