BILL NUMBER: SB 318 CHAPTERED
BILL TEXT
CHAPTER 467
FILED WITH SECRETARY OF STATE OCTOBER 1, 2013
APPROVED BY GOVERNOR OCTOBER 1, 2013
PASSED THE SENATE SEPTEMBER 11, 2013
PASSED THE ASSEMBLY SEPTEMBER 10, 2013
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
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, 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.
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 Oversight.
(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 or other electronic
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 once.
(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 mutually acceptable to the borrower 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
loan proceeds.
(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. (a) Notwithstanding any other law, the commissioner shall
examine each licensee that is accepted into the program at least once
every 24 months.
(b) 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.
(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.
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 self-report that they had a bank
account at the time of their loan application, the number of
borrowers who self-report that they had a bank account and used
check-cashing services, and the number of borrowers who self-report
that they did not have a bank account at the time of their loan
application.
(10) 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.
(11) 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.
(12) 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.
(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).
(14) The number and types of violations of this article by
finders, which were documented by the commissioner.
(15) The number and types of violations of this article by
licensees, which were documented by the commissioner.
(16) 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.
(17) The number of complaints received by the commissioner about a
licensee or a finder, and the nature of those complaints.
(18) Recommendations for improving the program.
(19) 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.