BILL ANALYSIS Ó AB 1091 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1091 (Skinner) As Amended June 25, 2013 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |76-0 |(May 29, 2013) |SENATE: |37-0 |(August 19, | | | | | | |2013) | ----------------------------------------------------------------- Original Committee Reference: B. & F. SUMMARY : Provides that the commissioner of the Department of Corporations (Commissioner) may issue a corrective enforcement citation with associated penalty 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 five or fewer 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. The Senate amendments make technical and clarifying changes. EXISTING LAW : 1)Provides for the regulation of finance lenders under the CFLL. AB 1091 Page 2 (Financial Code Section 22000 et seq). 2)Regulates non-bank residential mortgage lenders under the CRMLA. (Financial Code Section 50000 et seq). FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : This bill expands the enforcement powers of Department of Corporations (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. This bill 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 AB 1091 Page 3 penalties, where the penalties are not paid. Additionally, this bill 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 one loan to five loans in a 12-month period so long as the loans are incidental to the person's business. Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081 FN: 0001465