Amended in Senate April 22, 2013

Amended in Senate April 9, 2013

Senate Bill No. 526

Introduced by Senator Calderon

February 21, 2013

begin delete An act to add Section 23026.5 to the Financial Code, relating to deferred deposit transactions. end delete begin insert An act to add Division 9.5 (commencing with Section 22900) to the Financial Code, relating to lending practices. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 526, as amended, Calderon. begin delete Deferred deposit transactions. end delete begin insert Commissioner of Corporations: lending practices: unlicensed activity report. end insert

begin insert Existing law, the California Finance Lenders Law, provides for the licensure and regulation by the Commissioner of Corporations of licensees engaged in making consumer loans, as defined. Existing law requires these licensees to file an annual report with the commissioner concerning their business and operations. Existing law requires the commissioner to annually make and file with the department a composite of those annual reports. end 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.

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 begin insert Deputy end insert Commissioner of Business Oversight begin insert for the Division of Corporations end insert .

begin insert

This bill would, on or before March 15 annually, require the commissioner to prepare a specified report on the lending and collection practices of unlicensed persons offering deferred deposit transactions or installment loans, or both, in amounts under $2,500, over the Internet, to persons in California, and on the enforcement actions taken by the commissioner against these persons. The bill would also require the commissioner to post on the department’s Internet Web site the company names and Internet Web site addresses of unlicensed lenders offering those deferred deposit transactions or installment loans without a license from the commissioner. The bill would also require the commissioner to accompany this posting with a consumer warning that alerts Californians to the unlicensed nature of the activities being conducted by these lenders.

end insert begin delete

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 delete

Vote: majority. Appropriation: no. Fiscal committee: yes. 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 Division 9.5 (commencing with Section 22900)
is added to the end insert begin insert Financial Code end insert begin insert , to read: end insert

begin insert

 

Division  begin insert 9.5. end insert   Unlicensed Activity Report

 

begin insert 22900. end insert   

(a) In addition to the reports required by Sections
22160 and 23026, on or before March 15 of each year, the
commissioner shall report on the lending and collection practices
of unlicensed persons offering deferred deposit transactions or
installment loans, or both, in amounts under $2,500, over the
Internet, to persons in California, and on the enforcement actions
taken by the commissioner against these persons.

(b) To the extent information is available, the commissioner’s
report shall include all of the following for the prior calendar
year:

(1) The number of unlicensed lenders identified by the
commissioner as lending in California during the prior year, and
the company names and Internet Web site addresses these lenders
used.

(2) The state or country in which each of these Internet Web
sites was hosted.

(3) The rates and terms offered by these lenders.

(4) The collection practices of these lenders.

(5) The extent to which these lenders complied with the
provisions of California law applicable to them.

(6) The enforcement efforts taken against each of the unlicensed
lenders identified by the commissioner during the prior year.

(7) Recommendations for changes to law that would improve
the department’s ability to identify and take enforcement actions
against unlicensed persons lending in California over the Internet,
and to minimize consumer harm resulting from such lending.

(c) Based on the findings of the report prepared pursuant to
this section, on the department’s Internet Web site, the
commissioner shall on an ongoing basis post the company names
and Internet Web site addresses of unlicensed lenders offering
deferred deposit transactions or installment loans, or both, in
amounts under $2,500, over the Internet, to persons in California,
without a required license from the commissioner to engage in
those activities. The commissioner shall accompany this posting
with a consumer warning that alerts Californians to the unlicensed
nature of the activities being conducted by these lenders via these
Internet Web sites.

(d) For purposes of this section, the following definitions shall
apply:

(1) ”Commissioner” shall mean the Commissioner of
Corporations.

(2) “Department” shall mean the Department of Corporations.

end insert

begin delete

  

SECTION 1.  

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.

SEC. 2.  

Section 23026.5 is added to the Financial Code, to
read:

23026.5.  

(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 delete