BILL NUMBER: SB 235 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Block
FEBRUARY 17, 2015
An act to amend Sections 22372 and 22374 of the Financial Code,
relating to consumer loans.
LEGISLATIVE COUNSEL'S DIGEST
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:
SECTION 1. Section 22372 of the Financial Code is amended to read:
22372. (a) A finder may perform one or more of the following
services for a licensee at the finder's physical location for
business:
(1) Distributing, circulating, using, or publishing preprinted
brochures, flyers, factsheets, or other written materials relating to
loans that the licensee may make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their being
distributed, circulated, or published.
(2) Providing written factual information about loan terms,
conditions, or qualification requirements to a prospective borrower
that has been either prepared by the licensee or reviewed and
approved in writing by the licensee. A finder may discuss that
information with a prospective borrower in general terms, but may not
provide counseling or advice to a prospective borrower.
(3) Notifying a prospective borrower of the information needed in
order to complete a loan application without providing counseling or
advice to a prospective borrower.
(4) Entering information provided by the prospective borrower on a
preprinted or electronic application form or onto a preformatted
computer database without providing counseling or advice to a
prospective borrower.
(5) Assembling credit applications and other materials obtained in
the course of a credit application transaction for submission to the
licensee.
(6) Contacting the licensee to determine the status of a loan
application.
(7) Communicating a response that is returned by the licensee's
automated underwriting system to a borrower or a prospective
borrower.
(8) Obtaining a borrower's signature on documents prepared by the
licensee and delivering final copies of the documents to the
borrower.
(9) Providing the following services on behalf of the licensee for
any loan for which the finder performed finding activities:
(A) Disbursing loan proceeds to a borrower, if this method of
disbursement is acceptable to the borrower. Any loan disbursement
made by a finder under this subdivision shall be deemed made by the
licensee on the date the funds are disbursed or otherwise made
available by the finder to the borrower.
(B) Receiving loan payment or payments from the borrower, if this
method of payment is acceptable to the borrower.
(i) Any loan payment made by a borrower to a finder under this
subdivision shall be applied to the borrower's loan and deemed
received by the licensee as of the date the payment is received by
the finder.
(ii) A finder who receives loan payments under this subdivision
shall deliver or cause to be delivered to the borrower at the time
that the payment is made by the borrower, a plain and complete
receipt showing all of the following:
(I) The date of payment.
(II) The total payment amount made.
(III) The corresponding loan account upon which the payment is
being applied.
(iii) A borrower who submits a loan payment to a finder under this
subdivision shall not be liable for any failure or delay by the
finder in transmitting the payment to the licensee.
(C) Providing any notice or disclosure required to be provided to
the borrower by the licensee.
(b) A finder shall not engage in any of the following activities:
(1) Providing counseling or advice to a borrower or prospective
borrower.
(2) Providing loan-related marketing material that has not
previously been approved by the licensee to a borrower or a
prospective borrower.
(3) Interpreting or explaining the relevance, significance, or
effect of any of the marketing materials or loan documents the finder
provides to a borrower or prospective borrower.
(c) Any person who performs one or more of the following
activities is a broker within the meaning of Section 22004 rather
than a finder within the meaning of this section:
(1) Negotiating the price, length, or any other loan term between
a licensee and a prospective borrower.
(2) Advising either a prospective borrower or a licensee as to any
loan term.
(3) Offering information pertaining to a single prospective
borrower to more than one licensee, except that, if a licensee has
declined to offer a loan to a prospective borrower and has so
notified that prospective borrower in writing, the person may then
offer information pertaining to a single prospective borrower to
another licensee with which it has a finder's agreement.
(4) Personally contacting or providing services to a borrower or
prospective borrower at any place other than the finder's physical
location for business.
(d) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.
SEC. 2. Section 22374 of the Financial Code is amended to read:
22374. (a) A finder may be compensated by the licensee pursuant
to the written agreement between the licensee and the finder, as
described in Section 22376. Compensation may be paid in
accordance with a compensation schedule that is mutually agreed to by
the licensee and the finder.
(b) The Notwithstanding subdivision (a),
the compensation of a finder by a licensee shall be subject to
all of the following requirements:
(1) No fee compensation shall be
paid to a finder in connection with a loan application until
and unless that loan is consummated.
(2) No fee compensation shall be
paid to a finder based upon the principal amount of the loan.
(3) No fee paid to a finder shall exceed the following amounts:
(A) Forty-five dollars ($45) per loan for the first 40 loans
originated each month at the finder's location.
(B) Forty dollars ($40) per loan for any subsequent loans
originated during that month at the finder's location.
(4)
(3) The finder's location for services under this
article and other information required by Section 22375 has been
reported to the commissioner and the finder has not been barred from
providing services at that location by the commissioner.
(c) No licensee shall, directly or indirectly, pass on to a
borrower any fee, fee or other compensation,
or any portion of any fee, fee or other
compensation, that the licensee pays to a finder in connection
with that borrower's loan or loan application.
loan.
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.