BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 1290 (Mendoza) - Commissioner of Business Oversight: California Finance Lenders Law: California Deferred Deposit Transaction Law ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 11, 2016 |Policy Vote: B. & F.I. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: April 25, 2016 |Consultant: Jolie Onodera | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 1290 would require the Commissioner of Business Oversight (commissioner) to conduct consolidated examinations of licensees under common ownership, as specified. This bill would require the commissioner to submit a report to the Legislature no later than January 1, 2020, regarding the impacts of the consolidated examination procedure on consumers and licensees. This bill would repeal its provisions on January 1, 2021. Fiscal Impact: Consolidated examinations : One-time costs in excess of $600,000 (Special Fund*) to modify internal software systems, revise procedures, set up and load the licensing data to identify common ownership, and train staff on the revised SB 1290 (Mendoza) Page 1 of ? examination process. Annual costs through 2020 potentially in excess of $150,000 to maintain and support the new examination process. Legislative report : One-time costs of $150,000 (Special Fund*) to collect and analyze data, prepare and submit the report. *Corporations Fund Background: Existing law pursuant to the California Finance Lenders Law (CFLL) provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight (commissioner). Existing law pursuant to the California Deferred Deposit Transaction Law (CDDTL) provides for the licensure and regulation by the commissioner of persons engaged in the business of making or arranging deferred deposit transactions. For the purpose of discovering violations of the law or securing information required in the administration and enforcement of the CFLL, the commissioner is authorized to investigate the business of these licensees at any time, including examining the books, accounts, records, and files used in the business, as specified. (Financial Code § 22701.) For the purpose of discovering violations of the law or securing information required in the administration and enforcement of the CDDTL, the commissioner may, at any time, but not less than once every two years, investigate the business of deferred deposits, and examine the books, accounts, records, and files used in the business of deferred deposit transactions, as specified. (Financial Code § 23046.) Under existing law, each licensee under the CFLL and CDDTL is required to pay the commissioner the cost of each examination of that licensee. (Financial Code §§ 22707, 23046.) This bill seeks to streamline the licensee examinations and improve administrative efficiency under the CFLL and CDDTL, without compromising consumer protection or increasing examination costs to licensees. Proposed Law: This bill: SB 1290 (Mendoza) Page 2 of ? Requires the commissioner, when conducting an examination of a finance lender or broker that is under common ownership with one or more other persons licensed under the California Finance Lenders Law (CFLL), to conduct a single consolidated examination that includes all persons licensed under the CFLL, that share the same common ownership. Requires the commissioner, when conducting an investigation of a person licensed under the California Deferred Deposit Transaction Law (CDDTL) that is under common ownership with one or more other persons licensed under the CDDTL, to conduct a single consolidated examination that includes all persons licensed under the CDDTL, which share the same common ownership. Defines "common ownership" for purposes of the bill as two or more licensees that are wholly owned by the same person. Authorizes CFLL and CDDTL licensees that are examined as part of a consolidated examination to electronically submit all books, accounts, papers, records, and files required by the commissioner in connection with the examination. Notwithstanding the aforementioned provisions, expressly retains the commissioner's right to conduct periodic onsite investigations and examinations of CFLL and CDDTL licensees' physical locations for business to ensure compliance with CFLL and CDDTL provisions. Not later than January 1, 2020, requires the commissioner to submit a report to the Legislature regarding the impacts of the consolidated examination procedure on consumers and licensees, as specified. Repeals the bill's provisions on January 1, 2021. Staff Comments: By requiring the Department of Business Oversight SB 1290 (Mendoza) Page 3 of ? (DBO) to conduct consolidated examinations of specified licensees, this bill will result in significant one-time and ongoing costs to the DBO, as noted in the Fiscal Impact section of this analysis. To the extent the provisions of this bill do not provide the commissioner with sufficient flexibility to conduct licensee examinations, this bill could potentially impede the ability of the commissioner to achieve the administrative efficiencies that this bill seeks to promote. As the bill requires the commissioner to conduct a "single" consolidated examination of all licenses under common ownership, it appears the bill would not allow the commissioner to conduct investigations by region and/or by company, which may or may not be more efficient. -- END --