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
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|Version: April 11, 2016 |Policy Vote: B. & F.I. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: April 25, 2016 |Consultant: Jolie Onodera |
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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
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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:
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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
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(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.
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