Senate BillNo. 235

Introduced by Senator Block

February 17, 2015

An act to amend Sections 22372 and 22374 of the Financial Code, relating to consumer loans.


SB 235, as introduced, Block. Small dollar loans: finder duties and compensation

Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders by the Commissioner of Business Oversight and makes a willful violation of its provisions a crime. Existing law establishes, until January 1, 2018, the Pilot Program for Increased Access to Responsible Small Dollar Loans for the purpose of allowing greater access for responsible installment loans in principal amounts of at least $300 and less than $2,500 administered by the commissioner.

Existing law authorizes a licensee in the program to use the services of finders, as defined, to bring licensees and prospective borrowers together, at the finder’s place of business, for the purpose of negotiating loan contracts, subject to a written agreement meeting specified requirements.

This bill would expand the services that a finder is authorized to perform to include, among other things, disbursement of loan proceeds to, and receipt of loan payments from, the borrower.

Existing law establishes a maximum finders’s fee of $45 per loan for the first 40 loans originated at the finder’s location per month, and $40 per loan for loans thereafter during that month.

This bill would delete those maximums and would authorize payment of finder compensation pursuant to a schedule that is mutually agreed to by the licensee and the finder and would make conforming changes.

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.

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

P2    1


Section 22372 of the Financial Code is amended
2to read:



(a) A finder may perform one or more of the following
4services for a licensee at the finder’s physical location for business:

5(1) Distributing, circulating, using, or publishing preprinted
6brochures, flyers, factsheets, or other written materials relating to
7loans that the licensee may make or negotiate and that have been
8reviewed and approved in writing by the licensee prior to their
9being distributed, circulated, or published.

10(2) Providing written factual information about loan terms,
11conditions, or qualification requirements to a prospective borrower
12that has been either prepared by the licensee or reviewed and
13approved in writing by the licensee. A finder may discuss that
14information with a prospective borrower in general terms, but may
15not provide counseling or advice to a prospective borrower.

16(3) Notifying a prospective borrower of the information needed
17in order to complete a loan application without providing
18counseling or advice to a prospective borrower.

19(4) Entering information provided by the prospective borrower
20on a preprinted or electronic application form or onto a
21preformatted computer database without providing counseling or
22advice to a prospective borrower.

23(5) Assembling credit applications and other materials obtained
24in the course of a credit application transaction for submission to
25the licensee.

P3    1(6) Contacting the licensee to determine the status of a loan

3(7) Communicating a response that is returned by the licensee’s
4automated underwriting system to a borrower or a prospective

6(8) Obtaining a borrower’s signature on documents prepared
7by the licensee and delivering final copies of the documents to the

begin insert

9(9) Providing the following services on behalf of the licensee
10for any loan for which the finder performed finding activities:

end insert
begin insert

11(A) Disbursing loan proceeds to a borrower, if this method of
12disbursement is acceptable to the borrower. Any loan disbursement
13made by a finder under this subdivision shall be deemed made by
14the licensee on the date the funds are disbursed or otherwise made
15available by the finder to the borrower.

end insert
begin insert

16(B) Receiving loan payment or payments from the borrower, if
17this method of payment is acceptable to the borrower.

end insert
begin insert

18(i) Any loan payment made by a borrower to a finder under this
19subdivision shall be applied to the borrower’s loan and deemed
20received by the licensee as of the date the payment is received by
21the finder.

end insert
begin insert

22(ii) A finder who receives loan payments under this subdivision
23shall deliver or cause to be delivered to the borrower at the time
24that the payment is made by the borrower, a plain and complete
25receipt showing all of the following:

end insert
begin insert

26(I) The date of payment.

end insert
begin insert

27(II) The total payment amount made.

end insert
begin insert

28(III) The corresponding loan account upon which the payment
29is being applied.

end insert
begin insert

30(iii) A borrower who submits a loan payment to a finder under
31this subdivision shall not be liable for any failure or delay by the
32finder in transmitting the payment to the licensee.

end insert
begin insert

33(C) Providing any notice or disclosure required to be provided
34to the borrower by the licensee.

end insert

35(b) A finder shall not engage in any of the following activities:

36(1) Providing counseling or advice to a borrower or prospective

38(2) Providing loan-related marketing material that has not
39previously been approved by the licensee to a borrower or a
40prospective borrower.

P4    1(3) Interpreting or explaining the relevance, significance, or
2effect of any of the marketing materials or loan documents the
3finder provides to a borrower or prospective borrower.

4(c) Any person who performs one or more of the following
5activities is a broker within the meaning of Section 22004 rather
6than a finder within the meaning of this section:

7(1) Negotiating the price, length, or any other loan term between
8a licensee and a prospective borrower.

9(2) Advising either a prospective borrower or a licensee as to
10any loan term.

11(3) Offering information pertaining to a single prospective
12borrower to more than one licensee, except that, if a licensee has
13declined to offer a loan to a prospective borrower and has so
14notified that prospective borrower in writing, the person may then
15offer information pertaining to a single prospective borrower to
16another licensee with which it has a finder’s agreement.

17(4) Personally contacting or providing services to a borrower
18or prospective borrower at any place other than the finder’s
19physical location for business.

20(d) A finder shall comply with all laws applicable to the licensee
21that impose requirements upon the licensee for safeguards for
22information security.


SEC. 2.  

Section 22374 of the Financial Code is amended to



(a) A finder may be compensated by the licensee
26pursuant to the written agreement between the licensee and the
27finder, as described in Section 22376.begin insert Compensation may be paid
28in accordance with a compensation schedule that is mutually
29agreed to by the licensee and the finder.end insert

30(b) begin deleteThe end deletebegin insertNotwithstanding subdivision (a), theend insert compensation of
31a finder by a licensee shall be subject to all of the following

33(1) Nobegin delete feeend deletebegin insert compensationend insert shall be paid to a finder in connection
34with a loan applicationbegin delete until andend delete unless that loan is consummated.

35(2) Nobegin delete feeend deletebegin insert compensationend insert shall be paid to a finder based upon
36the principal amount of the loan.

begin delete

37(3) No fee paid to a finder shall exceed the following amounts:

38(A) Forty-five dollars ($45) per loan for the first 40 loans
39originated each month at the finder’s location.

P5    1(B) Forty dollars ($40) per loan for any subsequent loans
2originated during that month at the finder’s location.

end delete
begin delete


end delete

4begin insert(3)end insert The finder’s location for services under this article and other
5information required by Section 22375 has been reported to the
6commissioner and the finder has not been barred from providing
7services at that location by the commissioner.

8(c) No licensee shall, directly or indirectly, pass on to a borrower
9anybegin delete fee,end deletebegin insert fee or other compensation,end insert or any portion of anybegin delete fee,end deletebegin insert fee
10or other compensation,end insert
that the licensee pays to a finder in
11connection with that borrower’sbegin delete loan or loan application.end deletebegin insert loan.end insert


SEC. 3.  

No reimbursement is required by this act pursuant to
13Section 6 of Article XIII B of the California Constitution because
14the only costs that may be incurred by a local agency or school
15district will be incurred because this act creates a new crime or
16infraction, eliminates a crime or infraction, or changes the penalty
17for a crime or infraction, within the meaning of Section 17556 of
18the Government Code, or changes the definition of a crime within
19the meaning of Section 6 of Article XIII B of the California