Amended in Assembly July 15, 2015

Amended in Assembly July 8, 2015

Amended in Senate May 5, 2015

Senate BillNo. 235


Introduced by Senator Block

(Coauthor: Senator Hill)

begin insert

(Coauthor: Assembly Member Chiu)

end insert

February 17, 2015


An act to amend Sections 22370, 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.

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.

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 compensationbegin insert for certain servicesend insert pursuant to a schedule that is mutually agreed to by the licensee and the finder, not to exceedbegin delete $70end deletebegin insert $65end insert perbegin delete loan.end deletebegin insert loan, plus $2 per payment received by the finder on behalf of the licensee for the duration of the loan when the finder receives borrower loan payments on the licensee’s behalf, as specified.end insert The bill would require, if a loan applicant has questions that the finder is not permitted to answer, the finder to assist an applicant 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. 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 finder upon determination that it would be warranted by reported data, 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:

P3    1

SECTION 1.  

Section 22370 of the Financial Code is amended
2to read:

3

22370.  

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

5(1) The loan shall be unsecured.

6(2) Interest on the loan shall accrue on a simple-interest basis,
7through the application of a daily periodic rate to the actual unpaid
8principal balance each day.

9(3) The licensee shall disclose the following to the consumer
10in writing, in a type face no smaller than 12-point type, at the time
11of application:

12(A) The amount borrowed; the total dollar cost of the loan to
13the consumer if the loan is paid back on time, including the sum
14of the administrative fee, principal amount borrowed, and interest
15payments; the corresponding annual percentage rate, calculated in
16accordance with Federal Reserve Board Regulation Z (12 C.F.R.
17226); the periodic payment amount; the delinquency fee schedule;
18and the following statement: “Repaying your loan early will lower
19your borrowing costs by reducing the amount of interest you will
20pay. This loan has no prepayment penalty.”

21(B) A statement that the consumer has the right to rescind the
22loan by notifying the licensee of the consumer’s intent to rescind
23the loan and returning the principal advanced by the end of the
24business day following the date the loan is consummated.

25(4) A licensee may provide the borrower with the disclosures
26required by paragraph (3) in a mobile or other electronic
27application, on which the size of the type face of the disclosure
28can be manually modified by a prospective borrower, if the
29prospective borrower is given the option to print the disclosure in
30a type face of at least 12-point size or is provided by the licensee
31with a hardcopy of the disclosure in a type face of at least 12-point
32size before the loan is consummated.

33(5) The loan shall have a minimum principal amount upon
34origination of three hundred dollars ($300) and a term of not less
35than the following:

36(A) Ninety days for loans whose principal balance upon
37origination is less than five hundred dollars ($500).

P4    1(B) One hundred twenty days for loans whose principal balance
2upon origination is at least five hundred dollars ($500), but is less
3than one thousand five hundred dollars ($1,500).

4(C) One hundred eighty days for loans whose principal balance
5upon origination is at least one thousand five hundred dollars
6($1,500).

7(b) As an alternative to the charges authorized by Section 22303
8or 22304, a licensee approved by the commissioner to participate
9in the program may contract for and receive charges for a loan
10made pursuant to this section at an annual simple interest rate not
11to exceed the following:

12(1) The lesser of 36 percent or the sum of 32.75 percent plus
13the United States prime lending rate, as of the date of loan
14origination, on that portion of the unpaid principal balance of the
15loan up to and including, but not in excess of, one thousand dollars
16($1,000). The interest rate calculated as of the date of loan
17origination shall be fixed for the life of the loan.

18(2) The lesser of 35 percent or the sum of 28.75 percent plus
19the United States prime lending rate, as of the date of loan
20origination, on that portion of the unpaid principal balance of the
21loan in excess of one thousand dollars ($1,000), but less than two
22thousand five hundred dollars ($2,500). The interest rate calculated
23as of the date of loan origination shall be fixed for the life of the
24loan.

25(c) (1) As to any loan made under this section, a licensee
26approved by the commissioner to participate in the program may
27contract for and receive an administrative fee, which shall be fully
28earned immediately upon making the loan, in an amount not to
29exceed the applicable of the following:

30(A) Seven percent of the principal amount, exclusive of the
31administrative fee, or ninety dollars ($90), whichever is less, on
32the first loan made to a borrower.

33(B) Six percent of the principal amount, exclusive of the
34administrative fee, or seventy-five dollars ($75), whichever is less,
35on the second and subsequent loans made to that borrower.

36(2) A licensee shall not charge the same borrower an
37administrative fee more than once in any four-month period.

38(3) For purposes of this section, “refinance” means the
39replacement or revision of an existing loan contract with a borrower
40that results in an extension of additional principal to that borrower.
P5    1A licensee shall not refinance a loan made under this section, unless
2all of the following conditions are met at the time the borrower
3submits an application to refinance:

4(A) The borrower has repaid at least 60 percent of the
5outstanding principal remaining on his or her loan.

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

7(C) The licensee underwrites the new loan in accordance with
8paragraph (4) of subdivision (f).

9(D) If the loan proceeds of both the original loan and the
10refinance loan are to be used for personal, family, or household
11purposes, the borrower has not previously refinanced the
12outstanding loan more than once.

13(4) Notwithstanding paragraph (3), an administrative fee shall
14not be contracted for or received in connection with the refinancing
15of a loan unless at least eight months have elapsed since the receipt
16of a previous administrative fee paid by the borrower. With the
17exception of a loan that is refinanced, only one administrative fee
18may be contracted for or received until the loan has been repaid
19in full. Section 22305 shall not apply to any loan made under this
20section.

21(d) Notwithstanding subdivision (a) of Section 22320.5, a
22licensee approved by the commissioner to participate in the
23program may require reimbursement from a borrower for the actual
24insufficient funds fees incurred by that licensee due to actions of
25the borrower, and may contract for and receive a delinquency fee
26that is one of the following amounts:

27(1) For a period of delinquency of not less than seven days, an
28amount not in excess of fourteen dollars ($14).

29(2) For a period of delinquency of not less than 14 days, an
30amount not in excess of twenty dollars ($20).

31(e) If a licensee opts to impose a delinquency fee, it shall use
32the delinquency fee schedule described in subdivision (d), subject
33to all of the following:

34(1) No more than one delinquency fee may be imposed per
35delinquent payment.

36(2) No more than two delinquency fees may be imposed during
37any period of 30 consecutive days.

38(3) No delinquency fee may be imposed on a borrower who is
39180 days or more past due if that fee would result in the sum of
40the borrower’s remaining unpaid principal balance, accrued interest,
P6    1and delinquency fees exceeding 180 percent of the original
2principal amount of the borrower’s loan.

3(4) The licensee or any of its wholly owned subsidiaries shall
4attempt to collect a delinquent payment for a period of at least 30
5days following the start of the delinquency before selling or
6assigning that unpaid debt to an independent party for collection.

7(f) The licensee shall develop and implement policies and
8procedures designed to respond to questions raised by applicants
9and borrowers regarding their loans, including those involving
10finders, and to address customer complaints as soon as reasonably
11practicable.

12(g) The following shall apply to a loan made by a licensee
13pursuant to this section:

14(1) Prior to disbursement of loan proceeds, the licensee shall
15either (A) offer a credit education program or seminar to the
16borrower that has been previously reviewed and approved by the
17commissioner for use in complying with this section; or (B) invite
18the borrower to a credit education program or seminar offered by
19an independent third party that has been previously reviewed and
20approved by the commissioner for use in complying with this
21section. The borrower shall not be required to participate in either
22of these education programs or seminars. A credit education
23program or seminar offered pursuant to this paragraph shall be
24provided at no cost to the borrower.

25(2) The licensee shall report each borrower’s payment
26performance to at least one consumer reporting agency that
27compiles and maintains files on consumers on a nationwide basis,
28upon acceptance as a data furnisher by that consumer reporting
29agency. For purposes of this section, a consumer reporting agency
30that compiles and maintains files on consumers on a nationwide
31basis is one that meets the definition in Section 603(p) of the
32federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). Any
33licensee that is accepted as a data furnisher after admittance into
34the program must report all borrower payment performance since
35its inception of lending under the program, as soon as practicable
36after its acceptance into the program, but in no event more than
37six months after its acceptance into the program.

38(A) The commissioner may approve a licensee for the program,
39before that licensee has been accepted as a data furnisher by a
40consumer reporting agency, if the commissioner has a reasonable
P7    1expectation, based on information supplied by the licensee, of both
2of the following:

3(i) The licensee will be accepted as a data furnisher, once it
4achieves a lending volume required of data furnishers of its type
5by a consumer reporting agency.

6(ii) That lending volume will be achieved within the first six
7months of the licensee commencing lending.

8(B) Notwithstanding subparagraph (A), the commissioner shall
9withdraw approval for pilot program participation from any
10licensee that fails to become accepted as a data furnisher by a
11consumer reporting agency within six months of commencing
12lending under the pilot program.

13(3) The licensee shall provide each borrower with the name of
14the consumer reporting agency or agencies to which it will report
15the borrower’s payment history. A licensee that is accepted as a
16data furnisher after admittance into the program shall notify its
17borrowers, as soon as practicable following acceptance as a data
18furnisher, regarding the name of the consumer reporting agency
19or agencies to which it will report that borrower’s payment history.

20(4) (A) The licensee shall underwrite each loan to determine a
21borrower’s ability and willingness to repay the loan pursuant to
22the loan terms, and shall not make a loan if it determines, through
23its underwriting, that the borrower’s total monthly debt service
24payments, at the time of origination, including the loan for which
25the borrower is being considered, and across all outstanding forms
26of credit that can be independently verified by the licensee, exceed
2750 percent of   the borrower’s gross monthly income.

28(B) (i) The licensee shall seek information and documentation
29pertaining to all of a borrower’s outstanding debt obligations during
30the loan application and underwriting process, including loans that
31are self-reported by the borrower but not available through
32independent verification. The licensee shall verify that information
33using a credit report from at least one consumer reporting agency
34that compiles and maintains files on consumers on a nationwide
35basis or through other available electronic debt verification services
36that provide reliable evidence of a borrower’s outstanding debt
37obligations.

38(ii) Notwithstanding the verification requirement in
39subparagraph (A), the licensee shall request from the borrower
40and include all information obtained from the borrower regarding
P8    1outstanding deferred deposit transactions in the calculation of the
2borrower’s outstanding debt obligations.

3(iii) The licensee shall not be required to consider, for purposes
4of debt-to-income ratio evaluation, loans from friends or family.

5(C) The licensee shall also verify the borrower’s income that
6the licensee relies on to determine the borrower’s debt-to-income
7ratio using information from either of the following:

8(i) Electronic means or services that provide reliable evidence
9of the borrower’s actual income.

10(ii) Internal Revenue Service Form W-2, tax returns, payroll
11receipts, bank statements, or other third-party documents that
12provide reasonably reliable evidence of the borrower’s actual
13income.

14(5) The licensee shall notify each borrower, at least two days
15prior to each payment due date, informing the borrower of the
16amount due, and the payment due date. Notification may be
17provided by any means mutually acceptable to the borrower and
18the licensee. A borrower shall have the right to opt out of this
19notification at any time, upon electronic or written request to the
20licensee. The licensee shall notify each borrower of this right prior
21to disbursing loan proceeds.

22(h) (1) Notwithstanding Sections 22311 to 22315, inclusive,
23no person, in connection with, or incidental to, the making of any
24loan made pursuant to this article, may offer, sell, or require the
25borrower to contract for “credit insurance” as defined in paragraph
26(1) of subdivision (a) of Section 22314 or insurance on tangible
27personal or real property of the type specified in Section 22313.

28(2) Notwithstanding Sections 22311 to 22315, inclusive, no
29licensee, finder, or any other person that participates in the
30origination of a loan under this article shall refer a borrower to any
31other person for the purchase of “credit insurance” as defined in
32paragraph (1) of subdivision (a) of Section 22314 or insurance on
33tangible personal or real property of the type specified in Section
3422313.

35(i) (1) No licensee shall require, as a condition of providing the
36loan, that the borrower waive any right, penalty, remedy, forum,
37or procedure provided for in any law applicable to the loan,
38including the right to file and pursue a civil action or file a
39complaint with or otherwise communicate with the commissioner
40or any court or other public entity, or that the borrower agree to
P9    1resolve disputes in a jurisdiction outside of California or to the
2application of laws other than those of California, as provided by
3law. Any waiver by a borrower must be knowing, voluntary, and
4in writing, and expressly not made a condition of doing business
5with the licensee. Any waiver that is required as a condition of
6doing business with the licensee shall be presumed involuntary,
7unconscionable, against public policy, and unenforceable. The
8licensee has the burden of proving that a waiver of any rights,
9penalties, forums, or procedures was knowing, voluntary, and not
10made a condition of the contract with the borrower.

11(2) No licensee shall refuse to do business with or discriminate
12against a borrower or applicant on the basis that the borrower or
13applicant refuses to waive any right, penalty, remedy, forum, or
14procedure, including the right to file and pursue a civil action or
15complaint with, or otherwise notify, the commissioner or any court
16or other public entity. The exercise of a person’s right to refuse to
17waive any right, penalty, remedy, forum, or procedure, including
18a rejection of a contract requiring a waiver, shall not affect any
19otherwise legal terms of a contract or an agreement.

20(3) This subdivision shall not apply to any agreement to waive
21any right, penalty, remedy, forum, or procedure, including any
22agreement to arbitrate a claim or dispute, after a claim or dispute
23has arisen. Nothing in this subdivision shall affect the enforceability
24or validity of any other provision of the contract.

25(j) This section shall not apply to any loan of a bona fide
26principal amount of two thousand five hundred dollars ($2,500)
27or more as determined in accordance with Section 22251. For
28purposes of this subdivision, “bona fide principal amount” shall
29be determined in accordance with Section 22251.

30

SEC. 2.  

Section 22372 of the Financial Code is amended to
31read:

32

22372.  

(a) A finder may perform one or more of the following
33services for a licensee at the finder’s physical location for business:

34(1) Distributing, circulating, using, or publishing preprinted
35brochures, flyers, factsheets, or other written materials relating to
36loans that the licensee may make or negotiate and that have been
37reviewed and approved in writing by the licensee prior to their
38being distributed, circulated, or published.

39(2) Providing written factual information about loan terms,
40conditions, or qualification requirements to a prospective borrower
P10   1that has been either prepared by the licensee or reviewed and
2approved in writing by the licensee. A finder may discuss that
3information with a prospective borrower in general terms, but may
4not provide counseling or advice to a prospective borrower.

5(3) Notifying a prospective borrower of the information needed
6in order to complete a loan application without providing
7counseling or advice to a prospective borrower.

8(4) Entering information provided by the prospective borrower
9on a preprinted or electronic application form or onto a
10preformatted computer database without providing counseling or
11advice to a prospective borrower.

12(5) Assembling credit applications and other materials obtained
13in the course of a credit application transaction for submission to
14the licensee.

15(6) Contacting the licensee to determine the status of a loan
16application.

17(7) Communicating a response that is returned by the licensee’s
18automated underwriting system to a borrower or a prospective
19borrower.

20(8) Obtaining a borrower’s signature on documents prepared
21by the licensee and delivering final copies of the documents to the
22borrower.

23(b) A finder that is licensed or regulated pursuant to this division,
24Division 1.1 (commencing with Section 1000), Division 1.2
25(commencing with Section 2000), Division 3 (commencing with
26Section 12000), Division 5 (commencing with Section 14000),
27Division 6 (commencing with Section 17000), Division 7
28(commencing with Section 18000), Division 8 (commencing with
29Section 21000), Division 10 (commencing with Section 23000),
30or Division 20 (commencing with Section 50000) of this code;
31Chapter 5 (commencing with Section 1621) of Part 2 of Division
321 of the Insurance Code; Chapter 1 (commencing with Section
335000) of Division 3 of the Business and Professions Code; is an
34approved agent of a person licensed pursuant to Division 1.2
35(commencing with Section 2000) of this code; or is a federally
36regulated bank, thrift, or credit union, may additionally provide
37any of the following services on behalf of the licensee for any loan
38for which the finder performed finding activities:

39(1) Disbursing loan proceeds to a borrower, if this method of
40disbursement is acceptable to the borrower.

P11   1(A) Any loan disbursement made by a finder under this
2subdivision shall be deemed made by the licensee on the date the
3funds are disbursed or otherwise made available by the finder to
4the borrower.

5(B) A finder that disburses loan proceeds to a borrower shall
6deliver or cause to be delivered to the borrower at the time loan
7proceeds are disbursed a plain and complete receipt showing all
8of the following:

9(i) The date of disbursement.

10(ii) The total amount disbursed.

11(iii) The corresponding loan account identification.

12(iv) The following statement, prominently displayed in a type
13size equal to or greater than the type size used to display the other
14items on the receipt: “If you have any questions about your loan,
15now or in the future, you should direct those questions to [name
16of licensee] by [insert at least two different ways in which a
17borrower may contact the licensee].”

18(2) Receiving loan payment or payments from the borrower, if
19this method of payment is acceptable to the borrower.

20(A) Any loan payment made by a borrower to a finder under
21this subdivision shall be applied to the borrower’s loan and deemed
22received by the licensee as of the date the payment is received by
23the finder.

24(B) A finder that receives loan payments under this subdivision
25shall deliver or cause to be delivered to the borrower at the time
26that the payment is made by the borrower, a plain and complete
27receipt showing all of the following:

28(i) The name of the finder.

29(ii) The total payment amount received.

30(iii) The date of payment.

31(iv) The corresponding loan account identification upon which
32the payment is being applied.

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

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

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

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

16(1) Providing counseling or advice to a borrower or prospective
17borrower.

18(2) Providing loan-related marketing material that has not
19previously been approved by the licensee to a borrower or a
20prospective borrower.

21(d) Any person who performs one or more of the following
22activities is a broker within the meaning of Section 22004 rather
23than a finder within the meaning of this section:

24(1) Negotiating the price, length, or any other loan term between
25a licensee and a prospective borrower.

26(2) Advising either a prospective borrower or a licensee as to
27any loan term.

28(3) Offering information pertaining to a single prospective
29borrower to more than one licensee, except that, if a licensee has
30declined to offer a loan to a prospective borrower and has so
31notified that prospective borrower in writing, the person may then
32offer information pertaining to a single prospective borrower to
33another licensee with which it has a finder’s agreement.

34(4) Personally contacting or providing services to a borrower
35or prospective borrower at any place other than the finder’s
36physical location for business.

37(e) A finder shall comply with all laws applicable to the licensee
38that impose requirements upon the licensee for safeguards for
39information security.

P13   1

SEC. 3.  

Section 22373 of the Financial Code is amended to
2read:

3

22373.  

(a) At the time the finder receives or processes an
4application for a program loan, the finder shall provide the
5following statement to the applicant, on behalf of the licensee, in
6no smaller than 10-point type, and shall ask the applicant to
7acknowledge receipt of the statement in writing:

8

9“Your loan application has been referred to us by [Name of
10Finder]. We may pay a fee to [Name of Finder] for the successful
11referral of your loan application. IF YOU ARE APPROVED FOR
12THE LOAN, [NAME OF LICENSEE] WILL BECOME YOUR
13LENDER, AND YOU WILL BE BUILDING A RELATIONSHIP
14WITH [NAME OF LICENSEE]. If you have any questions about
15your loan, now or in the future, you should direct those questions
16to [name of licensee] by [insert at least two different ways in which
17a borrower may contact the licensee]. If you wish to report a
18complaint about [Name of Finder] or [Name of Licensee] regarding
19this loan transaction, you may contact the Department of Business
20Oversight at 866-275-2677, or file your complaint online at
21www.dbo.ca.gov.”

22(b) If the loan applicant has questions about the loan that the
23finder is not permitted to answer, the finder shall make a good
24faith effort to assist the applicant in making direct contact with the
25lender before the loan is consummated. This good faith effort shall,
26at a minimum, consist of assisting the applicant in communicating
27with the licensee as soon as reasonably practicable, which shall at
28a minimum include a “two-way communication.” For purposes of
29this section, “two-way communication” includes telephone,
30electronic mail, or another form of communication that allows the
31applicant to communicate with the licensee.

32(c) Using the policies developed pursuant to subdivision (f) of
33Section 22370, the licensee shall ensure that a loan is not
34consummated until the licensee has completed a “two-way
35communication” with the applicant. Sending a voicemail or
36electronic message to the applicant, without a prior or subsequent
37response from the applicant, shall not constitute a “two-way
38communication.”

39(d) If the loan is consummated, the licensee shall provide the
40borrower a written copy of the disclosure notice within two weeks
P14   1following the date of the loan consummation. A licensee may
2include the disclosure within its loan contract, or may provide it
3as a separate document to the borrower, via any means acceptable
4to the borrower.

5

SEC. 4.  

Section 22374 of the Financial Code is amended to
6read:

7

22374.  

(a) A finder may be compensated by the licensee
8pursuant to the written agreement between the licensee and the
9finder, as described in Section 22376. Compensation may be paid
10in accordance with a compensation schedule that is mutually agreed
11to by the licensee and the finder.

12(b) Notwithstanding subdivision (a), the compensation of a
13finder by a licensee shall be subject to all of the following
14requirements:

15(1) No compensation shall be paid to a finder in connection with
16a loan application unless that loan is consummated.

17(2) No compensation shall be paid to a finder based upon the
18principal amount of the loan.

19(3) The total compensation paid by a licensee to a finder over
20the life of a loan shall not exceed the sum of the origination fee
21and interest charges paid by the borrower in connection with that
22loan.

23(4) Subject to the limitations set forth in paragraphs (1) to (3),
24inclusive, the total compensation paid by a licensee to a finderbegin insert for
25the services set forth in subdivision (a) of Section 22372end insert
shall not
26exceedbegin delete seventy dollars ($70)end deletebegin insert sixtyend insertbegin insert-five dollars ($65)end insert per loan,
27whether paid at the time of consummation, over installments, or
28in a manner otherwise agreed upon by the licensee and thebegin delete finder.end delete
29begin insert finder, plus two dollars ($2) per payment received by the finder
30on behalf of the licensee for the duration of the loan, when the
31finder receives borrower loan payments on the licensee’s behalf
32in accordance with subdivision (b) of Section 22372.end insert

33(5) The finder’s location for services under this article and other
34information required by Section 22375 has been reported to the
35commissioner and the finder has not been barred from providing
36services at that location by the commissioner.

37(c) No licensee shall, directly or indirectly, pass on to a borrower
38any fee or other compensation, or any portion of any fee or other
39compensation, that the licensee pays to a finder in connection with
40that borrower’s loan.

P15   1

SEC. 5.  

Section 22375 of the Financial Code is amended to
2read:

3

22375.  

A licensee that utilizes the service of a finder shall do
4all of the following:

5(a) Notify the commissioner within 15 days of entering into a
6contract with a finder, on a form acceptable to the commissioner,
7regarding all of the following:

8(1) The name, business address, and licensing details of the
9finder and all locations at which the finder will perform services
10under this article.

11(2) The name and contact information for an employee of the
12finder who is knowledgeable about, and has the authority to
13execute, the contract governing the business relationship between
14the finder and the licensee.

15(3) The name and contact information for one or more
16employees of the finder who are responsible for that finder’s
17finding activities on behalf of the licensee.

18(4) A list of the activities the finder shall perform on behalf of
19the licensee.

20(5) Any other information requested by the commissioner.

21(b) Pay an annual finder registration fee to the commissioner
22in an amount to be established by the commissioner by regulation
23for each finder utilized by the licensee.

24(c) Submit an annual report to the commissioner including, for
25each finder, the information listed in paragraph (12) and
26subparagraph (A) of paragraph (13) of subdivision (d) of Section
2722380, and any other information pertaining to each finder and
28the licensee’s relationship and business arrangements with each
29finder as the commissioner may by regulation require. The
30information disclosed to the commissioner for the report described
31in this subdivision is exempted from any requirement of public
32disclosure by paragraph (2) of subdivision (d) of Section 6254 of
33the Government Code.

34

SEC. 6.  

Section 22377 of the Financial Code is amended to
35read:

36

22377.  

(a) The commissioner may examine the operations of
37each licensee and each finder to ensure that the activities of the
38licensee and the finder are in compliance with this article. The
39costs of the commissioner’s examination of each finder shall be
40attributed to the commissioner’s examination of the licensee. Any
P16   1violation of this article by a finder or a finder’s employee shall be
2attributed to the finance lender with whom it has entered into an
3agreement for purposes of determining the licensee’s compliance
4with this division.

5(b) Upon a determination that a finder has acted in violation of
6this article, or any implementing regulation, or upon a
7determination that it would be warranted by the data reported to
8the commissioner pursuant to subdivision (c) of Section 22375 for
9any finder, the commissioner may disqualify a finder from
10performing services under this article, bar a finder from performing
11services at one or more specific locations of that finder, terminate
12a written agreement between a finder and a licensee, and, if the
13commissioner deems that action in the public interest, prohibit the
14use of that finder by all licensees accepted to participate in the
15pilot program.

16(c) In addition to any other penalty allowed by law, the
17commissioner may impose an administrative penalty up to two
18thousand five hundred dollars ($2,500) for violations of this article
19committed by a finder.

20

SEC. 7.  

No reimbursement is required by this act pursuant to
21Section 6 of Article XIII B of the California Constitution because
22the only costs that may be incurred by a local agency or school
23district will be incurred because this act creates a new crime or
24infraction, eliminates a crime or infraction, or changes the penalty
25for a crime or infraction, within the meaning of Section 17556 of
26the Government Code, or changes the definition of a crime within
27the meaning of Section 6 of Article XIII B of the California
28Constitution.



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