Amended in Senate June 25, 2013

Amended in Assembly May 6, 2013

Amended in Assembly April 18, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 1091


Introduced by Assembly Member Skinner

February 22, 2013


An act to amendbegin delete Section 22050end deletebegin insert Sections 22050, 22161, and 22712end insert of, and to add Sectionsbegin delete 22173,22707.5, 22709.5,end deletebegin insert 22707.5end insert 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 makingbegin delete no more thanend delete 5begin insert or fewerend insert 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 abegin delete finance lender or brokerend deletebegin insert person, subject to the California Finance Lenders Law,end insert 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 or has violated the respective law applicable to the licensee, or that any other person is violating those laws, the bill would authorize the commissioner or his or her designee to issue a written citation to the licensee or person that may contain an order to correct the violation or violations and an assessment of an administrative fine not to exceed $2,500. The bill would require the commissioner, if the commissioner after investigation has reasonable grounds to believe that abegin delete finance lender or brokerend deletebegin insert personend insert is conducting businessbegin insert under the California Finance Lenders Lawend insert 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:

P2    1

SECTION 1.  

Section 22050 of the Financial Code is amended
2to read:

3

22050.  

(a) This division does not apply to any person doing
4business under any law of any state or of the United States relating
5to banks, trust companies, savings and loan associations, insurance
P3    1premium finance agencies, credit unions, small business investment
2companies, community advantage lenders, California business and
3industrial development corporations when acting under federal
4law or other state authority, or licensed pawnbrokers when acting
5under the authority of that license.

6“Community advantage lender” means an entity authorized by
7the United States Small Business Administration to deliver
8community advantage loans.

9(b) This division does not apply to a check casher who holds a
10valid permit issued pursuant to Section 1789.37 of the Civil Code
11when acting under the authority of that permit, and shall not apply
12to a person holding a valid license issued pursuant to Section 23005
13of the Financial Code when acting under the authority of that
14license.

15(c) This division does not apply to a college or university making
16a loan for the purpose of permitting a person to pursue a program
17or course of study leading to a degree or certificate.

18(d) This division does not apply to a broker-dealer acting
19pursuant to a certificate then in effect and issued pursuant to
20Section 25211 of the Corporations Code.

21(e) This division does not apply to any person who makes begin delete no
22more than fiveend delete
begin insert five or fewerend insert loans in a 12-month period, these
23loans are commercial loans as defined in Section 22502, and the
24loans are incidental to the business of the person relying upon the
25exemption.

26(f) This division does not apply to any public corporation as
27defined in Section 67510 of the Government Code, any public
28entity other than the state as defined in Section 811.2 of the
29Government Code, or any agency of any one or more of the
30foregoing, when making any loan so long as the public corporation,
31public entity, or agency of any one or more of the foregoing
32complies with all applicable federal and state laws and regulations.

begin delete33

SEC. 2.  

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

34

22173.  

A licensee shall not do any of the following:

35(a) Commit an act in violation of Section 1695.13 of the Civil
36Code.

37(b) Engage in any acts in violation of Section 17200 or 17500
38of the Business and Professions Code.

P4    1(c) Knowingly misrepresent, circumvent, or conceal, through
2subterfuge or device, any material aspect or information regarding
3a transaction to which the licensee is a party.

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

end delete
5begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 22161 of the end insertbegin insertFinancial Codeend insertbegin insert is amended to
6read:end insert

7

22161.  

begin delete(a)end deletebegin deleteend deletebegin deleteNo person shall make end deletebegin insertNo person subject to this
8division shall do any of the following:end insert

9begin insert(a)end insertbegin insertend insertbegin insertMake end inserta materially false or misleading statement or
10representation to a borrower about the terms or conditions of that
11borrower’s loan, when making or brokering the loan.

12(b) begin deleteNo person shall advertise, end deletebegin insertAdvertise, end insertprint, display, publish,
13distribute, or broadcast, or cause or permit to be advertised, printed,
14displayed, published, distributed, or broadcast in any manner, any
15statement or representation with regard to the business subject to
16the provisions of this division, including the rates, terms, or
17conditions for making or negotiating loans, that is false, misleading,
18or deceptive, or that omits material information that is necessary
19to make the statements not false, misleading, or deceptive, or in
20the case of a licensee, that refers to the supervision of the business
21by the state or any department or official of the state.

begin insert

22(c) Commit an act in violation of Section 1695.13 of the Civil
23Code.

end insert
begin insert

24(d) Engage in any act in violation of Section 17200 of the
25Business and Professions Code.

end insert
begin insert

26(e) Knowingly misrepresent, circumvent, or conceal, through
27subterfuge or device, any material aspect or information regarding
28a transaction to which the person is a party.

end insert
begin insert

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

end insert
30

SEC. 3.  

Section 22707.5 is added to the Financial Code, to
31read:

32

22707.5.  

(a) If, upon inspection, examination, or investigation,
33the commissioner has cause to believe that a licensee or other
34person is violating any provision of this division or any rule or
35order thereunder, the commissioner or his or her designee, may
36issue a citation to the licensee or person in writing, describing with
37particularity the basis of the citation. Each citation may contain
38an order to correct the violation or violations identified and provide
39a reasonable time period or periods by which the violation or
40violations must be corrected. In addition, each citation may assess
P5    1an administrative fine not to exceed two thousand five hundred
2dollars ($2,500) that shall be deposited in the State Corporations
3Fund. In assessing a fine, the commissioner shall give due
4consideration to the appropriateness of the amount of the fine with
5respect to factors including the gravity of the violation, the good
6faith of the person or licensees cited, and the history of previous
7violations. A citation issued or a fine assessed pursuant to this
8section, while constituting punishment for a violation of law, shall
9be in lieu of other administrative discipline by the commissioner
10for the offense or offenses cited, and the citation and fine payment
11thereof by a licensee shall not be reported as disciplinary action
12taken by the commissioner.

13(b) Notwithstanding subdivision (a), nothing in this section shall
14prevent the commissioner from issuing an order to desist and
15refrain from engaging in a specific business or activity or activities,
16or an order to suspend all business operations to a person or
17licensee who is engaged in or who has engaged in continued or
18repeated violations of this division. In any of these circumstances,
19the sanctions authorized under this section shall be separate from,
20and in addition to, all other administrative, civil, or criminal
21remedies.

22(c) If, within 30 days from the receipt of the citation, the licensee
23or person cited fails to notify the department that he or she intends
24to request a hearing as described in subdivision (d), the citation
25shall be deemed final.

26(d) Any hearing under this section shall be conducted in
27accordance with Chapter 5 (commencing with Section 11500) of
28Part 1 of Division 3 of Title 2 of the Government Code.

29(e) After the exhaustion of the review procedures provided for
30in this section, the commissioner may apply to the appropriate
31superior court for a judgment in the amount of the administrative
32begin delete penaltyend deletebegin insert fineend insert and an order compelling the cited licensee or person
33to comply with the order of the commissioner. The application,
34which shall include a certified copy of the final order of the
35commissioner, shall constitute a sufficient showing to warrant the
36issuance of the judgment and order.

begin delete37

SEC. 4.  

Section 22709.5 is added to the Financial Code, to
38read:

39

22709.5.  

If, after investigation, the commissioner has
40reasonable grounds to believe that any licensee is conducting
P6    1business in an unsafe or injurious manner, the commissioner shall,
2by written order addressed to the licensee, direct the discontinuance
3of the unsafe or injurious practices. The order shall be effective
4immediately, but shall not become final except in accordance with
5the provisions of Section 22717.

end delete
6begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 22712 of the end insertbegin insertFinancial Codeend insertbegin insert is amended to
7read:end insert

8

22712.  

begin insert(a)end insertbegin insertend insertWhenever, in the opinion of the commissioner, any
9person is engaged in the business as a broker or finance lender, or
10a mortgage loan originator, as defined in this division, without a
11license from the commissioner, or any licensee is violating any
12provision of this division, the commissioner may order that person
13or licensee to desist and to refrain from engaging in the business
14or further violating this division. If, within 30 days after the order
15is served, a written request for a hearing is filed and no hearing is
16held within 30 days thereafter, the order is rescinded. For purposes
17of this section, “licensee” includes a mortgage loan originator.

begin insert

18(b) Notwithstanding subdivision (a), if, after an investigation,
19the commissioner has reasonable grounds to believe that a person
20is conducting business in an unsafe or injurious manner, the
21commissioner shall, by written order addressed to that person,
22direct the discontinuance of the unsafe or injurious practices. The
23order shall be effective immediately, but shall not become final
24except in accordance with the provisions of Section 22717.

end insert
25

SEC. 5.  

Section 50501.5 is added to the Financial Code, to
26read:

27

50501.5.  

(a) If, upon inspection, examination, or investigation,
28the commissioner has cause to believe that a licensee or person is
29violating or has violated any provision of this division or any rule
30or order thereunder, the commissioner or his or her designee may
31issue a citation to that licensee or person in writing, describing
32with particularity the basis of the citation. Each citation may
33contain an order to correct the violation or violations identified
34and provide a reasonable time period or periods by which the
35violation or violations must be corrected. In addition, each citation
36may assess an administrative fine not to exceed two thousand five
37hundred dollars ($2,500) that shall be deposited in the State
38Corporations Fund. In assessing a fine, the commissioner shall
39give due consideration to the appropriateness of the amount of the
40fine with respect to factors including the gravity of the violation,
P7    1the good faith of the person or licensees cited, and the history of
2previous violations. A citation issued and a fine assessed pursuant
3to this section, while constituting punishment for a violation of
4law, shall be in lieu of other administrative discipline by the
5commissioner for the offense or offenses cited, and the citation
6and fine payment thereof by a licensee shall not be reported as
7disciplinary action taken by the commissioner.

8(b) Notwithstanding subdivision (a), nothing in this section shall
9prevent the commissioner from issuing an order to desist and
10refrain from engaging in a specific business or activity or activities,
11or an order to suspend all business operations to a person or
12licensee who is engaged in or who has engaged in continued or
13repeated violations of this division. In any of these circumstances,
14the sanctions authorized under this section shall be separate from,
15and in addition to, all other administrative, civil, or criminal
16remedies.

17(c) If, within 30 days from the receipt of the citation, the person
18cited fails to notify the department that the person intends to request
19a hearing as described in subdivision (d), the citation shall be
20deemed final.

21(d) Any hearing under this section shall be conducted in
22accordance with Chapter 5 (commencing with Section 11500) of
23Part 1 of Division 3 of Title 2 of the Government Code.

24(e) After the exhaustion of the review procedures provided for
25in this section, the commissioner may apply to the appropriate
26superior court for a judgment in the amount of the administrative
27begin delete penaltyend deletebegin insert fineend insert and an order compelling the cited person to comply
28with the order of the commissioner. The application, which shall
29include a certified copy of the final order of the commissioner,
30shall constitute a sufficient showing to warrant the issuance of the
31judgment and order.

32

SEC. 6.  

No reimbursement is required by this act pursuant to
33Section 6 of Article XIII B of the California Constitution because
34the only costs that may be incurred by a local agency or school
35district will be incurred because this act creates a new crime or
36infraction, eliminates a crime or infraction, or changes the penalty
37for a crime or infraction, within the meaning of Section 17556 of
38the Government Code, or changes the definition of a crime within
P8    1the meaning of Section 6 of Article XIII B of the California
2Constitution.



O

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