Amended in Assembly July 8, 2015

Amended in Senate May 5, 2015

Senate BillNo. 235


Introduced by Senator Block

(Coauthor: Senator Hill)

February 17, 2015


An act to amend Sectionsbegin insert 22370,end insert 22372, 22373, 22374, 22375, and 22377 of the Financial Code, relating to consumer loans.

LEGISLATIVE COUNSEL’S DIGEST

SB 235, as amended, 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, licensed or regulated under prescribed provisions of law, is authorized to perform to include, among other things, disbursement of loan proceeds to, and receipt of loan payments from, the borrower.

begin insert

This bill would require the licensee to develop and implement policies and procedures designed to respond to questions raised by applicants and borrowers regarding their loans, including those involving finders.

end insert

Existing law establishes a maximum finder’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, not to exceed $70 per loan. The bill wouldbegin delete requireend deletebegin insert require, if a loan applicant has questions that the finder is not permitted to answer,end insert the finder to assist an applicantbegin delete in obtaining answers to questions about his or her loan, and would make conforming changes.end deletebegin insert in making direct contact with the lender before the loan is consummated, and would require the licensee to ensure that a loan is not consummated until the licensee completes a 2-way communication, as defined, with the applicant.end insert The bill would require a licensee to provide the commissioner with prescribed information relating to each finder, including, but not limited to, the finder’s delinquency rate and default rate, and would authorize the commissioner to take prescribed action against a finderbegin delete that is found to be in violation,end deletebegin insert upon determination that it would be warranted by reported data,end insert including, but not limited to, disqualifying the finder from providing services under the pilot program.

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    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 22370 of the end insertbegin insertFinancial Codeend insertbegin insert is amended
2to read:end insert

3

22370.  

(a) Any loan made pursuant to this section shall comply
4with the following requirements:

5(1) The loan shall be unsecured.

P3    1(2) Interest on the loan shall accrue on a simple-interest basis,
2through the application of a daily periodic rate to the actual unpaid
3principal balance each day.

4(3) The licensee shall disclose the following to the consumer
5in writing, in a type face no smaller than 12-point type, at the time
6of application:

7(A) The amount borrowed; the total dollar cost of the loan to
8the consumer if the loan is paid back on time, including the sum
9of the administrative fee, principal amount borrowed, and interest
10payments; the corresponding annual percentage rate, calculated in
11accordance with Federal Reserve Board Regulation Z (12 C.F.R.
12226); the periodic payment amount; the delinquency fee schedule;
13and the following statement: “Repaying your loan early will lower
14your borrowing costs by reducing the amount of interest you will
15pay. This loan has no prepayment penalty.”

16(B) A statement that the consumer has the right to rescind the
17loan by notifying the licensee of the consumer’s intent to rescind
18the loan and returning the principal advanced by the end of the
19business day following the date the loan is consummated.

20(4) A licensee may provide the borrower with the disclosures
21required by paragraph (3) in a mobile or other electronic
22application, on which the size of the type face of the disclosure
23can be manually modified by a prospective borrower, if the
24prospective borrower is given the option to print the disclosure in
25a type face of at least 12-point size or is provided by the licensee
26with a hardcopy of the disclosure in a type face of at least 12-point
27size before the loan is consummated.

28(5) The loan shall have a minimum principal amount upon
29origination of three hundred dollars ($300) and a term of not less
30than the following:

31(A) Ninety days for loans whose principal balance upon
32origination is less than five hundred dollars ($500).

33(B) One hundred twenty days for loans whose principal balance
34upon origination is at least five hundred dollars ($500), but is less
35than one thousand five hundred dollars ($1,500).

36(C) One hundred eighty days for loans whose principal balance
37upon origination is at least one thousand five hundred dollars
38($1,500).

39(b) As an alternative to the charges authorized by Section 22303
40or 22304, a licensee approved by the commissioner to participate
P4    1in the program may contract for and receive charges for a loan
2made pursuant to this section at an annual simple interest rate not
3to exceed the following:

4(1) The lesser of 36 percent or the sum of 32.75 percent plus
5the United States prime lending rate, as of the date of loan
6origination, on that portion of the unpaid principal balance of the
7loan up to and including, but not in excess of, one thousand dollars
8($1,000). The interest rate calculated as of the date of loan
9origination shall be fixed for the life of the loan.

10(2) The lesser of 35 percent or the sum of 28.75 percent plus
11the United States prime lending rate, as of the date of loan
12origination, on that portion of the unpaid principal balance of the
13loan in excess of one thousand dollars ($1,000), but less than two
14thousand five hundred dollars ($2,500). The interest rate calculated
15as of the date of loan origination shall be fixed for the life of the
16loan.

17(c) (1) As to any loan made under this section, a licensee
18approved by the commissioner to participate in the program may
19contract for and receive an administrative fee, which shall be fully
20earned immediately upon making the loan, in an amount not to
21exceed the applicable of the following:

22(A) Seven percent of the principal amount, exclusive of the
23administrative fee, or ninety dollars ($90), whichever is less, on
24the first loan made to a borrower.

25(B) Six percent of the principal amount, exclusive of the
26administrative fee, or seventy-five dollars ($75), whichever is less,
27on the second and subsequent loans made to that borrower.

28(2) A licensee shall not charge the same borrower an
29administrative fee more than once in any four-month period.

30(3) For purposes of this section, “refinance” means the
31replacement or revision of an existing loan contract with a borrower
32that results in an extension of additional principal to that borrower.
33A licensee shall not refinance a loan made under this section, unless
34all of the following conditions are met at the time the borrower
35submits an application to refinance:

36(A) The borrower has repaid at least 60 percent of the
37outstanding principal remaining on his or her loan.

38(B) The borrower is current on his or her outstanding loan.

39(C) The licensee underwrites the new loan in accordance with
40paragraph (4) of subdivision (f).

P5    1(D) If the loan proceeds of both the original loan and the
2refinance loan are to be used for personal, family, or household
3purposes, the borrower has not previously refinanced the
4outstanding loan more than once.

5(4) Notwithstanding paragraph (3), an administrative fee shall
6not be contracted for or received in connection with the refinancing
7of a loan unless at least eight months have elapsed since the receipt
8of a previous administrative fee paid by the borrower. With the
9exception of a loan that is refinanced, only one administrative fee
10may be contracted for or received until the loan has been repaid
11in full. Section 22305 shall not apply to any loan made under this
12section.

13(d) Notwithstanding subdivision (a) of Section 22320.5, a
14licensee approved by the commissioner to participate in the
15program may require reimbursement from a borrower for the actual
16insufficient funds fees incurred by that licensee due to actions of
17the borrower, and may contract for and receive a delinquency fee
18that is one of the following amounts:

19(1) For a period of delinquency of not less than seven days, an
20amount not in excess of fourteen dollars ($14).

21(2) For a period of delinquency of not less than 14 days, an
22amount not in excess of twenty dollars ($20).

23(e) If a licensee opts to impose a delinquency fee, it shall use
24the delinquency fee schedule described in subdivision (d), subject
25to all of the following:

26(1) No more than one delinquency fee may be imposed per
27delinquent payment.

28(2) No more than two delinquency fees may be imposed during
29any period of 30 consecutive days.

30(3) No delinquency fee may be imposed on a borrower who is
31180 days or more past due if that fee would result in the sum of
32the borrower’s remaining unpaid principal balance, accrued interest,
33and delinquency fees exceeding 180 percent of the original
34principal amount of the borrower’s loan.

35(4) The licensee or any of its wholly owned subsidiaries shall
36attempt to collect a delinquent payment for a period of at least 30
37days following the start of the delinquency before selling or
38assigning that unpaid debt to an independent party for collection.

begin insert

39(f) The licensee shall develop and implement policies and
40procedures designed to respond to questions raised by applicants
P6    1and borrowers regarding their loans, including those involving
2finders, and to address customer complaints as soon as reasonably
3practicable.

end insert
begin delete

4(f)

end delete

5begin insert(g)end insert The following shall apply to a loan made by a licensee
6pursuant to this section:

7(1) Prior to disbursement of loan proceeds, the licensee shall
8either (A) offer a credit education program or seminar to the
9borrower that has been previously reviewed and approved by the
10commissioner for use in complying with this section; or (B) invite
11the borrower to a credit education program or seminar offered by
12an independent third party that has been previously reviewed and
13approved by the commissioner for use in complying with this
14section. The borrower shall not be required to participate in either
15of these education programs or seminars. A credit education
16program or seminar offered pursuant to this paragraph shall be
17provided at no cost to the borrower.

18(2) The licensee shall report each borrower’s payment
19performance to at least one consumer reporting agency that
20compiles and maintains files on consumers on a nationwide basis,
21upon acceptance as a data furnisher by that consumer reporting
22agency. For purposes of this section, a consumer reporting agency
23that compiles and maintains files on consumers on a nationwide
24basis is one that meets the definition in Section 603(p) of the
25federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). Any
26licensee that is accepted as a data furnisher after admittance into
27the program must report all borrower payment performance since
28its inception of lending under the program, as soon as practicable
29after its acceptance into the program, but in no event more than
30six months after its acceptance into the program.

31(A) The commissioner may approve a licensee for the program,
32before that licensee has been accepted as a data furnisher by a
33consumer reporting agency, if the commissioner has a reasonable
34expectation, based on information supplied by the licensee, of both
35of the following:

36(i) The licensee will be accepted as a data furnisher, once it
37achieves a lending volume required of data furnishers of its type
38by a consumer reporting agency.

39(ii) That lending volume will be achieved within the first six
40months of the licensee commencing lending.

P7    1(B) Notwithstanding subparagraph (A), the commissioner shall
2withdraw approval for pilot program participation from any
3licensee that fails to become accepted as a data furnisher by a
4consumer reporting agency within six months of commencing
5lending under the pilot program.

6(3) The licensee shall provide each borrower with the name of
7the consumer reporting agency or agencies to which it will report
8the borrower’s payment history. A licensee that is accepted as a
9data furnisher after admittance into the program shall notify its
10borrowers, as soon as practicable following acceptance as a data
11furnisher, regarding the name of the consumer reporting agency
12or agencies to which it will report that borrower’s payment history.

13(4) (A) The licensee shall underwrite each loan to determine a
14borrower’s ability and willingness to repay the loan pursuant to
15the loan terms, and shall not make a loan if it determines, through
16its underwriting, that the borrower’s total monthly debt service
17payments, at the time of origination, including the loan for which
18the borrower is being considered, and across all outstanding forms
19of credit that can be independently verified by the licensee, exceed
2050 percent of   the borrower’s gross monthly income.

21(B) (i) The licensee shall seek information and documentation
22pertaining to all of a borrower’s outstanding debt obligations during
23the loan application and underwriting process, including loans that
24are self-reported by the borrower but not available through
25independent verification. The licensee shall verify that information
26using a credit report from at least one consumer reporting agency
27that compiles and maintains files on consumers on a nationwide
28basis or through other available electronic debt verification services
29that provide reliable evidence of a borrower’s outstanding debt
30obligations.

31(ii) Notwithstanding the verification requirement in
32subparagraph (A), the licensee shall request from the borrower
33and include all information obtained from the borrower regarding
34outstanding deferred deposit transactions in the calculation of the
35borrower’s outstanding debt obligations.

36(iii) The licensee shall not be required to consider, for purposes
37of debt-to-income ratio evaluation, loans from friends or family.

38(C) The licensee shall also verify the borrower’s income that
39the licensee relies on to determine the borrower’s debt-to-income
40ratio using information from either of the following:

P8    1(i) Electronic means or services that provide reliable evidence
2of the borrower’s actual income.

3(ii) Internal Revenue Service Form W-2, tax returns, payroll
4receipts, bank statements, or other third-party documents that
5provide reasonably reliable evidence of the borrower’s actual
6income.

7(5) The licensee shall notify each borrower, at least two days
8prior to each payment due date, informing the borrower of the
9amount due, and the payment due date. Notification may be
10provided by any means mutually acceptable to the borrower and
11the licensee. A borrower shall have the right to opt out of this
12notification at any time, upon electronic or written request to the
13licensee. The licensee shall notify each borrower of this right prior
14to disbursing loan proceeds.

begin delete

15(g)

end delete

16begin insert(h)end insert (1) Notwithstanding Sections 22311 to 22315, inclusive,
17no person, in connection with, or incidental to, the making of any
18loan made pursuant to this article, may offer, sell, or require the
19borrower to contract for “credit insurance” as defined in paragraph
20(1) of subdivision (a) of Section 22314 or insurance on tangible
21personal or real property of the type specified in Section 22313.

22(2) Notwithstanding Sections 22311 to 22315, inclusive, no
23licensee, finder, or any other person that participates in the
24origination of a loan under this article shall refer a borrower to any
25other person for the purchase of “credit insurance” as defined in
26paragraph (1) of subdivision (a) of Section 22314 or insurance on
27tangible personal or real property of the type specified in Section
2822313.

begin delete

29(h)

end delete

30begin insert(i)end insert (1) No licensee shall require, as a condition of providing the
31loan, that the borrower waive any right, penalty, remedy, forum,
32or procedure provided for in any law applicable to the loan,
33including the right to file and pursue a civil action or file a
34complaint with or otherwise communicate with the commissioner
35or any court or other public entity, or that the borrower agree to
36resolve disputes in a jurisdiction outside of California or to the
37application of laws other than those of California, as provided by
38law. Any waiver by a borrower must be knowing, voluntary, and
39in writing, and expressly not made a condition of doing business
40with the licensee. Any waiver that is required as a condition of
P9    1doing business with the licensee shall be presumed involuntary,
2unconscionable, against public policy, and unenforceable. The
3licensee has the burden of proving that a waiver of any rights,
4penalties, forums, or procedures was knowing, voluntary, and not
5made a condition of the contract with the borrower.

6(2) No licensee shall refuse to do business with or discriminate
7against a borrower or applicant on the basis that the borrower or
8applicant refuses to waive any right, penalty, remedy, forum, or
9procedure, including the right to file and pursue a civil action or
10complaint with, or otherwise notify, the commissioner or any court
11or other public entity. The exercise of a person’s right to refuse to
12waive any right, penalty, remedy, forum, or procedure, including
13a rejection of a contract requiring a waiver, shall not affect any
14otherwise legal terms of a contract or an agreement.

15(3) This subdivision shall not apply to any agreement to waive
16any right, penalty, remedy, forum, or procedure, including any
17agreement to arbitrate a claim or dispute, after a claim or dispute
18has arisen. Nothing in this subdivision shall affect the enforceability
19or validity of any other provision of the contract.

begin delete

20(i)

end delete

21begin insert(j)end insert This section shall not apply to any loan of a bona fide
22principal amount of two thousand five hundred dollars ($2,500)
23or more as determined in accordance with Section 22251. For
24purposes of this subdivision, “bona fide principal amount” shall
25be determined in accordance with Section 22251.

26

begin deleteSECTION 1.end delete
27begin insertSEC. 2.end insert  

Section 22372 of the Financial Code is amended to
28read:

29

22372.  

(a) A finder may perform one or more of the following
30services for a licensee at the finder’s physical location for business:

31(1) Distributing, circulating, using, or publishing preprinted
32brochures, flyers, factsheets, or other written materials relating to
33loans that the licensee may make or negotiate and that have been
34reviewed and approved in writing by the licensee prior to their
35being distributed, circulated, or published.

36(2) Providing written factual information about loan terms,
37conditions, or qualification requirements to a prospective borrower
38that has been either prepared by the licensee or reviewed and
39approved in writing by the licensee. A finder may discuss that
P10   1information with a prospective borrower in general terms, but may
2not provide counseling or advice to a prospective borrower.

3(3) Notifying a prospective borrower of the information needed
4in order to complete a loan application without providing
5counseling or advice to a prospective borrower.

6(4) Entering information provided by the prospective borrower
7on a preprinted or electronic application form or onto a
8preformatted computer database without providing counseling or
9advice to a prospective borrower.

10(5) Assembling credit applications and other materials obtained
11in the course of a credit application transaction for submission to
12the licensee.

13(6) Contacting the licensee to determine the status of a loan
14application.

15(7) Communicating a response that is returned by the licensee’s
16automated underwriting system to a borrower or a prospective
17borrower.

18(8) Obtaining a borrower’s signature on documents prepared
19by the licensee and delivering final copies of the documents to the
20borrower.

21(b) A finder that is licensed or regulated pursuant to this division,
22Division 1.1 (commencing with Section 1000), Division 1.2
23(commencing with Section 2000), Division 3 (commencing with
24Section 12000), Division 5 (commencing with Section 14000),
25Division 6 (commencing with Section 17000), Division 7
26(commencing with Section 18000), Division 8 (commencing with
27Section 21000), Division 10 (commencing with Section 23000),
28or Division 20 (commencing with Section 50000) of this code;
29Chapter 5 (commencing with Section 1621) of Part 2 of Division
301 of the Insurance Code; Chapter 1 (commencing with Section
315000) of Division 3 of the Business and Professions Code; is an
32approved agent of a person licensed pursuant to Division 1.2
33(commencing with Section 2000) of this code; or is a federally
34regulated bank, thrift, or credit union, may additionally provide
35any of the following services on behalf of the licensee for any loan
36for which the finder performed finding activities:

37(1) Disbursing loan proceeds to a borrower, if this method of
38disbursement is acceptable to the borrower.

39(A) Any loan disbursement made by a finder under this
40subdivision shall be deemed made by the licensee on the date the
P11   1funds are disbursed or otherwise made available by the finder to
2the borrower.

3(B) A finder that disburses loan proceeds to a borrower shall
4deliver or cause to be delivered to the borrower at the time loan
5proceeds are disbursed a plain and complete receipt showing all
6of the following:

7(i) The date of disbursement.

8(ii) The total amount disbursed.

9(iii) The corresponding loan accountbegin delete number.end deletebegin insert identification.end insert

10(iv) The following statement, prominently displayed in a type
11size equal to or greater than the type size used to display the other
12items on the receipt: “If you have any questions about your loan,
13now or in the future, you should direct those questions to [name
14of licensee] by [insert at least two different ways in which a
15borrower may contact the licensee].”

16(2) Receiving loan payment or payments from the borrower, if
17this method of payment is acceptable to the borrower.

18(A) Any loan payment made by a borrower to a finder under
19this subdivision 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.

22(B) A finder that 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:

begin delete

26(i) The date of payment.

end delete
begin insert

27(i) The name of the finder.

end insert

28(ii) The total payment amountbegin delete made.end deletebegin insert received.end insert

begin insert

29(iii) The date of payment.

end insert
begin delete

30(iii)

end delete

31begin insert(iv)end insert The corresponding loan accountbegin delete numberend deletebegin insert identificationend insert upon
32which the payment is being applied.

begin insert

33(v) The loan balance prior to and following application of the
34payment.

end insert
begin insert

35(vi) The amount of the payment that was applied to principal,
36interest, and fees.

end insert
begin insert

37(vii) The type of payment, such as cash, automated clearing
38house (ACH) transfer, check, money order, or debit card.

end insert

39begin insert(viii)end insert (iv) The following statement, prominently displayed in a
40type size equal to or greater than the type size used to display the
P12   1other items on the receipt: “If you have any questions about your
2loan, now or in the future, you should direct those questions to
3[name of licensee] by [insert at least two different ways in which
4a borrower may contact the licensee].”

5(C) A borrower who submits a loan payment to a finder under
6this subdivision shall not be liable for any failure or delay by the
7finder in transmitting the payment to the licensee.

8(D) A finder that disburses or receives loan payments pursuant
9to this subdivision shall maintain records of all disbursements
10made and loan payments received for a period of at least two years
11or until one month following the completion of a regular
12examination by the commissioner, whichever is later.

13(3) Providing any notice or disclosure required to be provided
14to the borrower by the licensee.

15(c) A finder shall not engage inbegin delete anyend deletebegin insert eitherend insert of the following
16activities:

17(1) Providing counseling or advice to a borrower or prospective
18borrower.

19(2) Providing loan-related marketing material that has not
20previously been approved by the licensee to a borrower or a
21prospective borrower.

begin delete

22(3) Interpreting or explaining the relevance, significance, or
23effect of any of the marketing materials or loan documents the
24finder provides to a borrower or prospective borrower.

end delete

25(d) Any person who performs one or more of the following
26activities is a broker within the meaning of Section 22004 rather
27than a finder within the meaning of this section:

28(1) Negotiating the price, length, or any other loan term between
29a licensee and a prospective borrower.

30(2) Advising either a prospective borrower or a licensee as to
31any loan term.

32(3) Offering information pertaining to a single prospective
33borrower to more than one licensee, except that, if a licensee has
34declined to offer a loan to a prospective borrower and has so
35notified that prospective borrower in writing, the person may then
36offer information pertaining to a single prospective borrower to
37another licensee with which it has a finder’s agreement.

38(4) Personally contacting or providing services to a borrower
39or prospective borrower at any place other than the finder’s
40physical location for business.

P13   1(e) A finder shall comply with all laws applicable to the licensee
2that impose requirements upon the licensee for safeguards for
3information security.

4

begin deleteSEC. 2.end delete
5begin insertSEC. 3.end insert  

Section 22373 of the Financial Code is amended to
6read:

7

22373.  

(a) At the time the finder receives or processes an
8application for a program loan, the finder shall provide the
9following statement to the applicant, on behalf of the licensee, in
10no smaller than 10-point type, and shall ask the applicant to
11acknowledge receipt of the statement in writing:

12

13“Your loan application has been referred to us by [Name of
14Finder]. We may pay a fee to [Name of Finder] for the successful
15referral of your loan application. IF YOU ARE APPROVED FOR
16THE LOAN, [NAME OF LICENSEE] WILL BECOME YOUR
17LENDER, AND YOU WILL BE BUILDING A RELATIONSHIP
18WITH [NAME OF LICENSEE]. If you have any questions about
19your loan, now or in the future, you should direct those questions
20to [name of licensee] by [insert at least two different ways in which
21a borrower may contact the licensee]. If you wish to report a
22complaint about [Name of Finder] or [Name of Licensee] regarding
23this loan transaction, you may contact the Department of Business
24Oversightbegin delete, Division of Corporations at 1-866-ASK-CORP
25(1-866-275-2677),end delete
begin insert at 866-275-2677,end insert or file your complaint online
26atbegin delete www.corp.ca.gov.”end deletebegin insert www.dbo.ca.gov.end insertbegin insertend insert


28(b) If the loan applicant has questions about the loan that the
29finder is not permitted to answer, the finder shall make a good
30faith effort to assist the applicant in making direct contact with the
31lender before the loan is consummated. This good faith effort shall,
32at a minimum, consist of assisting the applicant in communicating
33with thebegin delete lender in real time via telephone, video chat, or instant
34messaging.end delete
begin insert licensee as soon as reasonably practicable, which shall
35at a minimum include a “two-way communication.” For purposes
36of this section, “two-way communication” includes telephone,
37electronic mail, or another form of communication that allows the
38applicant to communicate with the licensee.end insert

begin insert

39(c) Using the policies developed pursuant to subdivision (f) of
40Section 22370, the licensee shall ensure that a loan is not
P14   1consummated until the licensee has completed a “two-way
2communication” with the applicant. Sending a voicemail or
3electronic message to the applicant, without a prior or subsequent
4response from the applicant, shall not constitute a “two-way
5communication.”

end insert
begin delete

6(c)

end delete

7begin insert(d)end insert If the loan is consummated, the licensee shall provide the
8borrower a written copy of the disclosure notice within two weeks
9following the date of the loan consummation. A licensee may
10include the disclosure within its loan contract, or may provide it
11as a separate document to the borrower, via any means acceptable
12to the borrower.

13

begin deleteSEC. 3.end delete
14begin insertSEC. 4.end insert  

Section 22374 of the Financial Code is amended to
15read:

16

22374.  

(a) A finder may be compensated by the licensee
17pursuant to the written agreement between the licensee and the
18finder, as described in Section 22376. Compensation may be paid
19in accordance with a compensation schedule that is mutually agreed
20to by the licensee and the finder.

21(b) Notwithstanding subdivision (a), the compensation of a
22finder by a licensee shall be subject to all of the following
23requirements:

24(1) No compensation shall be paid to a finder in connection with
25a loan application unless that loan is consummated.

26(2) No compensation shall be paid to a finder based upon the
27principal amount of the loan.

28(3) The total compensation paid by a licensee to a finder over
29the life of a loan shall not exceed the sum of the origination fee
30and interest charges paid by the borrower in connection with that
31loan.

32(4) Subject to the limitations set forth in paragraphs (1) to (3),
33inclusive, the total compensation paid by a licensee to a finder
34shall not exceed seventy dollars ($70) per loan, whether paid at
35the time of consummation, over installments, or in a manner
36otherwise agreed upon by the licensee and the finder.

37(5) The finder’s location for services under this article and other
38information required by Section 22375 has been reported to the
39commissioner and the finder has not been barred from providing
40services at that location by the commissioner.

P15   1(c) No licensee shall, directly or indirectly, pass on to a borrower
2any fee or other compensation, or any portion of any fee or other
3compensation, that the licensee pays to a finder in connection with
4that borrower’s loan.

5

begin deleteSEC. 4.end delete
6begin insertSEC. 5.end insert  

Section 22375 of the Financial Code is amended to
7read:

8

22375.  

A licensee that utilizes the service of a finder shall do
9all of the following:

10(a) Notify the commissioner within 15 days of entering into a
11contract with a finder, on a form acceptable to the commissioner,
12regarding all of the following:

13(1) The name, business address, and licensing details of the
14finder and all locations at which the finder will perform services
15under this article.

16(2) The name and contact information for an employee of the
17finder who is knowledgeable about, and has the authority to
18execute, the contract governing the business relationship between
19the finder and the licensee.

20(3) The name and contact information for one or more
21employees of the finder who are responsible for that finder’s
22finding activities on behalf of the licensee.

23(4) A list of the activities the finder shall perform on behalf of
24the licensee.

25(5) Any other information requested by the commissioner.

26(b) Pay an annual finder registration fee to the commissioner
27in an amount to be established by the commissioner by regulation
28for each finder utilized by the licensee.

29(c) Submit an annual report to the commissioner including, for
30eachbegin delete finder, delinquency and default rates, number and dollar
31amount of late fees assessed to borrowers on consummated loans,end delete

32begin insert finder, the information listed in paragraph (12) and subparagraph
33(A) of paragraph (13) of subdivision (d) of Section 22380,end insert
and any
34other information pertaining to each finder and the licensee’s
35relationship and business arrangements with each finder as the
36commissioner may by regulation require.begin insert The information disclosed
37to the commissioner for the report described in this subdivision is
38exempted from any requirement of public disclosure by paragraph
39(2) of subdivision (d) of Section 6254 of the Government Code.end insert

P16   1

begin deleteSEC. 5.end delete
2begin insertSEC. 6.end insert  

Section 22377 of the Financial Code is amended to
3read:

4

22377.  

(a) The commissioner may examine the operations of
5each licensee and each finder to ensure that the activities of the
6licensee and the finder are in compliance with this article. The
7costs of the commissioner’s examination of each finder shall be
8attributed to the commissioner’s examination of the licensee. Any
9violation of this article by a finder or a finder’s employee shall be
10attributed to the finance lender with whom it has entered into an
11agreement for purposes of determining the licensee’s compliance
12with this division.

13(b) Upon a determination that a finder has acted in violation of
14this article, or any implementing regulation, or upon a
15determination that it would be warranted by the data reported to
16the commissioner pursuant to subdivision (c) of Section 22375 for
17any finder, the commissioner may disqualify a finder from
18performing services under this article, bar a finder from performing
19services at one or more specific locations of that finder, terminate
20a written agreement between a finder and a licensee, and, if the
21commissioner deems that action in the public interest, prohibit the
22use of that finder by all licensees accepted to participate in the
23pilot program.

24(c) In addition to any other penalty allowed by law, the
25commissioner may impose an administrative penalty up to two
26thousand five hundred dollars ($2,500) for violations of this article
27committed by a finder.

28

begin deleteSEC. 6.end delete
29begin insertSEC. 7.end insert  

No reimbursement is required by this act pursuant to
30Section 6 of Article XIII B of the California Constitution because
31the only costs that may be incurred by a local agency or school
32district will be incurred because this act creates a new crime or
33infraction, eliminates a crime or infraction, or changes the penalty
34for a crime or infraction, within the meaning of Section 17556 of
35the Government Code, or changes the definition of a crime within
36the meaning of Section 6 of Article XIII B of the California
37Constitution.


CORRECTIONS:

Text--Pages 11 and 13.




O

Corrected 7-16-15—See last page.     97