BILL NUMBER: AB 268 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JANUARY 4, 2016
AMENDED IN ASSEMBLY APRIL 15, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Dababneh
FEBRUARY 10, 2015
An act to amend Section 22305 of, to repeal Section 22304
of, and to repeal and add Section 22303 of the Financial Code,
relating to consumer loans. An act to amend Section
22701 of the Financial Code, relating to lending.
LEGISLATIVE COUNSEL'S DIGEST
AB 268, as amended, Dababneh. Consumer loans: charges.
California Finance Lenders Law: violations
.
Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders and brokers by the
Commissioner of Business Oversight and makes a willful violation of
its provisions a crime. Existing law authorizes the commissioner to
investigate at any time the loans and business, and examine the
books, accounts, records, and files used in the business of every
person engaged in the business of a finance lender or broker for the
purpose of discovering violations or securing information required by
the commissioner in the administration and enforcement of the
California Finance Lenders Law, as provided.
This bill would require the commissioner to examine at least every
48 months the affairs of every person engaged in the business of a
finance lender or broker for compliance under that law, and would
authorize the commissioner to examine those persons as often as the
commissioner deems necessary and appropriate for those purposes.
Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders and brokers by the
Commissioner of Business Oversight and makes a willful violation of
its provisions a crime. Under existing law, a finance lender includes
any person who is engaged in the business of making consumer loans.
With respect to consumer loans of less than a bona fide principal
amount of $2,500, existing law authorizes every licensee under that
law who lends money to contract for and receive charges at a rate not
exceeding the sum of certain percentages on specified parts of the
unpaid principal balance, or at a charge determined by an alternative
method.
This bill would repeal those consumer loan provisions and would
instead require the commissioner to establish an installment loan
rate review process for licensees that intend to offer unsecured full
amortizing installment loans of a minimum principal upon origination
of at least $300 and a maximum principal amount of $2,500. The bill
would require a licensee applying to make loans under this process to
provide to the commissioner specified information in order for its
loan product to be considered for approval, including information
about the proposed loan fees and other charges associated with the
loan and the length of the loan.
This bill would require the rate review applications submitted to
the commissioner to be in a manner prescribed by the commissioner,
and accompanied by a fee, in an amount calculated by the commissioner
to cover its administration costs. The bill would provide that an
installment loan product approved for a licensee under this process
is deemed approved for any licensee in good standing, and would
require the commissioner to maintain a list on its Internet Web site
of approved loan products.
Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program.
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 no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22701 of the
Financial Code is amended to read:
22701. For the purpose of discovering violations of this division
or securing information required by him or her in the administration
and enforcement of this division, the commissioner may at any time
investigate the loans and business, and examine the books, accounts,
records, and files used in the business, of every person engaged in
the business of a finance lender or broker, whether the person acts
or claims to act as principal or agent, or under or without the
authority of this division. For the purpose of examination, the
commissioner and his or her representatives shall have free access to
the offices and places of business, books, accounts, papers,
records, files, safes, and vaults of all these persons. As often
as the commissioner deems necessary and appropriate, but
at least once every 48 months, the commissioner shall examine the
affairs of every person engaged in the business of a finance lender
or broker for compliance with this division.
SECTION 1. Section 22303 of the Financial Code
is repealed.
SEC. 2. Section 22303 is added to the Financial
Code, to read:
22303. (a) The commissioner shall establish an installment loan
rate review process for licensees that intend to offer unsecured full
amortizing installment loans of a minimum principal upon origination
of at least three hundred dollars ($300) and a maximum principal
amount of two thousand five hundred dollars ($2,500). Rate review
applications submitted to the commissioner shall be in a manner
prescribed by the commissioner accompanied by a fee to the
commissioner, in an amount calculated by the commissioner to cover
its costs to administer this section.
(b) A licensee applying to make loans under this section shall
provide to the commissioner, at a minimum, the following information
in order for its loan product to be considered for approval:
(1) The proposed loan fees and other charges associated with the
loan and the length of the loans.
(2) The proposed corresponding annual percentage rate, calculated
in accordance with Federal Reserve Board Regulation Z (12 C.F.R.
226).
(3) If loans in differing amounts and terms are priced different,
a breakdown of those costs in each category.
(4) The underwriting standards by which a licensee will make a
determination to lend to a borrower.
(5) Estimated number of loans that will be made in a year.
(6) Estimated rate of return by the licensee based on projections
of the proposed loan product and an estimate of loan losses.
(7) Whether the licensee plans to report borrower payment
performance to the credit reporting agencies.
(c) The review of applications under this section by the
commissioner shall be conducted in accordance with subdivision (b) of
Section 11346 of, and Section 11346.45 of, the Government Code.
(d) Any entity that is not licensed under this chapter that wishes
to offer loans subject to this section shall submit its application
for licensure with the commissioner, in a manner prescribed by the
commissioner, along with an application to make loans under this
section.
(e) An installment loan product approved for a licensee under the
process established pursuant to this section shall be deemed approved
for any licensee in good standing. The commissioner shall maintain a
list on its Internet Web site of approved loan products.
SEC. 3. Section 22304 of the Financial Code is
repealed.
SEC. 4. Section 22305 of the Financial Code is
amended to read:
22305. A licensee may contract for and receive an administrative
fee, which shall be fully earned immediately upon making the loan,
with respect to a loan of a bona fide principal amount in excess of
two thousand five hundred dollars ($2,500), at an amount not to
exceed seventy-five dollars ($75). No administrative fee may be
contracted for or received in connection with the refinancing of a
loan unless at least one year has elapsed since the receipt of a
previous administrative fee paid by the borrower. Only one
administrative fee may be contracted for or received until the loan
has been repaid in full. For purposes of this section, "bona fide
principal amount" shall be determined in accordance with Section
22251.
SEC. 5. 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.