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  







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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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