Amended in Senate August 19, 2016

Amended in Senate August 1, 2016

Amended in Senate June 13, 2016

Amended in Assembly May 31, 2016

Amended in Assembly May 10, 2016

Amended in Assembly April 20, 2016

Amended in Assembly March 28, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2251

Introduced by Assembly Member Mark Stone

(Coauthors: Assembly Members Dababneh and Gonzalez)

(Coauthor: Senator Leno)

February 18, 2016

An act to add Division 12.5 (commencing with Section 28100) to the Financial Code, relating to student loan servicers.

LEGISLATIVE COUNSEL’S DIGEST

AB 2251, as amended, Mark Stone. Student loan servicers: licensing and regulation: Student Loan Servicing Act.

(1) Existing law establishes the Department of Business Oversight as headed by the Commissioner of Business Oversight, who, among other things, generally provides for the licensure and regulation of persons who are engaged in various consumer financial businesses, including, but not limited to, the business of making consumer or commercial loans.

This bill would enact the Student Loan Servicing Act providing for the licensure, regulation, and oversight of student loan servicers by the commissioner and would define terms for its purposes. The bill would prohibit a person from begin delete acting as end delete begin insert engaging in the business of servicing end insert a student loan begin delete servicer end delete begin insert in this state, directly or indirectly, end insert without a license, unless exempt from the licensing requirement, and would require a licensee to provide specific services to a student loan borrower and comply with reporting, auditing, and other oversight by the commissioner. The bill would require a person applying for a license to, among other things, pay an application fee, sign the application under penalty of perjury, and submit to a criminal background check by the Department of Justice. By expanding the scope of the crime of perjury and increasing who is authorized to receive criminal record information, this bill would impose a state-mandated local program. The bill would require each licensee begin delete to end delete begin insert to, among other things, file reports with the commissioner under oath, end insert pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of these provisions, as estimated by the commissioner, and would authorize the commissioner to enforce these provisions by, among other things, promulgating regulations, performing investigations, begin insert suspending a license, end insert and enforcing the provisions in begin delete a end delete begin insert an administrative end insert hearing or begin insert in end insert court, as specified. The bill would prohibit the public disclosure of specific information provided by a licensee to the commissioner. The bill would make the act operative on July 1, 2018, except for specific authorizations to the commissioner which may be exercised on and after January 1, 2017. The bill would make legislative findings in support of its provisions.

(2) 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.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

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.  

The Legislature finds and declares all of the
following:

(a) Student loan debt is a national crisis. More than 40,000,000
begin delete people end delete begin insert individuals end insert in the United States owe some amount of student
begin delete educational end delete loan debt. Total student begin delete educational end delete begin insert loan end insert debt in the
United States currently exceeds $1.2 trillion, surpassing both the
amount of credit card debt and car loans. With college costs
continuing to rise, student begin delete educational end delete begin insert loan end insert debt continues to rise,
and there is no reduction in sight.

(b) While California’s financial aid programs are some of the
strongest in the nation and our state’s college graduates have among
the lowest begin delete educational end delete begin insert student loan end insert debt burdens, California
students and graduates still incur significant debt. According to
the Institute for College Access & Success, 55 percent of
California’s graduating class of 2014 has student begin delete educational end delete loan
debt. According to the United States Department of Education, as
of January 2015, there are approximately 4,156,000 student
begin delete educational end delete loan borrowers in California, and the total student
begin delete educational end delete loan debt outstanding for Californians is approximately
$1.2 billion.

(c) Student begin delete educational end delete loan debt is a hindrance on the state’s
economy, preventing borrowers from achieving financial
independence, buying property, and starting businesses.

(d) Student begin delete educational end delete loan servicers administer student loans,
serving as a critical link between borrowers and lenders in
managing accounts, processing payments, and communicating
directly with borrowers. Despite this critical relationship, according
to the federal Consumer Financial Protection Bureau (CFPB), there
are no consistent, marketwide federal standards for student
begin delete educational end delete loan servicing.

(e) The CFPB released a report in September 2015 that found
that student begin delete educational end delete loan borrowers encounter servicers that
discourage borrower-friendly alternative payment plans, fail to
respond to questions and payment processing errors, and fail to
provide sufficient information to borrowers regarding payments,
benefits, interest rates, and other charges.

(f) It is the intent of the Legislature to promote all of the
following:

(1) Meaningful access to federal affordable repayment and loan
forgiveness benefits.

(2) Reliable information about student begin delete educational end delete loans and
loan repayment options.

(3) Quality customer service and fair treatment.

SEC. 2.  

Division 12.5 (commencing with Section 28100) is
added to the Financial Code, to read:

 

Division 12.5.  Student Loan Servicing Act

 

Chapter  1. General Provisions

 

Article 1.  Short Title

 

28100.  

This division may be known and cited as the “Student
Loan Servicing Act.”

 

Article 2.  Requirement for License

 

begin delete 28106. end delete

begin insert 28102. end insert   

(a)  begin delete A end delete begin insert No end insert person shall begin delete only end delete engage in the business of
servicing a student loan begin delete within end delete begin insert in end insert this state, directly or indirectly,
begin delete as end delete begin insert without first obtaining end insert a begin delete licensee end delete begin insert license end insert pursuant to this
division. A license shall not be transferable or assignable.

begin delete

(b) Notwithstanding subdivision (a), any of the following shall
not be required to be a licensee to engage in servicing a student
loan within this state:

end delete begin insert

(b) This division shall not apply to any of the following:

end insert

(1) A bank, trust company, or industrial loan company doing
business under the authority of, or in accordance with, a license,
certificate, or charter issued by the United States or any state,
district, territory, or commonwealth of the United States that is
authorized to transact business in this state.

(2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this state.

(3) A savings and loan association, savings bank, or credit union
organized under the laws of this or any other state that is authorized
to transact business in this state.

(4) A begin insert public postsecondary educational institution or a private end insert
nonprofit postsecondary educational institution servicing a student
loan it extended to the borrower.

begin delete

(5) A person who is licensed in good standing pursuant to the
California Finance Lenders Law (Division 9 (commencing with
Section 22000)) and services student loans pursuant to Section
22340.

end delete begin insert

(5) A nonprofit community service organization that meets all
the criteria of Section 12104.

end insert begin insert

(c) A private postsecondary educational institution not exempted
from the requirements of this division pursuant to subdivision (b)
shall not be required to comply with this division for the servicing
of a student loan it extended to a borrower that a licensee is
servicing pursuant to a servicing agreement with the private
postsecondary educational institution for that student loan.

end insert

 

Article 3.  Definitions

 

begin delete 28108. end delete

begin insert 28104. end insert   

For the purposes of this division, the following terms
have the following meanings:

(a) “Applicant” means a person applying for a license pursuant
to this division.

(b) “Borrower” means either of the following:

(1) A person who has received or agreed to pay a student loan.

(2) A person who shares responsibility for repaying a student
loan with a person described in paragraph (1).

(c) “Commissioner” means the Commissioner of Business
Oversight.

(d) “Department” means the Department of Business Oversight.

(e) “Engage in the business” means, without limitation, servicing
student loans.

(f) “In this state” means any activity of a person relating to
servicing student loans that originates from this state and is directed
to persons outside this state, or that originates from outside this
state and is directed to persons inside this state, or that originates
inside this state and is directed to persons inside this state.

(g) “Licensee” means a person licensed pursuant to this division.

(h) “Person” means an individual, a corporation, a partnership,
a limited liability company, an association, a trust, an
unincorporated organization, a government, or a political
subdivision of a government, and any other entity.

(i) “Qualified written request” means a written correspondence
made by a borrower, other than notice on a payment medium
supplied by a licensee, that is transmitted by mail, facsimile, or
electronically through an email address or Internet Web site
designated by the licensee to receive communications from a
borrower that does all of the following:

(1) Enables the licensee to identify the name and account of the
borrower.

(2) Includes a statement of the reasons for the belief by the
borrower, to the extent applicable, that the account is in error or
that provides sufficient detail to the servicer regarding information
sought by the borrower, such as a complete payment history for
the loan or the borrower’s account, a copy of the borrower’s student
loan promissory note, or the contact information for the creditor
to whom the borrower’s student loan is owed.

(j) “Servicing” means any of the following activities related to
a student loan of a borrower:

(1) Performing both of the following:

(A) Receiving any scheduled periodic payments from a borrower
or any notification that a borrower made a scheduled periodic
payment.

(B) Applying payments to the borrower’s account pursuant to
the terms of the student loan or the contract governing the
servicing.

(2) During a period when no payment is required on a student
loan, performing both of the following:

(A) Maintaining account records for the student loan.

(B) Communicating with the borrower regarding the student
loan on behalf of the owner of the student loan promissory note.

(3) Interacting with a borrower related to that borrower’s student
loan, with the goal of helping the borrower avoid default on his or
her student loan or facilitating the activities described in paragraph
(1) or (2).

(k)  begin insert (1) end insert begin insert   end insert “Student loan” means any loan primarily for use to
finance a postsecondary education and costs of attendance at a
postsecondary institution, including, but not limited to, tuition,
fees, books and supplies, room and board, transportation, and
miscellaneous personal expenses. begin insert A “student loan” includes a
loan made to refinance a student loan. end insert

begin insert

(2) (A) A “student loan” shall not include an extension of credit
under an open-end consumer credit plan, a reverse mortgage
transaction, a residential mortgage transaction, or any other loan
that is secured by real property or a dwelling.

end insert begin insert

(B) A “student loan” shall not include an extension of credit
made by a postsecondary educational institution to a borrower if
one of the following apply:

end insert begin insert

(i) The term of the extension of credit is no longer than the
borrower’s education program.

end insert begin insert

(ii) The remaining, unpaid principal balance of the extension
of credit is less than $1,500 at the time of the borrower’s
graduation or completion of the program.

end insert begin insert

(iii) The borrower fails to graduate or successfully complete
his or her education program and has a balance due at the time
of his or her disenrollment from the postsecondary institution.

end insert

(l) “Student loan servicer” means any person engaged in the
business of servicing student loans.

 

Chapter  2. Licensing

 

Article 1.  Commissioner of Business Oversight

 

begin delete 28110. end delete

begin insert 28106. end insert   

(a) The commissioner shall administer the provisions
of this division and may promulgate begin insert rules and end insert regulations and
issue orders consistent with that authority.

(b) Without limitation, the functions, powers, and duties of the
commissioner include all of the following:

(1) To issue or refuse to issue a license as provided by this
division.

(2) To revoke or suspend for cause any license as provided by
this division.

(3) To keep records of licenses issued under this division.

(4) To receive, consider, investigate, and act upon complaints
made in connection with a licensee.

(5) To prescribe the forms of and receive (A) applications for
licenses and (B) reports, books, and records required to be made
by a licensee under this division, including annual audited financial
statements.

(6) To subpoena documents and witnesses and compel their
attendance and production, to administer oaths, and to require the
production of books, papers, or other materials relevant to any
inquiry authorized by this division.

(7) To require information with regard to an applicant that the
commissioner may deem necessary, with regard for the paramount
public interest in ascertaining the experience, background, honesty,
truthfulness, integrity, and competency of an applicant for servicing
student loans, and if an applicant is an entity other than an
individual, in ascertaining the honesty, truthfulness, integrity, and
competency of an officer or director of the corporation, association,
or other entity, or the members of a partnership.

(8) To enforce by order any provision of this division.

(9) To levy fees, fines, and charges in an amount sufficient to
cover the cost of the services performed in administering this

begin delete division, as set forth by rule. end delete begin insert division. end insert

(10) To appoint examiners, begin insert attorneys, end insert supervisors, experts, and
special assistants as needed to effectively and efficiently administer
this division.

begin delete 28112. end delete

begin insert 28108. end insert   

(a) The commissioner shall have the authority to
conduct investigations and examinations of an applicant or licensee
as follows:

(1) For purposes of determining whether an applicant is eligible
for a license, or that a licensee is complying with the provisions
of this division or any regulation or order of the commissioner,
the commissioner may access, receive, and use any books,
accounts, records, files, documents, information, or evidence,
including, but not limited to, any of the following relating to the
intent to, or the practice of, servicing student loans for borrowers:

(A) Criminal, civil, and administrative history information.

(B) Personal history and experience information, including, but
not limited to, independent credit reports obtained from a consumer
begin delete credit end delete reporting agency.

(C) Any other documents, information, or evidence that the
commissioner deems relevant to the inquiry or investigation
regardless of the location, possession, control, or custody of those
documents, information, or evidence.

(2) For the purposes of investigating violations or complaints
arising under this division, the commissioner may direct, subpoena,
or order the attendance of, and examine under oath, any person
whose testimony may be required about the student loan or account
of the borrower.

(b) In making any examination or investigation authorized by
this section, the commissioner may control access to any documents
and records of the licensee or person under examination or
investigation. The commissioner may take possession of the
documents and records or place a person in exclusive charge of
the documents and records in the place where they are usually
kept. During the period of control, no person shall remove or
attempt to remove any of the documents and records except
pursuant to a court order or with the consent of the commissioner.
Unless the commissioner has reasonable grounds to believe the
documents or records of begin delete an applicant end delete begin insert a licensee end insert have been, or are
at risk of being, altered or destroyed for purposes of concealing a
violation of this division, the licensee or owner of the documents
and records shall have access to the documents or records as
necessary to conduct its ordinary business affairs.

begin delete 28114. end delete

begin insert 28110. end insert   

(a) Notwithstanding any other law, the commissioner
may by rule or order prescribe circumstances under which to accept
electronic records or electronic signatures. This section shall not
be deemed to require the commissioner to accept electronic records
or electronic signatures.

(b) For purposes of this section, the following terms have the
following meanings:

(1) “Electronic record” means an initial license application, or
material modification of that license application, and any other
record created, generated, sent, communicated, received, or stored
by electronic means. “Electronic records” also includes, but is not
limited to, all of the following:

(A) An application, amendment, supplement, and exhibit, filed
for any license, consent, or other authority.

(B) A financial statement, report, or advertising.

(C) An order, license, consent, or other authority.

(D) A notice of public hearing, accusation, and statement of
issues in connection with any application, license, consent, or other
authority.

(E) A proposed decision of a hearing officer and a decision of
the commissioner.

(F) The transcripts of a hearing and correspondence between a
party and the commissioner directly relating to the record.

(G) A release, newsletter, interpretive opinion, determination,
or specific ruling.

(H) Correspondence between a party and the commissioner
directly relating to any document listed in subparagraphs (A) to
(G), inclusive.

(2) “Electronic signature” means an electronic sound, symbol,
or process attached to or logically associated with an electronic
record and executed or adopted by a person with the intent to sign
the electronic record.

(c) The Legislature finds and declares that the Department of
Business Oversight has continuously implemented methods to
accept records filed electronically, and is encouraged to continue
to expand its use of electronic filings to the extent feasible, as
budget, resources, and equipment are made available to accomplish
that goal.

 

Article 2.  Application for License

 

begin delete 28116. end delete

begin insert 28112. end insert   

An applicant shall apply for a license by submitting all
of the following to the commissioner:

(a) A completed application for a license in a form prescribed
by the commissioner and signed under penalty of perjury.

(b) The sum of one hundred dollars ($100) as a fee for
investigating the application, plus the cost of fingerprint processing
and the criminal history record check under Section begin delete 28118, end delete begin insert 28116, end insert
and begin delete two end delete begin insert three end insert hundred dollars begin delete ($200) end delete begin insert ($300) end insert as an application fee.
The investigation fee, including the amount for the criminal history
record check, and the application fee are not refundable if an
application is denied or withdrawn.

(c)  begin delete Financial end delete begin insert Audited financial end insert statements prepared in
accordance with generally accepted accounting principles and
acceptable to the commissioner that indicate a net worth of at least
two hundred fifty thousand dollars ($250,000).

begin delete 28118. end delete

begin insert 28114. end insert   

(a) The commissioner shall submit to the Department
of Justice fingerprint images and related information required by
the Department of Justice of every applicant for a license for
purposes of obtaining information as to the existence and content
of a record of state or federal convictions, state or federal arrests,
and information as to the existence and content of a record of state
or federal arrests for which the Department of Justice establishes
that the person is free on bail or on his or her own recognizance
pending trial or appeal.

(b) When received, the Department of Justice shall forward to
the Federal Bureau of Investigation requests for federal summary
criminal history information received pursuant to this section. The
Department of Justice shall review the information returned from
the Federal Bureau of Investigation and compile and disseminate
a response to the commissioner.

(c) The Department of Justice shall provide a response to the
commissioner pursuant to paragraph (1) of subdivision (p) of
Section 11105 of the Penal Code.

(d) The commissioner shall request from the Department of
Justice subsequent arrest notification service, as provided pursuant
to Section 11105.2 of the Penal Code, for the license applicant
described in subdivision (a).

(e) The Department of Justice shall charge begin delete the applicant a fee end delete
begin insert a fee, payable by the applicant, end insert sufficient to cover the costs of
processing the requests pursuant to this section.

begin delete 28120. end delete

begin insert 28116. end insert   

(a) Upon the filing of an application for a license
pursuant to Section begin delete 28116 end delete begin insert 28112 end insert and the payment of the fees, the
commissioner shall investigate the applicant and its general partners
and begin delete persons end delete begin insert individuals end insert owning or controlling, directly or
indirectly, 10 percent or more of the outstanding interests or any
person responsible for the conduct of the applicant’s servicing
activities begin delete within end delete begin insert in end insert this state, if the applicant is a partnership. If
the applicant is a corporation, trust, limited liability company, or
association, including an unincorporated organization, the
commissioner shall investigate the applicant, its principal officers,
directors, managing members, and begin delete persons end delete begin insert individuals end insert owning or
controlling, directly or indirectly, 10 percent or more of the
outstanding equity securities or any person responsible for the
conduct of the applicant’s servicing activities begin delete within end delete begin insert in end insert this state.

(b) Upon the filing of an application for a license pursuant to
Section begin delete 28130 end delete begin insert 28126 end insert and the payment of the fees, the
commissioner shall investigate the person responsible for the
servicing activity of the licensee at the new location described in
the application. The investigation may be limited to information
that was not included in prior applications filed pursuant to this
division. If the commissioner determines that the applicant has
satisfied this division and does not find facts constituting reasons
for denial, the commissioner shall issue and deliver a license to
the applicant.

(c) For the purposes of this section, “principal officers” shall
mean president, chief executive officer, treasurer, and chief
financial officer, as may be applicable, and any other officer with
direct responsibility for the conduct of the applicant’s servicing
activities begin delete within the end delete begin insert in this end insert state.

begin delete 28122. end delete

begin insert 28118. end insert   

The commissioner shall, when the application is
complete, including having received the information from the
Department of Justice, either grant a license pursuant to this
division or provide a written explanation for the denial.

begin delete 28124. end delete

begin insert 28120. end insert   

(a) The proceedings for a denial of a license shall be
conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code.

(b) The commissioner may deny an application for a license for
any of the following reasons:

(1) The applicant made a false statement of a material fact on
the application.

(2) The applicant or an individual specified in Section begin delete 28120 end delete
begin insert 28116 end insert within the last 10 years of the date of application has
committed any act involving dishonesty, fraud, or deceit, or has
been convicted of, or pleaded nolo contendere to, a crime
substantially related to the qualifications, functions, or duties
related to servicing.

(3) The applicant or an individual specified in Section begin delete 28120 end delete
begin insert 28116 end insert has violated any provision of this division.

begin delete 28126. end delete

begin insert 28122. end insert   

(a) The commissioner may deem an application for a
license abandoned if the applicant fails to respond to any request
for information required by the commissioner or department during
an investigation of the application.

(b) The commissioner shall notify the applicant, in writing, that
if the applicant fails to submit responsive information no later than
60 days after the date the commissioner sent the written request
for information, the commissioner shall deem the application
abandoned.

(c) An application fee paid prior to the date an application is
deemed abandoned shall not be refunded. Abandonment of an
application pursuant to this subdivision shall not preclude the
applicant from submitting a new application and fee for a license.

begin delete 28128. end delete

begin insert 28124. end insert   

A license shall remain effective until the license is
either suspended or revoked by the commissioner or surrendered
by the licensee.

 

Chapter  3. Licensee Duties

 

begin delete 28130. end delete

begin insert 28126. end insert   

(a) A licensee shall notify the commissioner, in writing,
of any change in the information provided in the application for a
license, as applicable, not later than 10 business days after the
occurrence of the event that results in the information becoming
inaccurate or incomplete.

(b) (1) If a licensee seeks to change its place of business to a
street address other than that designated in its license, the licensee
shall provide notice to the commissioner at least 10 days prior to
the change. The commissioner shall notify the licensee within 10
days if the commissioner disapproves the change, and if the
commissioner does not notify the licensee of disapproval within
10 days, the change in address shall be deemed approved.

(2) If notice is not given at least 10 days prior to the change of
a street address of a place of business, as required by subdivision
(b), or notice is not given at least 10 days prior to engaging in begin insert the end insert
business begin insert of servicing student loans end insert at a new location, the
commissioner may assess a civil or administrative penalty on the
licensee not to exceed five hundred dollars ($500).

begin delete 28132. end delete

begin insert 28128. end insert   

(a) A licensee seeking to engage in the business of
servicing begin insert student loans end insert at a new location shall submit an application
for a branch office license to the commissioner at least 10 days
before engaging in the business of servicing begin insert student loans end insert at a new
location and pay the fee required by Section begin delete 28116. end delete begin insert 28112. end insert

(b) The licensee may engage in the business of servicing begin insert student
loans end insert at the new location 10 days after the date of submission of
a branch office application.

(c) (1) The commissioner shall approve or deny the person
responsible for engaging in the business of servicing at the new
location in accordance with Article 2 of Chapter 2 (commencing
with Section begin delete 28116), end delete begin insert 28112), end insert and shall notify the licensee of this
decision within 90 days of the date of receipt of the application.

(2) If the commissioner denies the application, the licensee shall,
within 10 days of the date of receipt of notification of the
commissioner’s denial, submit a new application to the
commissioner designating a different person responsible for
engaging in the business of servicing at the new location. The
commissioner shall approve or deny the different person as
provided in paragraph (1).

(d) A licensee shall not engage in begin insert the end insert business begin insert of servicing
student loans end insert at a new location in a name other than a name
approved by the commissioner.

(e) A branch office license to engage in the business of servicing
at a new location shall be issued in accordance with this section.
A change of street address of a place of business designated in a
license shall be made in accordance with Section begin delete 28130 end delete begin insert 28126 end insert
and shall not constitute a new location subject to the requirements
of this section.

begin delete 28134. end delete

begin insert 28130. end insert   

A licensee shall do all of the following:

(a) Develop policies and procedures reasonably intended to
promote compliance with this division.

(b) File with the commissioner any report required by begin delete regulation
or order of end delete the commissioner.

(c) Comply with the provisions of this division and any
regulation or order of the commissioner.

(d) Submit to periodic examination by the commissioner as
required by this division and any regulation or order of the
commissioner.

(e) Advise the commissioner of filing a petition for bankruptcy
within five days of the filing.

begin delete

(f) Comply with any other requirement established by regulation
or order of the commissioner.

end delete begin delete

(g)

end delete

begin insert (f) end insert  Provide, free of charge on its Internet Web site, information
or links to information regarding repayment and loan forgiveness
options that may be available to borrowers and provide this
information or these links to borrowers via written correspondence
or email at least once per calendar year.

begin delete

(h)

end delete

begin insert (g) end insert  (1) Respond to a qualified written request by acknowledging
receipt of the request within five business days and within 30
business days, begin delete to the extent possible, end delete provide information relating
to the request and, if applicable, the action the licensee will take
to correct the account or an explanation for the licensee’s position
that the borrower’s account is correct.

(2) The 30-day period described in paragraph (1) may be
extended for not more than 15 days if, before the end of the 30-day
period, the begin delete servicer end delete begin insert licensee end insert notifies the borrower of the extension
and the reasons for the delay in responding.

begin delete

(3) During the 60-business-day period starting on the date the
servicer received a qualified written request related to a dispute
on borrower’s payments, a servicer shall not provide adverse
information regarding any payment that is the subject of the
qualified written request to any consumer reporting agency.

end delete begin delete

(i)

end delete begin insert

(3) After receipt of a qualified written request related to a
dispute on a borrower’s payment on a student loan, a licensee
shall not, for 60 days, furnish adverse information to any consumer
reporting agency regarding any payment that is the subject of the
qualified written request.

end insert

begin insert (h) end insert  (1) Except as provided in federal law or required by a
student loan agreement, a begin delete servicer end delete begin insert licensee end insert shall inquire of a
borrower how to apply an overpayment to a student loan. A
borrower’s direction on how to apply an overpayment to a student
loan shall stay in effect for any future overpayments during the
term of a student loan until the borrower provides different
directions.

(2) For purposes of this subdivision, “overpayment” means a
payment on a student loan in excess of the begin insert monthly end insert amount due
from a borrower on a student begin delete loan on a monthly basis, end delete begin insert loan, end insert also
commonly referred to as a prepayment.

begin delete 28135. end delete

begin insert 28132. end insert   

(a) A licensee shall not be required to comply with the
requirements of subdivision begin delete (h) end delete begin insert (g) end insert of Section begin delete 28134, end delete begin insert 28130, end insert if
the licensee reasonably determines that any of the following apply:

(1) A qualified written request is substantially the same as a
qualified written request previously made by the borrower, for
which the licensee has previously complied with its obligation to
respond pursuant to subdivision begin delete (h) end delete begin insert (g) end insert of Section begin delete 28134, end delete begin insert 28130, end insert
unless the borrower provides new and material information to
support the more recent qualified written request. New and material
information means information that was not reviewed by the
licensee in connection with a prior qualified written request
submitted by the same borrower and that is reasonably likely to
change the licensee’s prior response related to that request.

(2) A qualified written request is overbroad. A qualified written
request is overbroad if the licensee cannot reasonably determine
from the qualified written request the specific error that the
borrower asserts has occurred on his or her account or the specific
information the borrower is requesting related to his or her account.
To the extent a licensee can reasonably identify a valid assertion
of an error or valid request for information in a qualified written
request that is otherwise overbroad, the licensee shall comply with
the requirements of subdivision begin delete (h) end delete begin insert (g) end insert of Section begin delete 28134 end delete begin insert 28130 end insert
with respect to that valid asserted error or request for information.

(3) A qualified written request is delivered to the licensee more
than one year after the licensee sells, assigns, or transfers the
servicing of the student loan that is the subject of the qualified
written request to another servicer.

(b) If, pursuant to subdivision (a), a licensee determines that it
is not required to comply with the requirements of subdivision begin delete (h) end delete
begin insert (g) end insert of Section begin delete 28134, end delete begin insert 28130, end insert the licensee shall notify the borrower
of the determination, and the basis for its determination, in writing
not later than five business days after making such determination.

begin delete 28136. end delete

begin insert 28134. end insert   

(a) If the sale, assignment, or other transfer of the
servicing of a student loan results in a change in the identity of the
party to whom the borrower is required to send payments or direct
any communications concerning the student loan the licensee shall
notify the borrower in writing at least 15 days before the borrower
is required to send a payment on the student loan of all of the
following:

(1) The identity of the new student loan servicer and the number
of the license of the new student loan servicer issued by the
commissioner.

(2) The name and address of the new student loan servicer to
whom subsequent payments or communications are required to
be sent.

(3) The telephone numbers and Internet Web sites of the new
student loan servicer.

(4) The effective date of the sale, assignment, or transfer.

(5) The date on which the licensee, as the current student loan
servicer, will stop accepting payments on the borrower’s student
loan.

(6) The date on which the new student loan servicer will begin
accepting payments on the borrower’s student loan.

(b) A licensee shall transfer all information regarding a
borrower, a borrower’s account, and a borrower’s student loan to
the new licensee servicing the borrower’s student loan within 45
calendar days.

begin delete 28140. end delete

begin insert 28136. end insert   

The licensee shall not do any of the following:

(a) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead a borrower.

(b) Engage in any unfair or deceptive practice toward any
borrower or misrepresent or omit any material information in
connection with the servicing of a student loan, including, but not
limited to, misrepresenting the amount, nature, or terms of any fee
or payment due or claimed to be due on a student loan, the terms
and conditions of the student loan agreement, or the borrower’s
obligations under the student loan.

(c) Misapply payments made by a borrower to the outstanding
balance of a student loan.

(d)  begin delete Fail end delete begin insert If the licensee is required to or voluntarily reports to a
consumer reporting agency, fail end insert to accurately 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 subdivision, 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 begin delete USC end delete
begin insert U.S.C. end insert Sec. 1681a(p)).

(e) Refuse to communicate with an authorized representative
of the borrower who provides a written authorization signed by
the borrower, provided the licensee may adopt procedures
reasonably related to verifying that the representative is in fact
authorized to act on behalf of the borrower.

(f) Negligently or intentionally make any false statement or
knowingly and willfully make any omission of a material fact in
connection with any information or reports filed with the
commissioner, the department, or another governmental agency.

begin delete 28142. end delete

begin insert 28138. end insert   

Notwithstanding subdivision (b) of Section begin delete 28136, end delete
begin insert 28134 and unless prohibited by federal law, end insert a licensee shall retain
and maintain its records of servicing a borrower’s student loan for
a minimum of three years after the student loan has been sold,
begin delete transferred, assigned, end delete begin insert assigned, transferred, end insert or paid in full.

begin delete 28144. end delete

begin insert 28140. end insert   

A licensee shall continuously maintain a minimum net
worth of at least two hundred fifty thousand dollars ($250,000).

begin delete 28146. end delete

begin insert 28142. end insert   

(a) A licensee shall maintain a surety bond in
accordance with this section in a minimum amount of twenty-five
thousand dollars ($25,000). The bond shall be payable to the
commissioner and issued by an insurer authorized to do business
in this state. An original surety bond, including any and all riders
and endorsements executed subsequent to the effective date of the
bond, shall be filed with the commissioner within 10 days of
execution. For licensees with multiple licensed locations, only one
surety bond is required. The bond shall be used for the recovery
of expenses, fines, and fees levied by the commissioner in
accordance with this division or for losses or damages incurred by
borrowers as the result of a licensee’s noncompliance with the
requirements of this division.

(b) When an action is commenced on a licensee’s bond, the
commissioner may require the filing of a new bond. Immediately
upon recovery of any action on the bond, the licensee shall file a
new bond. Failure to file a new bond within 10 days of the recovery
on a bond, or within 10 days after notification by the commissioner
that a new bond is required, constitutes sufficient grounds for the
suspension or revocation of the license.

(c) The commissioner may begin delete by rule end delete require a higher bond amount
for a licensee based on the dollar amount of servicing of student
loans by that licensee.

begin delete 28148. end delete

begin insert 28144. end insert   

(a) Each licensee shall pay to the commissioner its pro
rata share of all costs and expenses reasonably incurred in the
administration of this division, as estimated by the commissioner,
for the ensuing year and any deficit actually incurred or anticipated
in the administration of the division in the year in which the
assessment is made. The pro rata share shall be the proportion that
a licensee’s servicing activities begin delete within end delete begin insert in end insert this state bears to the
costs and expenses remaining after the amount assessed pursuant
to subdivision (c).

(b) On or before the 30th day of September in each year, the
commissioner shall notify each licensee of the amount assessed
and levied against it and that amount shall be paid by October 31.
If payment is not made by October 31, the commissioner shall
assess and collect a penalty, in addition to the assessment, of 1
percent of the assessment for each month or part of a month that
the payment is delayed or withheld.

(c) In the levying and collection of the assessment, a licensee
shall neither be assessed for nor be permitted to pay less than two
hundred fifty dollars ($250) per licensed location per year.

(d) If a licensee fails to pay the assessment on or before the 31st
day of October, the commissioner may by order summarily suspend
or revoke the license issued to the licensee. If, after an order is
made, a request for hearing is filed in writing within 30 days, and
a hearing is not held within 60 days thereafter, the order is deemed
rescinded as of its effective date. During any period when the
license is revoked or suspended, a licensee shall not engage in the
business of servicing student loans begin delete within end delete begin insert in end insert this state pursuant to
this division except as may be permitted by order of the
commissioner. However, the revocation, suspension, or surrender
of a license shall not affect the powers of the commissioner as
provided in this division.

begin delete

(e) The commissioner shall, by rule, establish the timelines,
fees, and assessments applicable to applicants for licenses under
this division.

end delete

begin delete 28150. end delete

begin insert 28146. end insert   

(a)  begin delete (1) end delete A licensee shall file an annual report with the
commissioner, on or before the 15th day of March, giving the
relevant information that the commissioner reasonably requires
concerning the business and operations conducted by the licensee
begin delete within end delete begin insert in end insert the state during the preceding calendar year, including
information regarding the number of loans that are sold, assigned,
or transferred to another party. The individual annual reports filed
pursuant to this section shall be made available to the public for begin delete inspection except, upon request in the annual report to the
commissioner, the balance sheet contained in the annual report of
a sole proprietor or any other nonpublicly traded persons. end delete
begin insert inspection. end insert The report shall be made under oath and in the form
prescribed by the commissioner.

begin delete

(2) “Nonpublicly traded person” for purposes of this section
means persons with securities owned by 35 or fewer individuals.

end delete

(b) A licensee shall make other special reports that may be
required by the commissioner.

begin delete 28151. end delete

begin insert 28148. end insert   

(a) At the end of the licensee’s fiscal year, but in no
case more than 12 months after the last audit conducted pursuant
to this section, each licensee shall cause its books and accounts to
be audited by an independent certified public accountant. The audit
shall be sufficiently comprehensive in scope to permit the
expression of an opinion on the financial statements prepared in
accordance with generally accepted accounting principles and shall
be performed in accordance with generally accepted auditing
standards. The audit shall include a reconciliation of the licensee’s
trust accounts as of the audit date.

(b) “Expression of an opinion” includes (1) an unqualified
opinion, (2) a qualified opinion, (3) a disclaimer of opinion, or (4)
an adverse opinion. If a financial statement, report, certificate, or
opinion of the independent certified public accountant is in any
way qualified, the commissioner may require the licensee to take
any action that the commissioner deems appropriate to address the
qualification. The commissioner may reject any financial statement,
report, certificate, or opinion by notifying the licensee or other
person required to make the filing of the rejection and the reason
therefor. Within 30 days after the receipt of the notice, the licensee
or other person shall correct the deficiencies. Failure to correct the
deficiencies is a violation of this division. The commissioner shall
retain a copy of all financial statements, reports, certificates, or
opinions so rejected.

(c) If a qualified or adverse opinion is expressed or if an opinion
is disclaimed, the reasons therefor shall be fully explained.

(d) The audit report shall be filed with the commissioner within
105 days of the end of the licensee’s fiscal year. The report filed
with the commissioner shall be certified by the certified public
accountant conducting the audit. begin delete The commissioner may
promulgate rules regarding late audit reports. end delete

(e) If a licensee required to make an audit fails to cause an audit
to be made, the commissioner may cause the audit to be made by
an independent certified public accountant at the licensee’s
expense. The commissioner shall select the independent certified
public accountant by advertising for bids or by other fair and
impartial begin delete means that the commissioner establishes by rule. end delete begin insert means. end insert
The commissioner may summarily revoke the license of a licensee
who fails to file a certified financial statement prepared by an
independent certified public accountant as required by this division
or at the request of the commissioner.

begin delete 28152. end delete

begin insert 28150. end insert   

A licensee that ceases to service student loans to
borrowers shall inform the commissioner in writing and surrender
the license and all other indicia of license to the commissioner.
The commissioner may require a licensee to file a plan for the
disposition of the servicing business that includes, but is not limited
to, a closing audit. Upon receipt of the written notice and plan, if
required, the commissioner shall determine whether the licensee
has violated this division. The commissioner shall give a licensee
notice of accepting a surrendered license, and a license shall not
be deemed surrendered until the commissioner accepts its tender
in writing.

 

Chapter  4. Administration and Power of the
Commissioner

 

begin delete 28154. end delete

begin insert 28152. end insert   

(a) As often as the commissioner deems necessary and
appropriate, but at least once every 36 months, the commissioner
shall examine the affairs of each licensee for compliance with this
division. The commissioner shall appoint suitable persons to
perform the examination. The commissioner and his or her
appointees may examine the books, records, and documents of the
licensee, and may examine the licensee’s officers, directors,
employees, or agents under oath regarding the licensee’s
operations. The commissioner may cooperate with any agency of
the state, the federal government, or other states. begin delete The commissioner
may accept an examination conducted by one of these entities in
place of an examination by the commissioner under this law, unless
the commissioner determines that the examination does not provide
information necessary to enable the commissioner to fulfill his or
her responsibilities under this division. end delete

(b) Unless otherwise exempt pursuant to Section begin delete 28106, end delete begin insert 28102, end insert
affiliates of a licensee are subject to examination by the
commissioner on the same terms as the licensee, but only when
reports from, or examination of, a licensee provides documented
evidence of unlawful activity between a licensee and affiliate
benefitting, affecting, or arising from the activities regulated by
this division.

(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.

(d) The statement of the findings of an examination shall belong
to the commissioner and shall not be disclosed to anyone other
than the licensee, law enforcement officials, or other state or federal
regulatory agencies for further investigation and enforcement.
Reports required of licensees by the commissioner under this
division and results of examinations performed by the
commissioner under this division are the property of the
commissioner.

(e) The commissioner shall provide a written statement of the
findings of the examination, issue a copy of that statement to begin delete each
licensee’s principals, officers, or directors, end delete begin insert the licensee end insert and take
appropriate steps to ensure correction of any violations of this
division.

(f) Notwithstanding any provision of this division, 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.

 

Chapter  5. Enforcement

 

begin delete 28158. end delete

begin insert 28154. end insert   

(a) If a licensee fails to do either of the following, the
commissioner shall impose a penalty in a sum of up to one hundred
dollars ($100) for every day:

(1) To make any report required by law or by the commissioner
within 10 days from the day designated for the making of the
report, or within any extension of time granted by the
commissioner.

(2) To include therein any matter required by law or by the
commissioner.

(b) The commissioner may by order summarily suspend or
revoke the license if a licensee fails to file any report required by
this division.

begin insert

begin insert 28156. end insert   

(a) The commissioner may, after appropriate notice
and opportunity for hearing, by order, censure or suspend for a
period not exceeding 12 months, or bar from any position of
employment, management, or control of any licensee, or any other
person, if the commissioner finds either of the following:

(1) That the censure, suspension, or bar is in the public interest
and that the person has committed or caused a violation of this
division or rule or order of the commissioner, which violation was
either known or should have been known by the person committing
or causing it or has caused material damage to the licensee or to
the public.

(2) That the person has been convicted of or pleaded nolo
contendere to any crime, or has been held liable in any civil action
by final judgment, or any administrative judgment by any public
agency, if that crime or civil or administrative judgment involved
any offense specified in subdivision (b) of Section 50317, or any
other offense reasonably related to the qualifications, functions,
or duties of a person engaged in the business in accordance with
the provisions of this division.

(b) Within 15 days from the date of a notice of intention to issue
an order pursuant to subdivision (a), the person may request a
hearing under the Administrative Procedure Act (Chapter 5
(commencing with Section 11500) of Division 3 of Title 2 of the
Government Code). Upon receipt of a request, the matter shall be
set for hearing to commence within 30 days after such receipt
unless the person subject to this division consents to a later date.
If no hearing is requested within 15 days after the mailing or
service of such notice and none is ordered by the commissioner,
the failure to request a hearing shall constitute a waiver of the
right to a hearing.

(c) Upon receipt of a notice of intention to issue an order
pursuant to this section, the person who is the subject of the
proposed order is immediately prohibited from engaging in any
servicing.

(d) Persons suspended or barred under this section are
prohibited from participating in any business activity of a licensee
and from engaging in any business activity on the premises where
a licensee is servicing.

(e) This section shall apply to any violation, conviction, plea,
or judgment occurring at any time prior to and after the enactment
of this section.

end insert begin delete

28160.  

(a) If the commissioner has a reasonable basis to
believe that a licensee is violating or failing to comply with this
division or any regulation or order of the commissioner, or
servicing student loans in an unsafe or injurious manner, then the
commissioner may direct the licensee to comply with the law by
an order issued by the commissioner. The order shall require the
licensee to show cause before the commissioner, at a time and
place to be fixed by the commissioner, as to why the order should
not be observed.

(b) 

end delete

begin insert

begin insert 28158. end insert   

end insert

If, after investigation, the commissioner has reasonable
grounds to believe that a licensee is conducting business in an
unsafe or injurious manner, the commissioner shall, by written
order addressed to the licensee, direct the discontinuance of the
unsafe or injurious practices. The order shall be effective
immediately, but shall not become final except in accordance with
the provisions of Section begin delete 21866. end delete begin insert 28164. end insert

begin delete 28162. end delete

begin insert 28160. end insert   

Whenever, in the opinion of the commissioner, a person
is engaged in the business of servicing student loans begin delete within end delete begin insert in end insert this
state, either actually or through subterfuge, without a license from
the commissioner, the commissioner may order that person to
desist and refrain. If, within 30 days after an order is served, a
request for a hearing is filed in writing and the hearing is not held
within 60 days of the filing, the order is rescinded. This section
does not apply to persons exempted under subdivision (b) of
Section begin delete 28106. end delete begin insert 28102. end insert

begin delete 28164. end delete

begin insert 28162. end insert   

If, after investigation, the commissioner has reasonable
grounds to believe that a licensee begin delete has violated its articles of
incorporation or any law or rule binding upon it, end delete begin insert is failing to
comply with this division or any regulation or order of the
commissioner, end insert the commissioner shall, by written order addressed
to the licensee, direct the discontinuance of the begin delete violation. end delete begin insert failure
to comply. end insert The order shall be effective immediately, but shall not
become final except in accordance with the provisions of Section

begin delete 28166. end delete begin insert 28164. end insert

begin delete 28166. end delete

begin insert 28164. end insert   

(a) No order issued pursuant to this chapter may
become final except after notice to the affected licensee of the
commissioner’s intention to make the order final and of the reasons
for the finding. The commissioner shall also notify the licensee
that upon receiving a request, the matter will be set for hearing to
commence within 15 business days after receipt. The licensee may
consent to have the hearing commence at a later date. If no hearing
is requested within 30 days after the mailing or service of the
required notice, and none is ordered by the commissioner, the order
may become final without hearing and the licensee shall
immediately discontinue the practices named in the order. If a
hearing is requested or ordered, it shall be held in accordance with
the provisions of the Administrative Procedure Act (Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title
2 of the Government Code), and the commissioner shall have all
of the powers granted under that act. If, upon the hearing, it appears
to the commissioner that the licensee is conducting business in an
unsafe and injurious manner or is begin delete violating its articles of
incorporation or any law of this division, or any rule binding upon
it, end delete begin insert failing to comply with this division or any regulation or order
of the commissioner, end insert the commissioner shall make the order of
discontinuance final and the licensee shall immediately discontinue
the practices named in the order.

(b) The licensee has 10 days after an order is made final to
commence an action to restrain enforcement of the order. If the
enforcement of the order is not enjoined within 10 days by the
court in which the action is brought, the licensee shall comply with
the order.

begin insert

(c) The commissioner may immediately revoke the licensee’s
license if the licensee fails to comply with any order issued under
this division. The commissioner shall not revoke the license if,
within 10 days from the effective date of the revocation order, the
licensee secures a court order restraining the enforcement of the
commissioner’s revocation order.

end insert

begin delete

28168.  

(a) 

end delete

begin insert

begin insert 28166. end insert   

end insert

The commissioner may issue an order suspending or
revoking a license if, after notice and an opportunity for hearing,
the commissioner finds any of the following:

begin delete

(1)

end delete

begin insert (a) end insert  The licensee is violating this division or a regulation adopted
or an order issued under this division.

begin delete

(2)

end delete

begin insert (b) end insert  The licensee does not cooperate with an examination or
investigation by the commissioner.

begin delete

(3)

end delete

begin insert (c) end insert  The licensee engages in fraud, intentional misrepresentation,
or gross negligence in servicing a student loan.

begin delete

(4)

end delete

begin insert (d) end insert  The competence, experience, character, or general fitness
of the licensee, an individual specified in Section begin delete 28120, end delete begin insert 28116, end insert
or any person responsible for servicing a student loan for the
licensee indicates that it is not in the public interest to permit the
licensee to continue servicing student loans.

begin delete

(5) The licensee engages in an unsafe or unsound practice.

end delete begin insert

(e) The licensee engages in unsafe or injurious practice.

end insert begin delete

(6)

end delete

begin insert (f) end insert  The licensee is insolvent, suspends payment of its obligations,
or makes a general assignment for the benefit of its creditors.

begin delete

(7)

end delete

begin insert (g) end insert  Any fact or condition exists that, if it had existed at the time
the licensee applied for the license, would have been grounds for
denying the application.

begin delete

(b) In determining whether a licensee is engaging in an unsafe
or unsound practice, the commissioner may consider the size and
condition of the licensee’s provision of servicing, the magnitude
of the loss, the gravity of the violation of this division, and the
previous conduct of the persons involved.

end delete

begin delete 28170. end delete

begin insert 28168. end insert   

(a) If, after investigation, the commissioner has
reasonable grounds to believe that a person has engaged or is about
to engage in any act or practice constituting a violation of any
provision of this division or any rule or order hereunder, the
commissioner may bring an action to enjoin the acts or practices
or to enforce compliance with this division or any rule or order
adopted under this division. The action shall be brought in the
name of the people of the State of California in the superior court.
Upon a proper showing, a permanent or preliminary injunction,
restraining order, or writ of mandate shall be granted. A receiver,
monitor, conservator, or other designated fiduciary or officer of
the court, which may include the commissioner, may be appointed
for the defendant or the defendant’s assets. Any other ancillary
relief may be granted as appropriate.

A receiver, monitor, conservator, or other designated fiduciary
or officer of the court appointed by the superior court pursuant to
this section may, with the approval of the court, exercise any or
all of the powers of the defendant’s officers, directors, partners,
trustees, or persons who exercise similar powers and perform
similar duties. The powers include the filing of a petition for
bankruptcy. No action at law or in equity may be maintained by
any party against the commissioner, or a receiver, monitor,
conservator, or other designated fiduciary or officer of the court,
by reason of their exercising these powers or performing these
duties pursuant to the order of, or with the approval of, the superior
court.

(b) If the commissioner determines it is in the public interest,
the commissioner may include in any action authorized by
subdivision (a) a claim for ancillary relief. The ancillary relief may
include, but not be limited to, restitution or disgorgement or
damages on behalf of the persons injured by the act or practice
constituting the subject matter of the action. The court shall have
jurisdiction to award additional relief.

begin delete

28171.  

(a) If, upon inspection, examination, or investigation,
the commissioner has cause to believe that a licensee or a person
is violating or has violated any provision of this division or any
rule or order thereunder, the commissioner or his or her designee
may issue a citation to that licensee or person in writing, describing
with particularity the basis of the citation. Each citation may
contain an order to correct the violation or violations identified
and provide a reasonable time period or periods by which the
violation or violations must be corrected. In addition, each citation
may assess an administrative fine not to exceed two thousand five
hundred dollars ($2,500) that shall be deposited in the State
Corporations Fund. In assessing a fine, the commissioner shall
give due consideration to the appropriateness of the amount of the
fine with respect to factors including the gravity of the violation,
the good faith of the person or licensees cited, and the history of
previous violations. A citation issued and a fine assessed pursuant
to this section, while constituting punishment for a violation of
law, shall be in lieu of other administrative discipline by the
commissioner for the offense or offenses cited, and the citation
and fine payment thereof by a licensee shall not be reported as
disciplinary action taken by the commissioner.

(b) Notwithstanding subdivision (a), nothing in this section shall
prevent the commissioner from issuing an order to desist and
refrain from engaging in a specific business or activity or activities,
or an order to suspend all business operations to a person or
licensee who is engaged in or who has engaged in continued or
repeated violations of this division. In any of these circumstances,
the sanctions authorized under this section shall be separate from,
and in addition to, all other administrative, civil, or criminal
remedies.

(c) If, within 30 days from the receipt of the citation, the person
cited fails to notify the department that the person intends to request
a hearing pursuant to Section 28176, the citation shall be deemed
final.

(d) After the exhaustion of the review procedures provided for
in this section, the commissioner may apply to the appropriate
superior court for a judgment in the amount of the administrative
fine and an order compelling the cited person to comply with the
order of the commissioner. The application, which shall include
a certified copy of the final order of the commissioner, shall
constitute a sufficient showing to warrant the issuance of the
judgment and order.

end delete begin insert

begin insert 28170. end insert   

(a) If, upon inspection, examination or investigation,
based upon a complaint or otherwise, the department has cause
to believe that a person is engaged in the business of servicing
student loans without a license, or a licensee or person is violating
any provision of this division or any rule or order thereunder, the
department may issue a citation to that person in writing,
describing with particularity the basis of the citation. Each citation
may contain an order to desist and refrain and an assessment of
an administrative penalty not to exceed two thousand five hundred
dollars ($2,500). All penalties collected under this section shall
be deposited in the State Corporations Fund.

(b) The sanctions authorized under this section shall be separate
from, and in addition to, all other administrative, civil, or criminal
remedies.

(c) If within 30 days from the receipt of the citation the person
cited fails to notify the department that the person intends to
request a hearing as described in subdivision (d), the citation shall
be deemed final.

(d) Any hearing under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code, and in all
states the commissioner has all the powers granted therein.

(e) After the exhaustion of the review procedures provided for
in this section, the department may apply to the appropriate
superior court for a judgment in the amount of the administrative
penalty and order compelling the cited person to comply with the
order of the department. The application, which shall include a
certified copy of the final order of the department, shall constitute
a sufficient showing to warrant the issuance of the judgment and
order.

end insert

28172.  

(a) Any person who violates a provision of this
division, or any rule or order under this division, shall be liable
for a civil penalty not to exceed two thousand five hundred dollars
($2,500) for each violation. This penalty shall be assessed and
recovered in a civil action brought in the name of the people of
the State of California by the commissioner in any court of
competent jurisdiction.

(b) As applied to the penalties for acts in violation of this
division, the remedies provided by this section and by other
sections of this division are not exclusive, and may be sought and
employed in any combination to enforce the provisions of this
division.

28174.  

(a) The commissioner may refer the evidence that is
available concerning any violation of this division or of any rule
or order adopted under this division to the district attorney of the
county in which the violation occurred. The district attorney may,
with or without the commissioner’s referral, institute criminal
proceedings under this division. The commissioner and his or her
counsel, deputies, or assistants may, upon request of the district
attorney, assist the district attorney in presenting the law or facts
at the trial.

(b) After an examination, investigation, or hearing under this
division, if the commissioner deems it of public interest or
advantage, he or she may certify a record to the proper prosecuting
official of the county or city in which the act complained of,
examined, or investigated occurred.

28176.  

All hearings provided for in this division shall be
conducted in accordance with the provisions of Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title
2 of the Government Code. The commissioner has all the powers
granted therein.

 

Chapter  6. Miscellaneous

 

28178.  

If any provision of this division or the application
thereof to any person or circumstances is held invalid, illegal, or
unenforceable, such invalidity, illegality, or unenforceability shall
not affect other provisions or applications of this division that can
be given effect without the invalid, illegal, or unenforceable
provision or application, and, to this end, the provisions of this
division are declared to be severable.

28180.  

The rights and remedies provided in this division are
in addition to any other rights and remedies provided by law.

begin delete 28181. end delete

begin insert 28182. end insert   

This division shall become operative on July 1, 2018.
The commissioner may take any necessary actions to exercise the
authority pursuant to begin delete subdivision (a) of Section 28110, end delete begin insert this division
to prepare for the July 1, 2018, operative date end insert on and after January
1, 2017.

SEC. 3.  

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.

SEC. 4.  

The Legislature finds and declares that Section 2 of
this act, which adds begin delete Sections 28150 and 28154 end delete begin insert Section 28152 end insert to
the Financial Code, imposes a limitation on the public’s right of
access to the meetings of public bodies or the writings of public
officials and agencies within the meaning of Section 3 of Article
I of the California Constitution. Pursuant to that constitutional
provision, the Legislature makes the following findings to
demonstrate the interest protected by this limitation and the need
for protecting that interest:

Protecting from public disclosure limited confidential
information provided by licensees to the Commissioner of Business
Oversight properly balances protecting legitimate private economic
interests and public interests in effective regulation.