BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                       AB 1091|
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                                    THIRD READING


          Bill No:  AB 1091
          Author:   Skinner (D)
          Amended:  6/25/13 in Senate
          Vote:     21


           SENATE BANKING & FINANCIAL INST. COMM.  :  9-0, 6/19/13
          AYES:  Correa, Berryhill, Beall, Calderon, Hill, Hueso, Roth,  
            Torres, Walters

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  76-0, 5/29/13 - See last page for vote


           SUBJECT  :    Finance and mortgage lenders

           SOURCE  :     Author


           DIGEST  :    This bill authorizes the Commissioner of the  
          Department of Corporations (Commissioner) to issue citations and  
          levy fines for violations of the California Finance Lenders Law  
          (CFLL) and California Residential Mortgage Lending Act (CRMLA),  
          as specified; prohibits specified acts by CFLL licensees; and  
          revises the de minimis exemption for commercial finance lenders  
          within the CFLL.

           ANALYSIS  :    

          Existing law:

          1.Authorizes a de minimis exemption under the CFLL for persons  
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            who make no more than one commercial loan in a 12-month period  
            (Financial Code Section 22050).

          2.Prohibits a person subject to the CFLL from (a) making a  
            materially false or misleading statement or representation to  
            a borrower about the terms or conditions of that borrower's  
            loan, when making or brokering the loan; or (b) advertising,  
            printing, displaying, publishing, distributing, or  
            broadcasting, or causing or permitting to be advertised,  
            printed, displayed, published, distributed, or broadcast in  
            any manner, any statement or representation that is false,  
            misleading, or deceptive, or that omits material information,  
            as specified.

          3.Provides that any person who willfully violates any provisions  
            of the CFLL, or who willfully violates any rule or order  
            adopted pursuant to the CFLL, is liable for a civil penalty  
            not to exceed $2,500 for each violation, which must be  
            assessed and recovered in a civil action brought in the name  
            of the people of the State of California by the Commissioner  
            in any court of competent jurisdiction.

          4.Provides that whenever, in the opinion of the Commissioner,  
            any person is engaged in the business as a broker or finance  
            lender, or a mortgage loan originator, without a license from  
            the Commissioner, or any licensee is violating any provision  
            of the CFLL, the Commissioner may order that person or  
            licensee to desist and to refrain from engaging in the  
            business or further violating the CFLL.  If a written request  
            for a hearing is filed by the recipient of an order within 30  
            days after the order is served, and no hearing is held within  
            30 days thereafter, the order is rescinded.

          5.Provides that any person who violates a provision of the  
            CRMLA, or any rule or order issued pursuant to the CRMLA, is  
            liable for a civil penalty not to exceed $2,500 for each  
            violation, which must be assessed and recovered in a civil  
            action brought in the name of the people of the State of  
            California by the Commissioner in any court of competent  
            jurisdiction.  Further provides that any person who willfully  
            violates any provision of the CRMLA or any rule or order  
            issued pursuant to the CRMLA is, upon conviction, liable for a  
            fine of not more than $10,000 or imprisonment in a county jail  
            for not more than one year, or both that fine and  

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            imprisonment.  No person may be imprisoned for the violation  
            of any rule or order unless he/she had knowledge of the rule  
            or order. 

          This bill:

          1.Revises the de minimis exemption for commercial finance  
            lenders, by providing that the CFLL does not apply to any  
            person who makes five or fewer commercial loans in a 12-month  
            period, provided the loans are incidental to the business of  
            the person relying on the exemption. 

          2.Prohibits, additionally, a CFLL licensee from doing any of the  
            following:

             A.   Committing an act in violation of Civil Code Section  
               1695.13 which states that it is unlawful for any person to  
               initiate, enter into, negotiate, or consummate any  
               transaction involving residential real property in  
               foreclosure, if such person, by the terms of such  
               transaction, takes unconscionable advantage of the property  
               owner in foreclosure.

             B.   Engaging in an act in violation of Business and  
               Professions Code Section 17200 which states that it is  
               unlawful to engage in unfair and deceptive business  
               practices or advertising practices, as specified.

             C.   Knowingly misrepresenting, circumventing, or concealing,  
               through subterfuge or device, any material aspect or  
               information regarding a transaction to which the person is  
               a party.

             D.   Committing an act that constitutes fraud or dishonest  
               dealings.

          1.Authorizes the Commissioner to direct the discontinuance of  
            specified practices, by written order, of a CFFL licensee if,  
            after an investigation, there are reasonable grounds to  
            believe that a person is conducting business in an unsafe or  
            injurious manner.  Requires the Commissioner to address the  
            written order to that person which shall be effective  
            immediately but shall not become final, except as specified.


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          2.Authorizes the Commissioner, under both the CFLL and the  
            CRMLA, to issue citations and levy administrative fines to any  
            person that the Commissioner has cause to believe is violating  
            any provision of either law or any rule or order issued  
            pursuant to either law.  Specifics of the citations and fines  
            will be as follows:

             A.   The citation must be in writing, and describe with  
               particularity the basis for the citation.  Each citation  
               may contain an order to correct the violation(s) identified  
               and provide a reasonable time period(s) in which to do so.   
               Each citation may assess an administrative fine not to  
               exceed $2,500 (per citation, not per violation).

             B.   A citation issued or a fine assessed pursuant to this  
               authority, while constituting punishment for a violation of  
               law, will be in lieu of other administrative discipline by  
               the Commissioner for the offense(s) cited.  Notwithstanding  
               this point, the Commissioner is authorized to issue an  
               order to desist and refrain from engaging in a specific  
               business activity or activities to a person issued a  
               citation.

             C.   Citations will become final within 30 days, if not  
               contested by the recipient of the citation.  Recipients  
               will be able to contest their citations using procedures  
               set forth in the Administrative Procedures Act.

             D.   Once all administrative appeal remedies have been  
               exhausted, if a cited person fails to comply with the  
               citation or pay the assessed fine, the Commissioner is  
               authorized to apply to the appropriate superior court for a  
               judgment in the amount of the administrative fine and an  
               order compelling the cited licensee or person to comply  
               with the order.  The application, which is to include a  
               certified copy of the final order of the Commissioner, will  
               constitute a sufficient showing to warrant the issuance of  
               the judgment and order.

           Comments
           
          According to the author's office, this bill will improve the  
          Department of Corporation's ability to sanction CFLL and CRMLA  
          licensees who violate their licensing laws, and to give the  

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          department more authority to stop the unlicensed activities of  
          persons who require a CFLL or CRMLA license, but have failed to  
          obtain one.  It also contains a provision intended to update the  
          commercial portion of the CFLL to minimize unnecessary  
          over-regulation of businesses.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           ASSEMBLY FLOOR  :  76-0, 5/29/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Cooley, Dahle, Daly, Dickinson, Fong, Fox, Frazier, Beth  
            Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,  
            Grove, Hagman, Hall, Harkey, Roger Hernández, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,  
            Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,  
            Muratsuchi, Nazarian, Nestande, 
          Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,  
            Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Wagner,  
            Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.  
            Pérez

          NO VOTE RECORDED:  Donnelly, Eggman, Holden, Vacancy


          MW:ej  8/12/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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