Amended in Senate April 9, 2013

Senate Bill No. 526

Introduced by Senator Calderon

February 21, 2013

begin delete An act to amend Section 2954.8 of the Civil Code, relating to banks. end delete begin insert An act to add Section 23026.5 to the Financial Code, relating to deferred deposit transactions. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 526, as amended, Calderon. begin delete Banks: mortgage loans: advance payments. end delete begin insert Deferred deposit transactions. end insert

begin insert

Existing law, the California Deferred Deposit Transaction Law, provides for the licensure and regulation by the Commissioner of Corporations of persons engaged in the business of originating or making deferred deposit transactions, as defined. Existing law requires a licensee to file an annual report with the commissioner. Existing law requires the commissioner to prepare an annual consolidated report based upon specified information received from licensees.

end insert begin insert

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

end insert begin insert

This bill would require the commissioner to include in the annual consolidated report specified information related to the practices of unlicensed deferred deposit lenders that make or originate deferred deposit transactions through the Internet to borrowers in this state. The bill would also require the department to report to the Legislature its recommendations with regard to those practices, as specified.

end insert begin delete

Existing state and federal law define and regulate banks. Existing state law requires a financial institution that makes loans secured by residential real property, as specified, that receives money in advance for payment of taxes and assessments on the property, for insurance, or for other purposes relating to the property, to pay interest on the amount held to the borrower.

end delete begin delete

This bill would make nonsubstantive, technical amendments to these provisions.

end delete

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert begin insert

It is the intent of the Legislature in enacting these
provisions to address the abhorrent and illegal practices employed
by unlicensed deferred deposit lenders that make or originate
deferred deposit transactions through the Internet to borrowers
in this state, including, but not limited to, to address the collection
practices employed by these lenders.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 23026.5 is added to the end insert begin insert Financial Code end insert begin insert , to
read: end insert

begin insert

begin insert 23026.5. end insert   

(a) The commissioner shall include in the annual
consolidated report prepared pursuant to Section 23026 an
analysis of the practices of unlicensed deferred deposit lenders
that make or originate deferred deposit transactions through the
Internet to borrowers in this state, including, but not limited to,
an analysis of the collection practices employed by these lenders.
The analysis shall also include the rates and terms offered by these
lenders and the extent to which these lenders comply with, or do
not comply with, the California Deferred Deposit Transaction
Law. The commissioner shall also include in the annual
consolidated report a summary of the department’s compliance
efforts regarding unregulated and unlicensed deferred deposit
lending through the Internet to borrowers in this state.

(b) (1) On or before January 1, 2015, the department shall
report to the Legislature its recommendations pertaining to the
regulation and enhancement of its enforcement authority with
regard to unlicensed deferred deposit lenders that make or
originate deferred deposit transactions through the Internet to
borrowers in this state. The department shall make
recommendations with regard to changes to law that may minimize
adverse consumer experiences.

(2) The report to be submitted pursuant to paragraph (1) shall
be submitted in compliance with Section 9795 of the Government
Code.

(3) The requirement for submitting a report pursuant to
paragraph (1) shall become inoperative on January 1, 2019,
pursuant to Section 10231.5 of the Government Code.

end insert

begin delete

SECTION 1.  

Section 2954.8 of the Civil Code is amended to
read:

2954.8.  

(a) Every financial institution that makes loans upon
the security of real property containing only a one- to four-family
residence and located in this state, or purchases obligations secured
by the property, and that receives money in advance for payment
of taxes and assessments on the property, for insurance, or for
other purposes relating to the property, shall pay interest on the
amount held to the borrower. The interest on these amounts shall
be at the rate of at least 2 percent simple interest per annum. This
interest shall be credited to the borrower’s account annually or
upon termination of the account, whichever is earlier.

(b) No financial institution subject to the provisions of this
section shall impose any fee or charge in connection with the
maintenance or disbursement of money received in advance for
the payment of taxes and assessments on real property securing
loans made by the financial institution, or for the payment of
insurance, or for other purposes relating to such real property, that
will result in an interest rate of less than 2 percent per annum being
paid on the moneys so received.

(c) For the purposes of this section, “financial institution” means
a bank, savings and loan association or credit union chartered under
the laws of this state or the United States, or any other person or
organization making loans upon the security of real property
containing only a one- to four-family residence.

(d) The provisions of this section do not apply to any of the
following:

(1) Loans executed prior to the effective date of this section.

(2) Moneys that are required by a state or federal regulatory
authority to be placed by a financial institution other than a bank
in a non-interest-bearing demand trust fund account of a bank.

The amendment of this section made by the 1979-80 Regular
Session of the Legislature shall only apply to loans executed on
or after January 1, 1980.

end delete