Amended in Assembly September 6, 2013

Amended in Assembly August 22, 2013

Amended in Assembly July 1, 2013

Amended in Assembly June 17, 2013

Amended in Senate May 7, 2013

Amended in Senate April 23, 2013

Amended in Senate April 1, 2013

Senate Bill No. 318

Introduced by Senators Hill, Steinberg, and Correa

(Coauthors: Assembly Members Alejo, Bonta, Brown, Dickinson, Mitchell, Mullin, and Perea)

February 19, 2013

An act to amend Section 22750 of, to add and repeal Article 3.6 (commencing with Section 22365) of Chapter 2 of Division 9 of, and to repeal Article 3.5 (commencing with Section 22348) of Chapter 2 of Division 9 of, the Financial Code, relating to consumer loans.

LEGISLATIVE COUNSEL’S DIGEST

SB 318, as amended, Hill. Consumer loans: Pilot Program for Increased Access to Responsible Small Dollar Loans.

Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Corporations and makes a willful violation of its provisions a crime. Existing law regulates the charges a licensee may impose or receive on loans it makes, and authorizes a licensee to contract for and receive specified alternative charges and administrative and delinquency fees.

Existing law establishes, until January 1, 2015, the Pilot Program for Affordable Credit-Building Opportunities for the purpose of increasing the availability of credit-building opportunities to underbanked individuals seeking low-dollar-value loans. Under the program, licensees must file an application with, and pay a fee to, the Commissioner of Corporations to participate in the program. Existing law authorizes a licensee approved by the commissioner to participate in the program to impose specified alternative interest rates and charges, including an administrative fee and delinquency fees, on loans of at least $250 and less than $2,500, subject to certain requirements. Existing law also authorizes licensees in the program to use the services of finders, defined as entities who, at the finder’s physical location for business, bring licensees and prospective borrowers together for the purpose of negotiating loan contracts at the finder’s location, subject to a written agreement meeting specified requirements.

The Governor’s Reorganization Plan No. 2 of the 2011-12 Regular Session provides that, on and after July 1, 2013, certain responsibilities of the Department of Corporations and the Commissioner of Corporations will be transferred to the Department of Business Oversight and the Commissioner of Business Oversight will be the head of the Department of Business Oversight.

This bill would abolish the Pilot Program for Affordable Credit-Building Opportunities. The bill would, until January 1, 2018, establish the Pilot Program for Increased Access to Responsible Small Dollar Loans for the purpose of allowing greater access for responsible installment loans in principal amounts of at least $300 and less than $2,500. The bill would require licensees and other entities to file an application and pay a specified fee to the Commissioner of Business Oversight to participate in the program. The bill would authorize a licensee approved by the commissioner to participate in the program to impose specified alternative interest rates and charges, including an administrative fee and delinquency fees, on loans of at least $300 and less than $2,500, subject to certain requirements.

This bill would also authorize a licensee in the program to use the services of finders, defined as entities who, at the finder’s physical location for business, bring licensees and prospective borrowers together for the purpose of negotiating loan contracts, subject to a written agreement meeting specified requirements. The bill would establish the services a finder is authorized and required to perform, and would require a finder to comply with the laws applicable to the licensee relative to information security. The bill would require a licensee to notify the commissioner within 15 days of entering into a contract with a finder, would require a licensee to pay an annual finder registration fee to the commissioner, and would require a licensee to submit an annual report to the commissioner on the licensee’s relationship and business arrangements with a finder, as specified. The bill would authorize the commissioner to examine the operations of a licensee and a finder to ensure that the activities of the licensee and the finder are in compliance with these provisions. The bill would make a licensee that uses a finder responsible for a violation of these provisions by a finder or a finder’s employee, and would authorize the commissioner to impose administrative penalties against a finder for a violation of these provisions. The bill would authorize the commissioner, upon a violation of these provisions, to disqualify a finder from performing services, bar a finder from performing services at one or more specific locations of the finder, terminate a written agreement between a licensee and a finder, and, under specified circumstances, prohibit the use of the finder by all licensees. The bill would authorize a licensee participating in the program to appoint one or more branch managers with responsibility for multiple branch locations, subject to approval by the commissioner.

This bill would require the commissioner to examine the performance of each licensee in the program at least once every 24 months, and would require the costs of examination to be paid by the licensee to the commissioner, as specified. The bill would also require the commissioner to conduct a random sample survey of borrowers under the program. The bill would require the commissioner to post a report on the commissioner’s Internet Web site by July 1, 2015, and once again by January 1, 2017, summarizing utilization of the Pilot Program for Increased Access to Responsible Small Dollar Loans, as specified.

This bill would make licensees of the abolished Pilot Program for Affordable Credit-Building Opportunities subject to the newly established Pilot Program for Increased Access to Responsible Small Dollar Loans. The bill would continue in existence any outstanding loans made under the abolished pilot program and the loans would remain subject to the terms and conditions that existed at the time the loan was made.

Because a willful violation of these provisions would be a crime, this bill would impose a state-mandated local program.

This bill would also make a clarifying change to the California Finance Lenders Law.

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.  

Article 3.5 (commencing with Section 22348) of
Chapter 2 of Division 9 of the Financial Code is repealed.

SEC. 2.  

Article 3.6 (commencing with Section 22365) is added
to Chapter 2 of Division 9 of the Financial Code, to read:

 

Article 3.6.  Pilot Program for Increased Access to Responsible
Small Dollar Loans

 

22365.  

(a) The Pilot Program for Increased Access to
Responsible Small Dollar Loans is hereby established.

(b) The Legislature finds and declares that consumer demand
for responsible installment loans in principal amounts of at least
three hundred dollars ($300) but less than two thousand five
hundred dollars ($2,500) exceeds the supply of these loans. In
2010, the Legislature enacted the Pilot Program for Affordable
Credit-Building Opportunities, as a first step toward addressing
this gap. California’s experience to date with that pilot program
has identified several improvements that could be made, which
would allow more Californians to access responsible installment
loans of at least three hundred dollars ($300) but less than two
thousand five hundred dollars ($2,500). This new Pilot Program
for Increased Access to Responsible Small Dollar Loans is intended
to implement those improvements.

(c) For purposes of this article:

(1) “Commissioner” means the Commissioner of Business
begin delete Oversight . end delete begin insert Oversight. end insert

(2) “Program” means the Pilot Program for Increased Access
to Responsible Small Dollar Loans.

(3) Pursuant to Section 22380.5, “licensee” also includes a
licensee approved to participate in the former Pilot Program for
Affordable Credit-Building Opportunities as described in Article
3.5 (commencing with Section 22348).

22366.  

(a) Any entity licensed under this chapter that wishes
to participate in the program, that is in good standing with the
commissioner and has no outstanding enforcement actions or
deficiencies at the time of its application, shall file an application
with the commissioner, in a manner prescribed by the
commissioner, and shall pay a fee to the commissioner, in an
amount calculated by the commissioner to cover its costs to
administer this article.

(b) Any entity wishing to participate in the program that is not
licensed pursuant to this chapter may submit a combined
application to the commissioner, in a manner prescribed by the
commissioner, for licensure under this chapter and admission to
the program and shall pay a fee to the commissioner in an amount
equal to the fees that would have been imposed if the person had
submitted separate applications. To be eligible to apply in this
manner, an entity must be free of outstanding enforcement or other
disciplinary actions taken against it by any of California’s financial
regulators or by a financial regulator of another state.

22367.  

Every entity approved by the commissioner to
participate in the program shall file with the commissioner on or
before March 15 an annual report consistent with Section 22159,
separate from any other annual report the licensee may be required
to file.

22368.  

Except as otherwise provided, nothing in this article
shall exempt any licensee from any of the provisions of this
division or Section 1632 of the Civil Code.

22369.  

No licensee may offer or make a loan, nor impose any
charges or fees pursuant to Section 22370, nor use a finder pursuant
to Section 22371, without prior approval from the commissioner
to participate in the program.

22370.  

(a) Any loan made pursuant to this section shall comply
with the following requirements:

(1) The loan shall be unsecured.

(2) Interest on the loan shall accrue on a simple-interest basis,
through the application of a daily periodic rate to the actual unpaid
principal balance each day.

(3) The licensee shall disclose the following to the consumer
in writing, in a type face no smaller than 12-point type, at the time
of application:

(A) The amount borrowed; the total dollar cost of the loan to
the consumer if the loan is paid back on time, including the sum
of the administrative fee, principal amount borrowed, and interest
payments; the corresponding annual percentage rate, calculated in
accordance with Federal Reserve Board Regulation Z (12 C.F.R.
226); the periodic payment amount; the delinquency fee schedule;
and the following statement: “Repaying your loan early will lower
your borrowing costs by reducing the amount of interest you will
pay. This loan has no prepayment penalty.”

(B) A statement that the consumer has the right to rescind the
loan by notifying the licensee of the consumer’s intent to rescind
the loan and returning the principal advanced by the end of the
business day following the date the loan is consummated.

(4) A licensee may provide the borrower with the disclosures
required by paragraph (3) in a mobile begin insert or other electronic end insert
application, on which the size of the type face of the disclosure
can be manually modified by a prospective borrower, if the
prospective borrower is given the option to print the disclosure in
a type face of at least 12-point size or is provided by the licensee
with a hardcopy of the disclosure in a type face of at least 12-point
size before the loan is consummated.

(5) The loan shall have a minimum principal amount upon
origination of three hundred dollars ($300) and a term of not less
than the following:

(A) Ninety days for loans whose principal balance upon
origination is less than five hundred dollars ($500).

(B) One hundred twenty days for loans whose principal balance
upon origination is at least five hundred dollars ($500), but is less
than one thousand five hundred dollars ($1,500).

(C) One hundred eighty days for loans whose principal balance
upon origination is at least one thousand five hundred dollars
($1,500).

(b) As an alternative to the charges authorized by Section 22303
or 22304, a licensee approved by the commissioner to participate
in the program may contract for and receive charges for a loan
made pursuant to this section at an annual simple interest rate not
to exceed the following:

(1) The lesser of 36 percent or the sum of 32.75 percent plus
the United States prime lending rate, as of the date of loan
origination, on that portion of the unpaid principal balance of the
loan up to and including, but not in excess of, one thousand dollars
($1,000). The interest rate calculated as of the date of loan
origination shall be fixed for the life of the loan.

(2) The lesser of 35 percent or the sum of 28.75 percent plus
the United States prime lending rate, as of the date of loan
origination, on that portion of the unpaid principal balance of the
loan in excess of one thousand dollars ($1,000), but less than two
thousand five hundred dollars ($2,500). The interest rate calculated
as of the date of loan origination shall be fixed for the life of the
loan.

(c) (1) As to any loan made under this section, a licensee
approved by the commissioner to participate in the program may
contract for and receive an administrative fee, which shall be fully
earned immediately upon making the loan, in an amount not to
exceed the applicable of the following:

(A) Seven percent of the principal amount, exclusive of the
administrative fee, or ninety dollars ($90), whichever is less, on
the first loan made to a borrower.

(B) Six percent of the principal amount, exclusive of the
administrative fee, or seventy-five dollars ($75), whichever is less,
on the second and subsequent loans made to that borrower.

(2) A licensee shall not charge the same borrower an
administrative fee more than once in any four-month period.

(3) For purposes of this section, “refinance” means the
replacement or revision of an existing loan contract with a borrower
that results in an extension of additional principal to that borrower.
A licensee shall not refinance a loan made under this section, unless
all of the following conditions are met at the time the borrower
submits an application to refinance:

(A) The borrower has repaid at least 60 percent of the
outstanding principal remaining on his or her loan.

(B) The borrower is current on his or her outstanding loan.

(C) The licensee underwrites the new loan in accordance with
paragraph (4) of subdivision (f).

(D) If the loan proceeds of both the original loan and the
refinance loan are to be used for personal, family, or household
purposes, the borrower has not previously refinanced the
outstanding loan more than begin delete twice end delete begin insert once end insert .

(4) Notwithstanding paragraph (3), an administrative fee shall
not be contracted for or received in connection with the refinancing
of a loan unless at least eight months have elapsed since the receipt
of a previous administrative fee paid by the borrower. With the
exception of a loan that is refinanced, only one administrative fee
may be contracted for or received until the loan has been repaid
in full. Section 22305 shall not apply to any loan made under this
section.

(d) Notwithstanding subdivision (a) of Section 22320.5, a
licensee approved by the commissioner to participate in the
program may require reimbursement from a borrower for the actual
insufficient funds fees incurred by that licensee due to actions of
the borrower, and may contract for and receive a delinquency fee
that is one of the following amounts:

(1) For a period of delinquency of not less than seven days, an
amount not in excess of fourteen dollars ($14).

(2) For a period of delinquency of not less than 14 days, an
amount not in excess of twenty dollars ($20).

(e) If a licensee opts to impose a delinquency fee, it shall use
the delinquency fee schedule described in subdivision (d), subject
to all of the following:

(1) No more than one delinquency fee may be imposed per
delinquent payment.

(2) No more than two delinquency fees may be imposed during
any period of 30 consecutive days.

(3) No delinquency fee may be imposed on a borrower who is
180 days or more past due if that fee would result in the sum of
the borrower’s remaining unpaid principal balance, accrued interest,
and delinquency fees exceeding 180 percent of the original
principal amount of the borrower’s loan.

(4) The licensee or any of its wholly owned subsidiaries shall
attempt to collect a delinquent payment for a period of at least 30
days following the start of the delinquency before selling or
assigning that unpaid debt to an independent party for collection.

(f) The following shall apply to a loan made by a licensee
pursuant to this section:

(1) Prior to disbursement of loan proceeds, the licensee shall
either (A) offer a credit education program or seminar to the
borrower that has been previously reviewed and approved by the
commissioner for use in complying with this section; or (B) invite
the borrower to a credit education program or seminar offered by
an independent third party that has been previously reviewed and
approved by the commissioner for use in complying with this
section. The borrower shall not be required to participate in either
of these education programs or seminars. A credit education
program or seminar offered pursuant to this paragraph shall be
provided at no cost to the borrower.

(2) The licensee shall report each borrower’s payment
performance to at least one consumer reporting agency that
compiles and maintains files on consumers on a nationwide basis,
upon acceptance as a data furnisher by that consumer reporting
agency. For purposes of this section, a consumer reporting agency
that compiles and maintains files on consumers on a nationwide
basis is one that meets the definition in Section 603(p) of the
federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). Any
licensee that is accepted as a data furnisher after admittance into
the program must report all borrower payment performance since
its inception of lending under the program, as soon as practicable
after its acceptance into the program, but in no event more than
six months after its acceptance into the program.

(A) The commissioner may approve a licensee for the program,
before that licensee has been accepted as a data furnisher by a
consumer reporting agency, if the commissioner has a reasonable
expectation, based on information supplied by the licensee, of both
of the following:

(i) The licensee will be accepted as a data furnisher, once it
achieves a lending volume required of data furnishers of its type
by a consumer reporting agency.

(ii) That lending volume will be achieved within the first six
months of the licensee commencing lending.

(B) Notwithstanding subparagraph (A), the commissioner shall
withdraw approval for pilot program participation from any
licensee that fails to become accepted as a data furnisher by a
consumer reporting agency within six months of commencing
lending under the pilot program.

(3) The licensee shall provide each borrower with the name of
the consumer reporting agency or agencies to which it will report
the borrower’s payment history. A licensee that is accepted as a
data furnisher after admittance into the program shall notify its
borrowers, as soon as practicable following acceptance as a data
furnisher, regarding the name of the consumer reporting agency
or agencies to which it will report that borrower’s payment history.

(4) (A) The licensee shall underwrite each loan to determine a
borrower’s ability and willingness to repay the loan pursuant to
the loan terms, and shall not make a loan if it determines, through
its underwriting, that the borrower’s total monthly debt service
payments, at the time of origination, including the loan for which
the borrower is being considered, and across all outstanding forms
of credit that can be independently verified by the licensee, exceed
50 percent of   the borrower’s gross monthly income.

(B) (i) The licensee shall seek information and documentation
pertaining to all of a borrower’s outstanding debt obligations during
the loan application and underwriting process, including loans that
are self-reported by the borrower but not available through
independent verification. The licensee shall verify that information
using a credit report from at least one consumer reporting agency
that compiles and maintains files on consumers on a nationwide
basis or through other available electronic debt verification services
that provide reliable evidence of a borrower’s outstanding debt
obligations.

(ii) Notwithstanding the verification requirement in
subparagraph (A), the licensee shall request from the borrower
and include all information obtained from the borrower regarding
outstanding deferred deposit transactions in the calculation of the
borrower’s outstanding debt obligations.

(iii) The licensee shall not be required to consider, for purposes
of debt-to-income ratio evaluation, loans from friends or family.

(C) The licensee shall also verify the borrower’s income that
the licensee relies on to determine the borrower’s debt-to-income
ratio using information from either of the following:

(i) Electronic means or services that provide reliable evidence
of the borrower’s actual income.

(ii) Internal Revenue Service Form W-2, tax returns, payroll
receipts, bank statements, or other third-party documents that
provide reasonably reliable evidence of the borrower’s actual
income.

(5) The licensee shall notify each borrower, at least two days
prior to each payment due date, informing the borrower of the
amount due, and the payment due date. Notification may be
provided by any means begin insert mutually end insert acceptable to the borrower begin insert and
the licensee. A borrower shall have the right to opt out of this
notification at any time, upon electronic or written request to the
licensee. The licensee shall notify each borrower of this right prior
to disbursing end insert begin insert loan proceeds end insert .

(g) (1) Notwithstanding Sections 22311 to 22315, inclusive,
no person, in connection with, or incidental to, the making of any
loan made pursuant to this article, may offer, sell, or require the
borrower to contract for “credit insurance” as defined in paragraph
(1) of subdivision (a) of Section 22314 or insurance on tangible
personal or real property of the type specified in Section 22313.

(2) Notwithstanding Sections 22311 to 22315, inclusive, no
licensee, finder, or any other person that participates in the
origination of a loan under this article shall refer a borrower to any
other person for the purchase of “credit insurance” as defined in
paragraph (1) of subdivision (a) of Section 22314 or insurance on
tangible personal or real property of the type specified in Section
22313.

(h) (1) No licensee shall require, as a condition of providing
the loan, that the borrower waive any right, penalty, remedy, forum,
or procedure provided for in any law applicable to the loan,
including the right to file and pursue a civil action or file a
complaint with or otherwise communicate with the commissioner
or any court or other public entity, or that the borrower agree to
resolve disputes in a jurisdiction outside of California or to the
application of laws other than those of California, as provided by
law. Any waiver by a borrower must be knowing, voluntary, and
in writing, and expressly not made a condition of doing business
with the licensee. Any waiver that is required as a condition of
doing business with the licensee shall be presumed involuntary,
unconscionable, against public policy, and unenforceable. The
licensee has the burden of proving that a waiver of any rights,
penalties, forums, or procedures was knowing, voluntary, and not
made a condition of the contract with the borrower.

(2) No licensee shall refuse to do business with or discriminate
against a borrower or applicant on the basis that the borrower or
applicant refuses to waive any right, penalty, remedy, forum, or
procedure, including the right to file and pursue a civil action or
complaint with, or otherwise notify, the commissioner or any court
or other public entity. The exercise of a person’s right to refuse to
waive any right, penalty, remedy, forum, or procedure, including
a rejection of a contract requiring a waiver, shall not affect any
otherwise legal terms of a contract or an agreement.

(3) This subdivision shall not apply to any agreement to waive
any right, penalty, remedy, forum, or procedure, including any
agreement to arbitrate a claim or dispute, after a claim or dispute
has arisen. Nothing in this subdivision shall affect the enforceability
or validity of any other provision of the contract.

(i) This section shall not apply to any loan of a bona fide
principal amount of two thousand five hundred dollars ($2,500)
or more as determined in accordance with Section 22251. For
purposes of this subdivision, “bona fide principal amount” shall
be determined in accordance with Section 22251.

22371.  

(a) A licensee who is approved by the commissioner
to participate in the program may use the services of one or more
finders as provided in this article.

(b) For purposes of this article, a “finder” means an entity that,
at the finder’s physical location for business, brings a licensee and
a prospective borrower together for the purpose of negotiating a
loan contract.

(c) An entity, whose sole means of bringing a licensee and a
prospective borrower together at that entity’s physical location for
business is via an electronic access point through which a
prospective borrower may directly access the Internet Web site of
a licensee is not a “finder” for purposes of this article.

22372.  

(a) A finder may perform one or more of the following
services for a licensee at the finder’s physical location for business:

(1) Distributing, circulating, using, or publishing preprinted
brochures, flyers, factsheets, or other written materials relating to
loans that the licensee may make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their
being distributed, circulated, or published.

(2) Providing written factual information about loan terms,
conditions, or qualification requirements to a prospective borrower
that has been either prepared by the licensee or reviewed and
approved in writing by the licensee. A finder may discuss that
information with a prospective borrower in general terms, but may
not provide counseling or advice to a prospective borrower.

(3) Notifying a prospective borrower of the information needed
in order to complete a loan application without providing
counseling or advice to a prospective borrower.

(4) Entering information provided by the prospective borrower
on a preprinted or electronic application form or onto a
preformatted computer database without providing counseling or
advice to a prospective borrower.

(5) Assembling credit applications and other materials obtained
in the course of a credit application transaction for submission to
the licensee.

(6) Contacting the licensee to determine the status of a loan
application.

(7) Communicating a response that is returned by the licensee’s
automated underwriting system to a borrower or a prospective
borrower.

(8) Obtaining a borrower’s signature on documents prepared
by the licensee and delivering final copies of the documents to the
borrower.

(b) A finder shall not engage in any of the following activities:

(1) Providing counseling or advice to a borrower or prospective
borrower.

(2) Providing loan-related marketing material that has not
previously been approved by the licensee to a borrower or a
prospective borrower.

(3) Interpreting or explaining the relevance, significance, or
effect of any of the marketing materials or loan documents the
finder provides to a borrower or prospective borrower.

(c) Any person who performs one or more of the following
activities is a broker within the meaning of Section 22004 rather
than a finder within the meaning of this section:

(1) Negotiating the price, length, or any other loan term between
a licensee and a prospective borrower.

(2) Advising either a prospective borrower or a licensee as to
any loan term.

(3) Offering information pertaining to a single prospective
borrower to more than one licensee, except that, if a licensee has
declined to offer a loan to a prospective borrower and has so
notified that prospective borrower in writing, the person may then
offer information pertaining to a single prospective borrower to
another licensee with which it has a finder’s agreement.

(4) Personally contacting or providing services to a borrower
or prospective borrower at any place other than the finder’s
physical location for business.

(d) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.

22373.  

(a) At the time the finder receives or processes an
application for a program loan, the finder shall provide the
following statement to the applicant, on behalf of the licensee, in
no smaller than 10-point type, and shall ask the applicant to
acknowledge receipt of the statement in writing:

 

“Your loan application has been referred to us by [Name of
Finder]. We may pay a fee to [Name of Finder] for the successful
referral of your loan application. IF YOU ARE APPROVED FOR
THE LOAN, [NAME OF LICENSEE] WILL BECOME YOUR
LENDER, AND YOU WILL BE BUILDING A RELATIONSHIP
WITH [NAME OF LICENSEE]. If you wish to report a complaint
about [Name of Finder] or [Name of Licensee] regarding this loan
transaction, you may contact the Department of Business Oversight,
Division of Corporations at 1-866-ASK-CORP (1-866-275-2677),
or file your complaint online at www.corp.ca.gov.”

  

(b) If the loan is consummated, the licensee shall provide the
borrower a written copy of the disclosure notice within two weeks
following the date of the loan consummation. A licensee may
include the disclosure within its loan contract, or may provide it
as a separate document to the borrower, via any means acceptable
to the borrower.

22374.  

(a) A finder may be compensated by the licensee
pursuant to the written agreement between the licensee and the
finder, as described in Section 22376.

(b) The compensation of a finder by a licensee shall be subject
to all of the following requirements:

(1) No fee shall be paid to a finder in connection with a loan
application until and unless that loan is consummated.

(2) No fee shall be paid to a finder based upon the principal
amount of the loan.

(3) No fee paid to a finder shall exceed the following amounts:

(A) Forty-five dollars ($45) per loan for the first 40 loans
originated each month at the finder’s location.

(B) Forty dollars ($40) per loan for any subsequent loans
originated during that month at the finder’s location.

(4) The finder’s location for services under this article and other
information required by Section 22375 has been reported to the
commissioner and the finder has not been barred from providing
services at that location by the commissioner.

(c) No licensee shall, directly or indirectly, pass on to a borrower
any fee, or any portion of any fee, that the licensee pays to a finder
in connection with that borrower’s loan or loan application.

22375.  

A licensee that utilizes the service of a finder shall do
all of the following:

(a) Notify the commissioner within 15 days of entering into a
contract with a finder, on a form acceptable to the commissioner,
regarding all of the following:

(1) The name and business address of the finder and all locations
at which the finder will perform services under this article.

(2) The name and contact information for an employee of the
finder who is knowledgeable about, and has the authority to
execute, the contract governing the business relationship between
the finder and the licensee.

(3) The name and contact information for one or more
employees of the finder who are responsible for that finder’s
finding activities on behalf of the licensee.

(4) A list of the activities the finder shall perform on behalf of
the licensee.

(5) Any other information requested by the commissioner.

(b) Pay an annual finder registration fee to the commissioner
in an amount to be established by the commissioner by regulation
for each finder utilized by the licensee.

(c) Submit an annual report to the commissioner including any
information pertaining to each finder and the licensee’s relationship
and business arrangements with each finder as the commissioner
may by regulation require.

22376.  

All arrangements between a licensee and a finder shall
be set forth in a written agreement between the parties. The
agreement shall contain a provision establishing that the finder
agrees to comply with all regulations that are established by the
commissioner pursuant to this article regarding the activities of
finders and that the commissioner shall have access to all of the
finder’s books and records that pertain to the finder’s operations
under the agreement with the licensee.

22377.  

(a) The commissioner may examine the operations of
each licensee and each finder to ensure that the activities of the
licensee and the finder are in compliance with this article. The
costs of the commissioner’s examination of each finder shall be
attributed to the commissioner’s examination of the licensee. Any
violation of this article by a finder or a finder’s employee shall be
attributed to the finance lender with whom it has entered into an
agreement for purposes of determining the licensee’s compliance
with this division.

(b) Upon a determination that a finder has acted in violation of
this article, or any implementing regulation, the commissioner
shall have the authority to disqualify a finder from performing
services under this article, bar a finder from performing services
at one or more specific locations of that finder, terminate a written
agreement between a finder and a licensee, and, if the
commissioner deems that action in the public interest, prohibit the
use of that finder by all licensees accepted to participate in the
pilot program.

(c) In addition to any other penalty allowed by law, the
commissioner may impose an administrative penalty up to two
thousand five hundred dollars ($2,500) for violations of this article
committed by a finder.

22378.  

Notwithstanding the requirements of Section 22102
and its implementing regulations, a licensee accepted to participate
in the program may appoint one or more branch managers with
responsibility for multiple branch locations, subject to approval
by the commissioner, and a finding by the commissioner that the
centralized nature of underwriting and other key business activities
performed by the licensee does not require a unique manager for
each branch location, to ensure the protection of consumers who
seek out loans from the licensee. The commissioner may revoke
this approval at any time, upon a finding that a unique branch
manager at each branch location is required for consumer
protection.

22379.  

begin insert (a) end insert begin insert   end insert Notwithstanding any other law, the commissioner
shall examine each licensee that is accepted into the program at
least once every 24 months. begin delete The cost of each examination of a
licensee shall be paid to the commissioner by the licensee
examined, and the commissioner may maintain an action for the
recovery of the cost in any court of competent jurisdiction. In
determining the cost of the examination, the commissioner may
use the estimated average hourly cost for all persons performing
examinations of licensees or other persons subject to this division
for the fiscal year. end delete

begin insert (b) end insert begin insert   end insert begin insert Notwithstanding subdivision (a), the commissioner shall
have the authority to waive one or more branch office
examinations, if the commissioner deems that the branch office
examinations are not necessary for the protection of the public,
due to the centralized operations of the licensee or other factors
acceptable to the commissioner. end insert

begin insert

(c) The cost of each examination of a licensee shall be paid to
the commissioner by the licensee examined, and the commissioner
may maintain an action for the recovery of the cost in any court
of competent jurisdiction. In determining the cost of the
examination, the commissioner may use the estimated average
hourly cost for all persons performing examinations of licensees
or other persons subject to this division for the fiscal year.

end insert

22380.  

(a) On or before July 1, 2015, and again, on or before
January 1, 2017, the commissioner shall post a report on his or her
Internet Web site summarizing utilization of the Pilot Program for
Increased Access to Responsible Small Dollar Loans. The report
required to be submitted on or before July 1, 2015, shall
additionally include the information required by former Section
22361, summarizing utilization of the Pilot Program for Affordable
Credit-Building Opportunities, which was created by Chapter 640
of the Statutes of 2010.

(b) The information disclosed to the commissioner for the
commissioner’s use in preparing the report described in this section
is exempted from any requirement of public disclosure by
paragraph (2) of subdivision (d) of Section 6254 of the Government
Code.

(c) If there is more than one licensee approved to participate in
the program under this article, the report required pursuant to
subdivision (a) shall state information in aggregate so as not to
identify data by specific licensee.

(d) The report required pursuant to this section shall specify the
time period to which the report corresponds, and shall include, but
not be limited to, the following for that time period:

(1) The number of entities that applied to participate in the
program.

(2) The number of entities accepted to participate in the program.

(3) The reason or reasons for rejecting applications for
participation, if applicable. This information shall be provided in
a manner that does not identify the entity or entities rejected.

(4) The number of program loan applications received by lenders
participating in the program, the number of loans made pursuant
to the program, the total amount loaned, the distribution of loan
lengths upon origination, and the distribution of interest rates and
principal amounts upon origination among those loans.

(5) The number of borrowers who obtained more than one
program loan and the distribution of the number of loans per
borrower.

(6) Of the number of borrowers who obtained more than one
program loan, the percentage of those borrowers whose credit
scores increased between successive loans, based on information
from at least one major credit bureau, and the average size of the
increase.

(7) The income distribution of borrowers upon loan origination,
including the number of borrowers who obtained at least one
program loan and who resided in a low-to-moderate-income census
tract at the time of their loan application.

(8) The number of borrowers who obtained loans for the
following purposes, based on borrower responses at the time of
their loan applications indicating the primary purpose for which
the loan was obtained:

(A) Medical.

(B) Other emergency.

(C) Vehicle repair.

(D) Vehicle purchase.

(E) To pay bills.

(F) To consolidate debt.

(G) To build or repair credit history.

(H) To finance a purchase of goods or services other than a
vehicle.

(I) For other than personal, family, or household purposes.

(J) Other.

(9) The number of borrowers who begin insert self-report that they end insert had a
bank account at the time of their loan application, the number of
borrowers who begin insert self-report that they end insert had a bank account and used
check-cashing services, and the number of borrowers who
begin insert self-report that they end insert did not have a bank account begin insert at the time of
their loan application end insert .

begin delete

(10) The number of borrowers who received loan proceeds on
a stored value card, the fee schedules associated with these cards,
and the distribution of fees assessed on borrowers who received
their loan proceeds on these cards.

(11)

end delete

begin insert (10) end insert  With respect to refinance loans, the report shall specifically
include the following information:

(A) The number and percentage of borrowers who applied for
a refinance loan.

(B) Of those borrowers who applied for a refinance loan, the
number and percentage of borrowers who obtained a refinance
loan.

(C) Of those borrowers who obtained a refinance loan:

(i) The percentage of borrowers who refinanced once.

(ii) The percentage of borrowers who refinanced twice.

(iii) The percentage of borrowers who refinanced more than
twice.

(D) Of those borrowers who obtained a refinance loan, the
average percentage of principal paid down before obtaining a
refinance loan.

(E) Of those borrowers who obtained a refinance loan, the
average amount of additional principal extended.

(F) Of those borrowers who obtained a refinance loan, the
average number of late payments made on the loan that was
refinanced.

begin delete

(12)

end delete

begin insert (11) end insert  The number and type of finders used by licensees and the
relative performance of loans consummated by finders compared
to the performance of loans consummated without a finder.

begin delete

(13)

end delete

begin insert (12) end insert  The number and percentage of borrowers who obtained
one or more program loans on which late fees were assessed, the
total amount of late fees assessed, and the average late fee assessed
by dollar amount and as a percentage of the principal amount
loaned.

begin delete

(14)

end delete begin delete

 
The quality of underwriting and performance of loans under
this article, including the number and percentage of borrowers
who defaulted on a program loan, consistent with the reporting
standards applicable to other loans and financial products, including
credit cards and deferred deposit transactions.

end delete begin insert

(13) (A) The performance of loans under this article, as
reflected by all of the following:

(i) The number and percentage of pilot program borrowers who
experienced at least one delinquency lasting between 7 and 29
days, and the distribution of principal loan amounts corresponding
to those delinquencies.

(ii) The number and percentage of pilot program borrowers
who experienced at least one delinquency lasting between 30 and
59 days, and the distribution of principal loan amounts
corresponding to those delinquencies.

(iii) The number and percentage of pilot program borrowers
who experienced at least one delinquency lasting 60 days or more,
and the distribution of principal loan amounts corresponding to
those delinquencies.

(iv) The number and percentage of pilot program borrowers
who experienced at least one delinquency of greater than 7 days
and who did not subsequently bring their loan current.

(v) Among loans that were ever delinquent for 7 days or more,
the average number of times borrowers experienced a delinquency
of 7 days or more.

(B) To the extent data are readily available to the commissioner,
the commissioner shall include in his or her report comparable
delinquency data for unsecured loans made by persons licensed
under Chapter 2 (commencing with Section 22365) of Division 9
in principal amounts between two thousand five hundred dollars
($2,500) and four thousand nine hundred ninety-nine dollars
($4,999), and in principal amounts between five thousand dollars
($5,000) and nine thousand nine hundred ninety-nine dollars
($9,999), and for unsecured extensions of credit made by
state-chartered banks and credit unions under the commissioner’s
jurisdiction, in principal amounts between two thousand five
hundred dollars ($2,500) and four thousand nine hundred
ninety-nine dollars ($4,999), and in principal amounts between
five thousand dollars ($5,000) and nine thousand nine hundred
ninety-nine dollars ($9,999).

end insert begin delete

(15)

end delete

begin insert (14) end insert  The number and types of violations of this article by finders,
which were documented by the commissioner.

begin delete

(16)

end delete

begin insert (15) end insert  The number and types of violations of this article by
licensees, which were documented by the commissioner.

begin delete

(17)

end delete

begin insert (16) end insert  The number of times that the commissioner disqualified a
finder from performing services, barred a finder from performing
services at one or more specific locations of the finder, terminated
a written agreement between a finder and a licensee, or imposed
an administrative penalty.

begin delete

(18)

end delete

begin insert (17) end insert  The number of complaints received by the commissioner
about a licensee or a finder, and the nature of those complaints.

begin delete

(19)

end delete

begin insert (18) end insert  Recommendations for improving the program.

begin delete

(20)

end delete

begin insert (19) end insert  Recommendations regarding whether the program should
be continued after January 1, 2018.

(e) The commissioner shall conduct a random sample survey
of borrowers who have participated in the program to obtain
information regarding the borrowers’ experience and licensees’
compliance with this article. The results of this survey shall be
included in the report required by this section.

22380.5.  

(a) The Pilot Program for Affordable Credit-Building
Opportunities as described in Article 3.5 (commencing with Section
22348) is abolished.

(b) All powers, duties, purposes, jurisdiction, responsibilities,
and functions of the Commissioner of Corporations with respect
to the former Article 3.5 (commencing with Section 22348) are
transferred to the Commissioner of Business Oversight.

(c) Any licensee approved to participate in the Pilot Program
for Affordable Credit-Building Opportunities as described in the
former Article 3.5 (commencing with Section 22348) shall be
transferred to, and subject to, the provisions of this article.

(d) Any outstanding loans made under the former Pilot Program
for Affordable Credit-Building Opportunities as described in
Article 3.5 (commencing with Section 22348) shall continue in
existence and be valid on and after January 1, 2014, subject to
those terms and conditions that existed at the time the loan was
made pursuant to the former Article 3.5 (commencing with Section
22348).

(e) Data submitted to the commissioner by licensees accepted
to the former Pilot Program for Affordable Credit-Building
Opportunities shall be summarized by the commissioner in the
report due to the Legislature on or before July 1, 2015, pursuant
to subdivision (a) of Section 22380.

22381.  

This article shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2018, deletes or extends that date.

SEC. 3.  

Section 22750 of the Financial Code is amended to
read:

22750.  

(a) If any amount other than, or in excess of, the
charges permitted by this division is willfully charged, contracted
for, or received, the contract of loan is void, and no person has any
right to collect or receive any principal, charges, or recompense
in connection with the transaction.

(b) If any provision of this division is willfully violated in the
making or collection of a loan, whether by a licensee or by an
unlicensed person subject to this division, the contract of loan is
void, and no person has any right to collect or receive any principal,
charges, or recompense in connection with the transaction.

SEC. 4.  

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.