BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON
                         BANKING AND FINANCIAL INSTITUTIONS
                             Senator Marty Block, Chair
                                2015 - 2016  Regular 

          Bill No:             SB 235         Hearing Date:    April 15,  
          2015
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          |Author:    |Block                                                |
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          |Version:   |February 17, 2015                                    |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Eileen Newhall                                       |
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            Subject:  Small dollar loans:  finder duties and compensation

           SUMMARY       Authorizes finders under the Pilot Program for Increased  
          Access to Responsible Small Dollar Loans to disburse loan  
          proceeds to borrowers, receive loan payments from borrowers, and  
          provide notices and disclosures to borrowers, as specified, and  
          authorizes pilot program lenders to enter into compensation  
          agreements with their finders in accordance with compensation  
          schedules that are mutually agreed to by the lender and the  
          finder, rather than statutorily prescribed under California law.  
           
          
           DESCRIPTION
            
            1.  Authorizes finders under the Pilot Program for Increased  
              Access to Responsible Small Dollar Loans (pilot program) to  
              provide the following services on behalf of the pilot  
              program lenders with which they have a written agreement.   
              These services are in addition to the eight services finders  
              are authorized to provide on behalf of pilot program lenders  
              under existing law:  

               a.     Disbursing loan proceeds to a borrower, if this  
                 method of disbursement is acceptable to the borrower.   
                 Any loan disbursement made by a finder is deemed made by  
                 the licensee on the date that funds are disbursed or  
                 otherwise made available by the finder to the borrower.

               b.     Receiving loan payment or payments from the  







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                 borrower, if this method of payment is acceptable to the  
                 borrower.

                    i.          Any loan payment made by a borrower to a  
                     finder is deemed received by the licensee as of the  
                     date the payment is received by the finder and must  
                     be applied by lender to the borrower's outstanding  
                     loan.

                    ii.        A finder who receives loan payments must  
                     provide a receipt to the borrower making the payment  
                     at the time the payment is made.  This receipt must  
                     include the date of payment, total payment amount  
                     made, and the corresponding loan account upon which  
                     the payment is being applied.

                    iii.       A borrower who submits a loan payment to a  
                     finder may not be held liable by the lender for any  
                     failure or delay by the finder in transmitting  
                     payment to the lender.

               c.     Providing any notice or disclosure required to be  
                 provided to the borrower by the lender.

           2.  Deletes the existing law cap on fees that licensees may pay  
              finders, replaces the reference to finder's "fees" in  
              existing law with a reference to finder's "compensation,"  
              and provides that compensation may be paid by a licensee to  
              a finder in accordance with a compensation schedule that is  
              mutually agreed to by a licensee and a finder. 

           EXISTING LAW
           
           3.  Until January 1, 2018, authorizes the pilot program within  
              the California Finance Lenders Law (CFLL), administered by  
              the Department of Business Oversight (DBO; Financial Code  
              Sections 22365 et seq.).

           4.  Authorizes CFLL licensees that are approved by the  
              Commissioner of Business Oversight (commissioner) to  
              participate in the pilot program to use the services of one  
              or more finders, as specified.  Defines a finder for  
              purposes of the pilot program as an entity that, at the  
              finder's physical location for business, brings a pilot  








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              program lender and a prospective borrower together for the  
              purpose of negotiating a loan contract.  Clarifies that an  
              entity, whose sole means of bringing a licensee and a  
              prospective borrower together at that entity's physical  
              location for business, is via an electronic access point  
              through which a prospective borrower may "click through" to  
              the Internet Web site of a pilot lender, is not a finder  
              (Section 22371).

           5.  Requires all agreements between a pilot program lender and  
              its finders to be set forth in writing and to contain a  
              provision establishing that the finder agrees to comply with  
              all regulations established by the commissioner related to  
              the pilot program and agree to provide the commissioner  
              access to all of the finder's books and records that pertain  
              to the finder's finding activities (Section 22375).

           6.  Authorizes finders to perform one or more of the following  
              services for a pilot program lender at the finder's physical  
              location for business (Section 22372):

               a.     Distributing, circulating, using, or publishing  
                 preprinted brochures, flyers, fact sheets, or other  
                 written materials relating to loans that the pilot  
                 program lender may make or negotiate, which have been  
                 reviewed and approved in writing by the lender prior to  
                 their being distributed, circulated, or published.

               b.     Providing written factual information about loan  
                 terms. conditions, or qualification requirements to a  
                 prospective borrower that have either been prepared by  
                 the lender or reviewed and approved in writing by the  
                 lender.  A finder may discuss that information with a  
                 prospective borrower in general terms, but may not  
                 provide counseling or advice to a prospective borrower.

               c.     Notifying a prospective borrower of the information  
                 needed to complete a loan application, without providing  
                 counseling or advice to the borrower.

               d.     Entering information provided by a prospective  
                 borrower on an application form or into a database,  
                 without providing counseling or advice to the borrower.  









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               e.     Assembling credit applications and other materials  
                 obtained in the course of a credit application  
                 transaction for submission to the lender.

               f.     Contacting the lender to determine the status of a  
                 loan application.

               g.     Communicating a response that is returned by the  
                 licensee's automated underwriting system to a borrower.

               h.     Obtaining a borrower's signature on documents  
                 prepared by the licensee and delivering final copies of  
                 the documents to the borrower.  

           7.  Prohibits finders from engaging in any of the following  
              activities (Section 22372):

               a.     Providing counseling or advice to a borrower or  
                 prospective borrower.

               b.     Providing loan-related marketing material that has  
                 not previously been approved by the pilot lender to a  
                 borrower or prospective borrower.

               c.     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.

               d.     Negotiating the price, length, or any other loan  
                 terms between a pilot lender and a prospective borrower  
                 (unless separately licensed as a finance broker under the  
                 CFLL).

               e.     Advising a prospective borrower or a pilot lender as  
                 to any loan term (unless separately licensed as a finance  
                 broker under the CFLL).

           8.  Authorizes pilot program lenders to compensate finders  
              pursuant to a written agreement, subject to all of the  
              following limitations (Section 22374):

               a.     No fee may be paid by a lender to a finder in  
                 connection with a loan application until and unless that  








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                 loan is consummated.

               b.     No fee may be paid by a lender to a finder based on  
                 the principal amount of the loan.

               c.     No fee paid to a finder may exceed $45 per loan for  
                 the first 40 loans originated each month at the finder's  
                 location and $40 per loan for any subsequent loans  
                 originated during that month at the finder's location.

               d.     No lender may, directly or indirectly, pass on to a  
                 borrower any fee, or any portion of any fee, that the  
                 lender pays to a finder in connection with that  
                 borrower's loan or loan application.

           9.  Requires finders to provide a disclosure to each  
              prospective borrower with which it interacts on behalf of a  
              pilot program lender on behalf of that lender, which says  
              the following in no smaller than 10-point type:  "Your loan  
              application has been referred to us by [Name of Finder].  We  
              may pay a fee to [Name of Finder] for the successful  
              referral of your loan application.  IF YOU ARE APPROVED FOR  
              THE LOAN, [NAME OF LICENSEE WILL BECOME YOUR LENDER, AND YOU  
              WILL BE BUILDING A RELATIONSHIP WITH [NAME OF LICENSEE]  If  
              you wish to report a complaint about [Name of Finder] or  
              [Name of Licensee] regarding this loan transaction, you may  
              contact the Department of Business Oversight, Division of  
              Corporations at 1-866-ASK-CORP (1-866-275-2677), or file  
              your complaint online at  www.corp.ca.gov  ." (Section 22373)

           10. Requires each licensee that utilizes the services of one or  
              more finders to inform the commissioner regarding the  
              identities of and contact information for their finders, as  
              specified; pay an annual finder registration fee to the  
              commissioner to cover the commissioner's costs to regulate  
              their finders; and submit an annual report to the  
              commissioner, containing whatever information the  
              commissioner requests related to the finder's finding  
              activities (Section 22375). 

           11. Authorizes the commissioner to examine the operations of  
              each finder to ensure that the activities of the finder are  
              in compliance with the pilot program and its implementing  
              regulations, and requires the costs of the commissioner's  








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              examination of each finder to be charged to the licensee  
              with which the finder has its agreement.  Provides that any  
              violation of the pilot program or its regulations by a  
              finder or a finder's employee is attributed to the lender  
              (Section 22377).

           12. Gives the commissioner authority to disqualify a finder  
              from performing services under the pilot program, bar a  
              finder from performing services at one or more specific  
              locations, terminate a written agreement between a finder  
              and a pilot program lender, and prohibit the use of a finder  
              by all licensees accepted to participate in the pilot  
              program, if the commissioner determines that the finder has  
              violated the pilot program rules or regulations.   
              Additionally authorizes the commissioner to impose an  
              administrative penalty of up to $2,500 for violations of the  
              pilot program that are committed by a finder (Section  
              22377).

           COMMENTS
         
            1.  Purpose:   SB 235 is sponsored by Insikt Corporation to  
              improve the viability of California's small-dollar loan  
              pilot program.  By removing bureaucratic hurdles that have  
              discouraged the use of finders by pilot program  
              participants, the sponsor believes that the bill will help  
              increase the availability of pilot program loans throughout  
              California. 

           2.  Background:   Relatively few installment loans are made in  
              California with principal amounts under $2,500.  This  
              represents a challenge to the significant population of  
              people in California who are unable to access affordable  
              credit through banks and credit unions.  Californians who  
              lack credit scores, or have very thin credit files or  
              damaged credit, currently have very few affordable options  
              when they need to borrow money.  Credit cards are often  
              unavailable to this population, or, if available, bear very  
              high interest rates and fees.  When their spending needs  
              outpace their incomes, these Californians commonly turn to  
              payday loans, auto title loans, or high-interest rate,  
              unsecured installment loans.  All three of these options  
              come with high costs, and none rewards timely loan repayment  
              with a credit score increase.  








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          Recognizing California's shortage of affordable, credit-building  
              loans, the California Legislature authorized a small-dollar  
              loan pilot program in 2010 (SB 1146, Florez, Chapter 640,  
              Statutes of 2010).  The Legislature modified that pilot  
              program in 2013, based on pilot participants' first two  
              years of experience, with the aim of attracting more lenders  
              to the program and increasing the viability of lenders  
              participating in the pilot (SB 318, Hill, Chapter 467,  
              Statutes of 2013).  SB 235 proposes to modify one element of  
              the 2010 pilot that has not yet been updated to reflect  
              knowledge gained through pilot participants' experience:   
              the finder provisions.  

          As envisioned in the 2010 legislation, finders are third parties  
              who can work on behalf of pilot program lenders to identify  
              prospective borrowers and connect them with the lenders,  
              helping to lower pilot program lenders' costs of customer  
              acquisition.  Until very recently, however, no pilot program  
              licensee had utilized the finder authority granted in the  
              2010 legislation, because the finder provisions have proven  
              too rigid for the realities of the small dollar loan  
              marketplace.  SB 235 is premised on the belief that the  
              finder provisions require revision, if the pilot program is  
              to achieve its full potential.  

           3.  Discussion:  Recently, the Insikt Corporation, parent company  
              of Lendify, a new entrant to the pilot program, devised a  
              way to utilize finders as an integral part of its business  
              model.  However, Insikt has run into two bureaucratic  
              hurdles in its attempts to implement Lendify's finder  
              roll-out.  First, although existing law authorizes finders  
              to engage in several specific activities (generally  
              involving the distribution of information about pilot  
              program loans and acting as a communications link between  
              prospective borrowers and pilot program lenders), existing  
              law is silent on whether finders may disburse loan proceeds  
              or required disclosures to approved borrowers or accept  
              periodic loan payments from borrowers.  Insikt's business  
              model seeks to give borrowers the freedom to decide how and  
              from whom they wish to receive their loan proceeds and how  
              and to whom they wish to make their periodic payments -  
              flexibility that current law fails to authorize, but which  
              this bill would.








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          Second, the original 2010 legislation authorized only one, very  
              simplified method of finder compensation: a per-loan fee  
              paid by a pilot program licensee to a finder at the time of  
              loan consummation (the 2010 legislation capped fees at the  
              somewhat arbitrary levels of $45 per loan for the first 40  
              loans originated each month at a finder's location and $40  
              per loan for any subsequent loans originated during that  
              month at a finder's locations).  These simple compensation  
              schemes fail to reflect the realities of today's financial  
              services marketplace.  Both Insikt and its finders would  
              prefer to utilize a compensation schedule that treats  
              finders as partners in Insikt's loan portfolio.   Insikt is  
              seeking the flexibility to pay its finders as its program  
              loans are repaid, rather than up front, and to compensate  
              finders based on negotiated amounts that reflect the size of  
              Insikt's performing loan portfolio, rather than a set amount  
              per loan.  These proposed changes would not revise the  
              requirements in existing law that finders be compensated  
              only for consummated loans, nor the prohibition against  
              compensating finders based on the principal amount of a  
              loan; both of those consumer protections would remain.

           4.  How Many Pilot Lenders Are There, and How Many Loans Are  
              They Making?   According to DBO, a total of seven lenders  
              have been approved to participate in the pilot program to  
              date, including Progreso Financiero, LendUp, Fairloan  
              Financial, Lendify Financial (owned by Insikt), Avanza  
              (operating as Listo!), International Rescue Committee, and  
              Cyco Financial Services Center.  Because annual reports for  
              the 2014 calendar year are not yet publicly available, and  
              because only three pilot lenders made loans in 2013,  
              information is limited regarding the number of loans made  
              under the pilot.  

          On the basis of 2013 annual reports for Progreso Financiero,  
              LendUp, and Fairloan Financial, slightly over 125,000 pilot  
              program loans totaling approximately $140 million were made  
              by pilot program lenders during 2013.  

           ----------------------------------------------- 
          |               |   Number of   |   Principal   |
          |               | Pilot Program |   Amount of   |
          |               |  Loans Made   | Pilot Program |








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          |               |               |Loans Made     |
          |---------------+---------------+---------------|
          |Progreso       |               |               |
          |Financiero     |     125,262   |               |
          |               |               |$139,534,300   |
          |---------------+---------------+---------------|
          |LendUp         |         2,674 |               |
          |               |               |$432,690       |
          |---------------+---------------+---------------|
          |Fairloan       |               |           $   |
          |Financial      |68             |66,390         |
          |               |               |               |
           ----------------------------------------------- 

           5.  Summary of Arguments in Support:   

               a.     Insikt, Inc., sponsor of SB 235, is "a white-label  
                 loan origination and investing platform that enables any  
                 brand to lend to its customers and any accredited  
                 investor to invest in consumer loans....Insikt seeks to  
                 ensure that all people have access to affordable loans  
                 based on more than their credit score and whether they  
                 have a banking relationship.  Insikt does this by  
                 providing a technology solution for retailers, brands,  
                 and online companies - all of whom are finders - to make  
                 loans to their customers without having to take risk,  
                 invest in systems, or figure out how to fund their  
                 loans."  Insikt was founded in 2012 by James Gutierrez,  
                 the founder and original chief executive officer of  
                 Progreso Financiero.

               Insikt is sponsoring SB 235 for two key reasons.  "First,  
                 existing law is silent on whether a finder may disburse  
                 loan proceeds and accept loan payments from borrowers.   
                 This was because, originally, the concept was that  
                 finders would be merchants who would deliver goods to the  
                 consumers instead of disbursing loan funds.  However,  
                 Insikt has taken the model beyond a mere substitute for  
                 retail installment sales, and now provides loan funds for  
                 purposes beyond the purchase of durable goods from a  
                 retailer/finder.  Insikt believes that borrowers should  
                 have the freedom to decide how and from whom they receive  
                 their loan proceeds and how and to whom they wish to make  
                 their payments - flexibility that current law fails to  








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                 authorize, but which this bill would enable.  A  
                 customer's ability to obtain loan proceeds and make loan  
                 payments expeditiously and in a convenient manner is  
                 simply a fundamental customer need."

               Second, the original 2010 legislation authorized only one  
                 rigid compensation scheme for finders - a per loan fee  
                 paid by a pilot program licensee to a finder at the time  
                 of loan origination.  Insikt and its finder partners are  
                 seeking the flexibility to negotiate compensation  
                 agreements that work for both parties.  Failure to  
                 provide that flexibility as part of the pilot program  
                 risks discouraging potential partnerships between pilot  
                 program lenders and finders, to the ultimate detriment of  
                 consumers, who will find themselves with less, rather  
                 than more, access to pilot program loans.  

               Insikt argues that increased flexibility around finder  
                 compensation agreements will not have the negative  
                 consequences feared by this bill's opponents.  First, the  
                 amount of finder compensation has no impact on a  
                 borrower's cost, because pilot program lenders are  
                 prohibited from passing the cost of finder compensation  
                 on to their borrowers.  If the cost of the loan to the  
                 borrower remains unchanged, why should it matter how the  
                                                                                             lender and finder split revenue derived from a loan?   
                 Second, Insikt believes that concerns about excessive  
                 finder compensation are unfounded; the low principal  
                 amounts, low rates, and low fees that may be charged  
                 under the pilot program result in very small (if any)  
                 profit margins.  There is simply too little margin  
                 available under the existing pilot program to accommodate  
                 the payment of excessive compensation.

               b.     Several of Insikt's current and potential future  
                 finder partners also support SB 235.  For example,  
                 Avanza, Inc. (which operates under the name Listo!) is a  
                 new company that provides a range of financial services,  
                 including pilot program loans, to lower-income Latino  
                 families.  As a start-up, Listo! initially lacked the  
                 resources to develop a software and underwriting system  
                 capable of making loans directly to consumers.  However,  
                 in partnering with Insikt as a finder, Listo! has access  
                 to the capability and systems of an approved pilot  








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                 program lender, which allows it to offer affordable,  
                 credit-building loans to its customers.  Listo! is  
                 committed to providing underbanked families in California  
                 access to capital and opportunities.  Listo! supports SB  
                 235, because it will improve one of the key goals of  
                 California's pilot program:  access.

               Listo! writes, "After five years, only one pilot program  
                 lender has applied to register a finder.  As we've  
                 learned through our experience, the finder provisions, as  
                 currently written, are inadequate....SB 235 takes a step  
                 in the right direction of increasing the availability of  
                 pilot program loans by making the finder provisions  
                 workable....In order for us to continue providing pilot  
                 program loans to our customers without risk to our  
                 operation, we need to fix the finder provisions in the  
                 pilot program."

               Check Agencies of California, Inc (which operates under the  
                 name Check Center) is another of Insikt's finder partners  
                 that supports SB 235.  Check Center describes itself as a  
                 socially responsible, CFLL licensee that has provided  
                 financial services and loan products to underserved and  
                 underbanked borrowers across California for 30 years.   
                 Check Center's products include payday loans, small  
                 business finance, bill pay, money transfer, and check  
                 cashing.  In August 2014, Check Center partnered with  
                 Insikt's lending subsidiary (Lendify Financial) to offer  
                 pilot program loans.  "Our goal was to provide our  
                 customers access to larger, lower-cost, pilot program  
                 loans.  Since launching, Lendify's loan product has been  
                 extremely well received by our team members and customers  
                 with almost 2,000 loan applications processed at seven  
                 locations across California.  Based on this success, we  
                 will soon expand Lendify's offering to all of our 19  
                 locations.  We are, however, concerned that existing law  
                 does not expressly permit finders like ourselves to  
                 disburse loans, nor to accept payments made by borrowers  
                 at finder locations.  When we first applied to be a  
                 finder (in partnership with Lendify), we were initially  
                 declined by the Department of Business Oversight because  
                 of our intention to disburse loans and take payments  
                 (which is a natural expectation of any customer who  
                 applies for a loan with us).  As a CFL regulated by the  








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                 DBO, we were ultimately approved as a finder with the  
                 ability to disburse funds and receive payments, but not  
                 without risk.  We are concerned that without a  
                 legislative fix to the finder provision in the pilot  
                 program, our plans to provide customer access to lower  
                 cost pilot program loans could be jeopardized."

               Check Center also observes, "It's hard to contemplate  
                 making a loan to a borrower without giving them a  
                 convenient way of repaying that loan.  In our experience,  
                 underbanked consumers operate largely in cash and are  
                 accustomed to paying for many of their bills in cash.   
                 Any provision that prohibits borrowers from making  
                 in-person loan payment unfairly disadvantages underbanked  
                 families and, thus, in our opinion, defeats the purpose  
                 of the pilot program."

               c.     uTax Software is one of the largest tax industry  
                 service providers in the country.  It would like to enter  
                 into a finder partnership with Insikt, and, in doing so,  
                 allow its network of tax preparation professionals offer  
                 Insikt's responsibly priced lending product to thousands  
                 of low- and moderate-income customers in California.  "We  
                 are concerned, however, that existing law may be a  
                 barrier to a partnership with Insikt because it is silent  
                 as to whether a finder, approved by the Department of  
                 Business Oversight under the pilot program, may disburse  
                 loans to approved borrowers and accept loan payments from  
                 those borrowers.  Our tax professionals offer year round  
                 financial services to customers, and many of them are  
                 agents of money transmitters - sending and receiving cash  
                 on behalf of customers every day.  These customers  
                 transact almost all of their business in cash and need  
                 the ability to receive loans and make payments in cash at  
                 the retail location where the loan was made.  The  
                 amendments proposed by SB 235 are therefore essential."

               d.     LendUp, an existing pilot program participant, is  
                 also supportive of SB 235.  "SB 1146 was truly  
                 revolutionary in structure; it codified in law that  
                 lenders should be rewarded for responsible underwriting,  
                 credit building access, and credit education...and while  
                 we have a handful of companies that have gotten funding  
                 and started lending responsibly - companies that have  








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                 significant social impact goals and who wish to do public  
                 good - we need more...The finder's provisions in the  
                 original bill were intended to give consumers more  
                 locations where they could apply for pilot program loans  
                 and to encourage partnerships that could lower the cost  
                 of customer acquisition for lenders."  However, the  
                 current finder provisions fail to achieve SB 1146's  
                 original objectives.  Therefore, "we think SB 235 will  
                 take the best of what we have learned with the original  
                 pilot program and encourage more participants and finders  
                 to enter the space."  

               LendUp also sees SB 235 as important, because it will allow  
                 Silicon Valley and like-minded technology players to  
                 facilitate more competition within the market for  
                 responsible small dollar loans.  There are a number of  
                 people, businesses and community groups that want to help  
                 provide better, safer lending alternatives in California,  
                 but are unable to do so due to the complex and expensive  
                 regulatory environment we live in.  SB 235 will allow  
                 able, willing, and motivated parties to use technology to  
                 solve problems.  

           6.  Summary of Arguments in Opposition:    

               a.     The Center for Responsible Lending (CRL) and  
                 Consumers Union (CU) support the general goal of  
                 expanding access to credit, but believe that such  
                 expansions must be both affordable and responsible. Both  
                 groups are opposed to SB 235.  "When we negotiated the  
                 original pilot program...we focused much attention on the  
                 issue of finders.  As originally conceived, the finders  
                 would play a very limited role and would essentially  
                 connect potential borrowers with lenders under the pilot  
                 program, and provide pre-printed materials to the  
                 borrower.  We were concerned that finders could have  
                 perverse incentives to market loans that are not in a  
                 consumer's interest, or to generate loans from  
                 transactions in which the consumer was not actively  
                 seeking credit.  As such, we negotiated limits to the  
                 role of the finder, as well as the compensation allowed  
                 for finders.  Giving finders the authority to disburse  
                 loan proceeds, provide official notices to consumers, and  
                 accept loan payments transforms these finders into a very  








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                 different kind of role than the one initially  
                 envisioned."  

               Under existing law, and as contemplated by SB 235, finders  
                 are not allowed to provide counseling or advice to  
                 borrowers, nor to interpret or explain the relevance,  
                 significance, or effect of any of the marketing materials  
                 or loan documents.  "Given the new expanded role this  
                 bill would give to a finder, it seems difficult to  
                 imagine that a finder would not be put in the position of  
                 providing some counseling or explanation to a potential  
                 borrowers.  So, either you have a finder who is illegally  
                 serving as an unlicensed broker, or you have a loan  
                 transaction occurring in a context in which the borrower  
                 is interacting with a person who is prohibited from  
                 properly assisting him or her in the decision-making  
                 process.  Either way, this is problematic.  Moreover, DBO  
                 would have limited ability to monitor a finder's loan  
                 level transactions to ensure that the law's provisions  
                 are being followed, especially when finders are not  
                 subject to any licensure requirements."

               CRL and CU are seeking three amendments, at a minimum.   
                 First, they would like to limit the new finder activities  
                 authorized by the bill to persons who are already  
                 licensed in a field pertaining to financial transactions  
                 (e.g., depository and nondepository lenders, money  
                 transmitters, check sellers, bill payers, proraters,  
                 escrow agents, pawnbrokers, insurance brokers, and real  
                 estate licensees).  Second, the organizations would like  
                 to require that finders who disburse loan proceeds or  
                 receive loan payments be required to maintain records of  
                 all disbursements made and payments received for a period  
                 of at least three years.  Finally, they are concerned  
                 about the wholesale removal of any limits or structure  
                 around the compensation of finders.  "Without some  
                 reasonable limits on finders' compensation, we fear that  
                 finders will be motivated to aggressively market loans to  
                 borrowers in a range of settings, such as retail  
                 environments where they are already trying to complete a  
                 sale of a related product or service."
                
                b.     Although not officially opposed to the bill,  
                 Progreso Financiero (now called Oportun) submitted a  








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                 letter expressing concerns.  Progreso would like to see  
                 the bill amended to minimize its potential for unintended  
                 negative consequences that could hurt, rather than help,  
                 borrowers and create opportunities for activity that  
                 could damage the reputation of the pilot program.  Like  
                 CRL and CU, Progreso would like to see better  
                 qualification of the entities that will be conducting the  
                 activities contemplated in the bill.   

          7.  Prior and Related Legislation:   

               a.     SB 1146 (Florez), Chapter 640, Statutes of 2010:   
                 Authorized California's original small-dollar loan pilot  
                 program within the CFLL, named the Pilot Program for  
                 Affordable Credit-Building Opportunities.  Allowed  
                 lenders approved to participate in the pilot program to  
                 charge higher interest rates and fees on loans of up to  
                 $2,500 than those authorized under CFLL.  Required pilot  
                 program lenders to rigorously underwrite their loans,  
                 offer credit education at no cost to their borrowers, and  
                 report borrower payment history to at least one major  
                 credit bureau.  Required detailed reporting of loan  
                 outcomes to DBO.  Scheduled to sunset on January 1, 2015,  
                 but was replaced by the Pilot Program for Increased  
                 Access to Responsible Small Dollar Loans, as described  
                 immediately below, on January 1, 2014.  

               b.     SB 318 (Hill), Chapter 467, Statutes of 2013:   
                 Replaced the Pilot Program for Affordable,  
                 Credit-Building Opportunities with the Pilot Program for  
                 Increased Access to Responsible Small Dollar Loans.   
                 Retained several aspects of the original pilot, including  
                 the underwriting requirements, offers of free credit  
                 education, reports to at least one major credit bureau,  
                 and detailed reporting of program loan outcomes, but  
                 modified other aspects of the original pilot program.   
                 These modifications increased the maximum interest rates  
                 and fees that pilot lenders could charge, allow pilot  
                 lenders to originate new loans and to refinance loans  
                 more frequently than under the original pilot, and  
                 eliminated several administrative and licensing rules  
                 that were serving as bureaucratic barriers to the success  
                 of the original pilot.  Sunsets on January 1, 2018.  
           








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          LIST OF REGISTERED SUPPORT/OPPOSITION
           
          Support
           
          Insikt, Inc. (sponsor; parent company of Lendify)
          Avanza (dba Listo!)
          Check Agencies of California (dba Check Center)
          LendUp
          uTax Software
           
          Opposition
               
          Center for Responsible Lending
          Consumers Union


                                      -- END --