BILL ANALYSIS �
AB 1091
Page 1
Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 1091 (Skinner) - As Amended: April 18, 2013
SUBJECT : Finance and mortgage lenders.
SUMMARY : Provides that the commissioner of the Department of
Corporations (Commissioner) may issue a citation to a licensee
under the California Finance Lenders Law (CFLL) or the
California Residential Mortgage Lending Act (CRMLA) under
certain circumstances. Specifically, this bill,
1)Specifies that upon inspection, examination, or investigation,
if the commissioner believes that a licensee under the CFLL or
CRMLA has violated their licensing law then the commissioner
may issue a citation to the licensee or person that may
contain a desist and refrain order and the assessment of a
$2,500 administrative penalty per violation.
2)Provides that a CFLL may not engage in specified practices,
nor knowingly misrepresent, circumvent, or conceal, through
subterfuge or device, any material aspect or information
regarding a transaction to which the licensee is a party.
3)Provides that the CFLL does not apply to a person that makes
no more than five commercial loans in a 12-month period and
that the loans are incidental to that person's business.
4)Clarifies that the CFLL does not apply to industrial
development corporations when acting under federal law or
other state authority, or pawnbrokers when acting under
authority of their license.
EXISTING LAW
1)Provides for the regulation of finance lenders under the CFLL.
(Financial Code Section 22000 et seq).
2)Regulates non-bank residential mortgage lenders under the
CRMLA. (Financial Code, Section 50000 et seq).
FISCAL EFFECT : Unknown
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COMMENTS :
AB 1091 expands the enforcement powers of DOC under the CFLL by:
1)Prohibiting a licensee from conducting business in an unsafe
or injurious manner, consistent with the protection in the
CRMLA;
2)Prohibiting a licensee from engaging in any unfair or
deceptive act or practice, consistent with the protection in
the CRMLA;
3)Prohibiting a licensee from knowingly misrepresenting,
circumventing, or concealing, through subterfuge or device,
any material aspect or information regarding a transaction to
which the licensee is a party, consistent with the protection
in the CRMLA.
In 2011 the Legislature passed SB 53 (Calderon), Chapter 717
Statutes of 2011 that gave the commissioner of the Department of
Real Estate (DRE) the authority to issue citations and/or fines
to licensees found to have violated provisions of the Real
Estate Law. AB 1091 attempts to bring the same provisions of
the Real Estate Law into the CRMLA and the CFLL with the
following:
1)Provides the DOC with the authority to bring administrative
penalties and desist and refrain orders through the issuance
of a citation, under both the CRMLA and the CFLL.
2)Allows the DOC to take the citation to superior court and
obtain a judgment, thereby facilitating collection of
penalties, where the penalties are not paid.
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Additionally, AB 1091 provides for an exemption from licensure
under the CFLL to ensure that exempt lenders are only exempt for
activities that are overseen by another regulatory authority.
This exemption would allow businesses that are not lenders to
make a de minimis number of commercial loans, such as bridge
loans, by increasing the exemption for commercial lending from 1
loan to 5 loans in a 12 month period so long as the loans are
incidental to the person's business.
Amendments .
As already established, this bill seeks to incorporate the
ability of the commissioner to issue citations similar to the
authority given to DRE. Committee staff recommends the adoption
of amendments in order to ensure that the citation authority
proposed for use by the commissioner is consistent with the
authority already provided to DRE. The following are the
suggested amendments:
1)Amend Section 3 as follows,
22707.5. (a) If, upon inspection, examination, or investigation,
the commissioner has cause to believe that a licensee or person
is violating any provision of this division or any rule or order
thereunder, the commissioner 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
desist and refrain and an assessment of an administrative
penalty not to exceed two thousand five hundred dollars ($2,500)
per violation. 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.
(a) If, upon inspection, examination, or investigation, the
commissioner has cause to believe that a person or licensee is
violating or has violated any provision of this division or any
rule or order thereunder, the commissioner or his or her
designated representative may issue a citation to that person or
licensee in writing, describing with particularity the basis of
the citation. Each citation may contain an order to correct the
violation or violations identified and a reasonable time period
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or periods by which the violation or violations must be
corrected. In addition, each citation may assess an
administrative fine not to exceed two thousand five hundred
dollars ($2,500), which shall be deposited into the State
Corporations Fund. In assessing a fine, the commissioner shall
give due consideration to the appropriateness of the amount of
the fine with respect to factors such as the gravity of the
violation, the good faith of the person or licensee cited, and
the history of previous violations. A citation issued and a fine
assessed pursuant to this section, while constituting discipline
for a violation of the law, shall be in lieu of other
administrative discipline by the commissioner for the offense or
offenses cited, and the citation against and payment of any fine
by a licensee shall not be reported as disciplinary action taken
by the commissioner.
(b) 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 activity or
activities or an order to suspend all business operations to a
person or licensee who is engaged in or has engaged in continued
or repeated violations of this part. In any of these
circumstances, the sanctions authorized under this section shall
be separate from, and in addition to, all other administrative,
civil, or criminal penalties
(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.
2)Amend Section 5 as follows:
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50501.5. (a) If, upon inspection, examination, or investigation,
the department has cause to believe that a licensee or person is
violating any provision of this division or any rule or order
thereunder, 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.
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.
(a) If, upon inspection, examination, or investigation, the
commissioner has cause to believe that a person or licensee is
violating or has violated any provision of this division or any
rule or order thereunder, the commissioner or his or her
designated representative may issue a citation to that person or
licensee in writing, describing with particularity the basis of
the citation. Each citation may contain an order to correct the
violation or violations identified and a reasonable time period
or periods by which the violation or violations must be
corrected. In addition, each citation may assess an
administrative fine not to exceed two thousand five hundred
dollars ($2,500), which shall be deposited into the State
Corporations Fund. In assessing a fine, the commissioner shall
give due consideration to the appropriateness of the amount of
the fine with respect to factors such as the gravity of the
violation, the good faith of the person or licensee cited, and
the history of previous violations. A citation issued and a fine
assessed pursuant to this section, while constituting discipline
for a violation of the law, shall be in lieu of other
administrative discipline by the commissioner for the offense or
offenses cited, and the citation against and payment of any fine
by a licensee shall not be reported as disciplinary action taken
by the commissioner.
(b) 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 activity or
activities or an order to suspend all business operations to a
person or licensee who is engaged in or has engaged in continued
or repeated violations of this part. In any of these
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circumstances, the sanctions authorized under this section shall
be separate from, and in addition to, all other administrative,
civil, or criminal penalties
(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.
Note regarding Governor's Reorganization Plan # 2 (GRP #2).
Last year the Legislature passed GRP #2 which reorganizes
various functions within state government. Among the numerous
changes provided in GRP #2 is the creation of the Department of
Business Oversight (DBO) that will be operational on July 1,
2013 and will result in combining DOC and the Department of
Financial Institutions. This analysis uses the term
commissioner of DOC as that is the appropriate designation until
July 1, 2013. If this bill becomes law then commissioner, as
referred to in this bill, will become be the commission of DBO.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
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None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081