BILL NUMBER: SB 1146 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Florez
FEBRUARY 18, 2010
An act to amend Section 116.230 of the Code of Civil Procedure,
and to amend Sections 22165 and 22166 of, to add Section 22304.1 to,
and to add Article 5 (commencing with Section 22173) to Chapter 1 of
Division 9 of, the Financial Code, relating to finance lenders.
LEGISLATIVE COUNSEL'S DIGEST
SB 1146, as introduced, Florez. Finance lenders: finders: small
loans.
(1) Existing law, the California Finance Lenders Law, provides for
the licensure and regulation of finance lenders and brokers by the
Commissioner of Corporations and makes a willful violation its
provisions a crime. Existing law prohibits a licensed finance lender
or broker from using advertising copy after its use has been
disapproved by the commissioner and the licensee is notified in
writing of the disapproval. Existing law authorizes the commissioner
to require a licensee to maintain a file of all advertising copy for
a period of 90 days from the date of its use. Existing law regulates
the charges a licensee may impose or receive on loans it makes and
authorizes a licensee to contract for and receive specified
alternative charges and administrative and delinquency fees.
This bill would authorize the commissioner to direct any licensee
to submit advertising copy for review by the commissioner prior to
its use. The bill would authorize the commissioner to require a
licensee to maintain a file of all advertising copy for a period of 2
years from the date of its use.
The bill would authorize a licensee to use the services of
finders, defined as persons who bring a licensee and a prospective
borrower together for the purpose of negotiating a loan contract. The
bill would require a written agreement meeting specified
requirements in order for a licensee to use the services of a finder,
would establish the services a finder would be authorized to
perform, and would require a finder to comply with the laws
applicable to the licensee relative to information security. The bill
would require a licensee to notify the commissioner within 10 days
of using the services of a finder, would require a licensee to pay an
annual finder registration fee to the commissioner, and would
require a licensee to submit an annual report to the commissioner on
the licensee's relationship and business arrangements with a finder,
as specified. The bill would authorize the commissioner to examine
the operations of a licensee and a finder to ensure that the
activities of the licensee and the finder are in compliance with
these provisions. The bill would make a licensee that uses a finder
responsible for the finder's violation of these provisions.
The bill would also authorize a licensee, for loans in an amount
less than $2,500, to impose different alternative charges, including
an administrative fee and a delinquency fee, if specified conditions
are satisfied.
Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program.
(2) Existing law establishes specified filing fees the clerk of a
court is authorized to collect in small claims cases.
This bill would establish a $25-filing fee for any small claim
action filed relative to the alternative charges authorized by this
bill for loans in an amount less than $2,500.
(3)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:
SECTION 1. Section 116.230 of the Code of Civil Procedure is
amended to read:
116.230. (a) In a small claims case, the clerk of the court shall
charge and collect only those fees authorized under this chapter.
(b) If the party filing a claim has filed 12 or fewer small claims
in the state within the previous 12 months, the filing fee is the
following:
(1) Thirty dollars ($30) if the amount of the demand is one
thousand five hundred dollars ($1,500) or less.
(2) Fifty dollars ($50) if the amount of the demand is more than
one thousand five hundred dollars ($1,500) but less than or equal to
five thousand dollars ($5,000).
(3) Seventy-five dollars ($75) if the amount of the demand is more
than five thousand dollars ($5,000).
(c) If the party has filed more than 12 other small claims in the
state within the previous 12 months, the filing fee is one hundred
dollars ($100).
(d) (1) If, after having filed a claim and paid the required fee
under paragraph (1) of subdivision (b), a party files an amended
claim or amendment to a claim that raises the amount of the demand so
that the filing fee under paragraph (2) of subdivision (b) would be
charged, the filing fee for the amended claim or amendment is twenty
dollars ($20).
(2) If, after having filed a claim and paid the required fee under
paragraph (2) of subdivision (b), a party files an amended claim or
amendment to a claim that raises the amount of the demand so that the
filing fee under paragraph (3) of subdivision (b) would be charged,
the filing fee for the amended claim or amendment is twenty-five
dollars ($25).
(3) If, after having filed a claim and paid the required fee under
paragraph (1) of subdivision (b), a party files an amended claim or
amendment to a claim that raises the amount of the demand so that the
filing fee under paragraph (3) of subdivision (b) would be charged,
the filing fee for the amended claim or amendment is forty-five
dollars ($45).
(4) The additional fees paid under this subdivision are due upon
filing. The court shall not reimburse a party if the party's claim is
amended to demand a lower amount that falls within the range for a
filing fee lower than that originally paid.
(e) Each party filing a claim shall file a declaration with the
claim stating whether that party has filed more than 12 other small
claims in the state within the last 12 months.
(f) Notwithstanding subdivisions (b), (c), and (d), for any action
filed to enforce a contract entered into pursuant to Section 22304.1
of the Financial Code, the filing fee shall be twenty-five dollars
($25).
(f)
(g) The clerk of the court shall deposit
fees collected under this section into a bank account established for
this purpose by the Administrative Office of the Courts and
maintained under rules adopted by or trial court financial policies
and procedures authorized by the Judicial Council under subdivision
(a) of Section 77206 of the Government Code. The deposits shall be
made as required under Section 68085.1 of the Government Code and
trial court financial policies and procedures authorized by the
Judicial Council.
(g)
(h) (1) The Administrative Office of the
Courts shall distribute six dollars ($6) of each thirty-dollar ($30)
fee, eight dollars ($8) of each fifty-dollar ($50) fee, ten dollars
($10) of each seventy-five-dollar ($75) fee, and fourteen dollars
($14) of each one hundred-dollar ($100) fee collected under
subdivision (b) or (c) , and four dollars ($4) of each
twenty-five dollar ($25) fee collected under subdivision (f),
to a special account in the county in which the court is located to
be used for the small claims advisory services described in Section
116.940, or, if the small claims advisory services are administered
by the court, to the court. The Administrative Office of the Courts
shall also distribute two dollars ($2) of each seventy-five-dollar
($75) fee collected under subdivision (b) to the law library fund in
the county in which the court is located.
(2) From the fees collected under subdivision (d), the
Administrative Office of the Courts shall distribute two dollars ($2)
to the law library fund in the county in which the court is located,
and three dollars ($3) to the small claims advisory services
described in Section 116.940, or, if the small claims advisory
services are administered by the court, to the court.
(3) Records of these moneys shall be available from the
Administrative Office of the Courts for inspection by the public on
request.
(4) Nothing in this section precludes the court or county from
contracting with a third party to provide small claims advisory
services as described in Section 116.940.
(h)
(i) The remainder of the fees collected
under subdivisions (b), (c), and (d) , and
(f) shall be transmitted monthly to the Controller for deposit
in the Trial Court Trust Fund.
(i)
(j) All money distributed under this section
to be used for small claims advisory services shall be used only for
providing those services as described in Section 116.940. Nothing in
this section shall preclude the county or the court from procuring
other funding to comply with the requirements of Section 116.940.
SEC. 2. Section 22165 of the Financial Code is amended to read:
22165. No advertising copy shall be used after its use has been
disapproved by the commissioner and the licensee is notified in
writing of the disapproval. The commissioner may by order direct
any licensee to submit advertising copy to the commissioner for
review prior to use, provided that the commissioner has established
procedures to ensure that the review is effected expeditiously. The
commissioner may not require prior review of advertising copy except
as provided in this section.
SEC. 3. Section 22166 of the Financial Code is amended to read:
22166. The commissioner may require licensees to maintain a file
of all advertising copy for a period of 90 days
two years from the date of its use. The file shall be
available to the commissioner upon request.
SEC. 4. Article 5 (commencing with Section 22173) is added to
Chapter 1 of Division 9 of the Financial Code, to read:
Article 5. Finders
22173. (a) A licensee may use the services of one or more finders
as provided in this article.
(b) For purposes of this article, a "finder" means a person who
brings a licensee and a prospective borrower together for the purpose
of negotiating a loan contract.
22174. (a) A finder may perform one or more of the following
services for a licensee:
(1) Preparing and designing advertising relating to loan
transactions for the licensee's review and written approval prior to
its distribution, circulation, use, or publication.
(2) Distributing, circulating, using, or publishing preprinted
brochures, flyers, fact sheets, or other written materials relating
to loans that the licensee can make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their being
distributed, circulated, or published.
(3) Providing written factual information about loan terms,
conditions, or qualification requirements to a prospective borrower
that has been either prepared by the licensee, or reviewed and
approved in writing by the licensee. A finder may discuss that
information with a prospective borrower in general terms, but may not
provide counseling or advice to a prospective borrower.
(4) Notifying a prospective borrower of the information needed in
order to complete a loan application without providing counseling or
advice to a prospective borrower.
(5) Entering information provided by the prospective borrower on a
preprinted or electronic application form without providing
counseling or advice to a prospective borrower.
(6) Entering information provided by a prospective borrower or
third party into a preformatted computer database.
(7) Accepting and providing a receipt on behalf of a licensee for
funds received from a prospective borrower for credit or appraisal
fees.
(8) Preparing and mailing requests for verification of employment,
verification of deposits, credit reports, or appraisal reports, or
obtaining those reports for transmission to the licensee.
(9) Assembling, under the direction of the licensee, credit
applications and other materials obtained in the course of a credit
application transaction for submission to the finance lender,
providing the final determination as to completeness or compliance is
made by the licensee.
(10) Communicating with a service provider in connection with a
loan transaction to determine when reports or other information
needed concerning any aspect of the transaction will be delivered, or
when certain services will be performed or completed.
(11) Mailing, delivering, picking up, or arranging the mailing,
delivery, or picking up of documents or instruments related to the
loan transaction, including obtaining signatures to the documents or
instruments from principals, parties, or service providers in
connection with the loan transaction, as long as the finder does not
interpret or explain the content, relevance, significance, or effect
of the document or signature and the documents or instruments have
been reviewed and approved in writing by the licensee.
(12) Contacting the licensee to determine the status of a loan
application.
(13) Responding to an inquiry or notifying a prospective borrower
or his or her agent of the status of the loan application as long as
the finder does not interpret or explain the relevance, significance,
or effect of that status. A finder may communicate omissions to a
party or principal to the loan as long as the finder does not
interpret or explain the relevance or significance of those
omissions.
(14) Preparing and completing documents and instruments under the
supervision and direction of the licensee if the final documents or
instruments will be or have been reviewed and approved in writing by
the licensee.
(15) Arranging or making appointments for third-party service
providers to enter the real property securing the loan, or arranging
or making appointments for the prospective borrower to meet with the
licensee or service provider in connection with the loan.
(b) Any person who performs one or more of the following
activities is a broker within the meaning of Section 22004 rather
than a finder within the meaning of this section:
(1) Negotiating the price, length, or any other loan term between
a licensee and a prospective borrower.
(2) Advising either a prospective borrower or a licensee as to any
loan term.
(3) Offering information pertaining to a single prospective
borrower to more than one licensee, except that, if a licensee has
declined to offer a loan to a prospective borrower and has so
notified that prospective borrower in writing, the person may then
offer information pertaining to a single prospective borrower to
another licensee with which it has a finder's agreement.
(c) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.
22175. A finder may be compensated by the licensee pursuant to
the written agreement between the licensee and the finder, as
described in Section 22177.
22176. A licensee that utilizes the services of a finder shall do
all of the following:
(a) Notify the commissioner within 10 days of the commencement of
the utilization of the services of each finder.
(b) Pay an annual finder registration fee to the commissioner in
an amount to be established by the commissioner by regulation for
each finder utilized by the licensee.
(c) Submit an annual report to the commissioner including any
information pertaining to each finder and the licensee's relationship
and business arrangements with each finder as the commissioner may
by regulation require.
22177. All arrangements between a licensee and a finder shall be
set forth in a written agreement between the parties. The agreement
shall contain a provision establishing that the finder agrees to
comply with all applicable provisions of this division and that the
commissioner shall have access to all of the finder's books and
records that pertain to the finder's operations under the agreement
with the licensee.
22178. The commissioner may examine the operations of each
licensee and each finder to ensure that the activities of the
licensee and the finder are in compliance with this article. The
costs of the commissioner's examination for each finder shall be
attributed to the commissioner's examination of the licensee. Any
violation of this article by a finder may be attributed to the
finance lender with whom it has entered into an agreement for
purposes of determining the licensee's compliance with this division.
SEC. 5. Section 22304.1 is added to the Financial Code, to read:
22304.1. (a) As an alternative to the charges authorized by
Section 22303 or 22304, a licensee may contract for and receive
charges at a rate not exceeding 3 percent per month on the unpaid
principal balance, provided that the loan complies with the following
requirements:
(1) Interest on the loan accrues on a simple-interest basis,
through the application of a daily periodic rate to the actual unpaid
principal balance each day.
(2) The licensee discloses the following to the consumer in
writing at the time of application:
(A) The annual percentage rate, the periodic payment amount, and
the total finance charge, calculated as required by Federal Reserve
Board Regulation Z, as to a loan of an amount and term substantially
similar to the loan applied for by the consumer.
(B) That the consumer shall have the right to rescind the loan by
notifying the licensee of the consumer's intent to rescind the loan
and returning the principal advanced by the end of the business day
following the date of the consummation of the loan.
(3) The loan has a term of not less than 90 days and a minimum
principal amount upon origination of two hundred fifty dollars
($250).
(b) As to any loan made under this a section, a licensee may
contract for and receive an administrative fee, which shall be fully
earned immediately upon making the loan, in an amount not in excess
of (1) 15 percent of the principal amount, exclusive of the
administrative fee, or (2) seventy-five dollars ($75), whichever is
less. An administrative fee shall not be contracted for or received
in connection with the refinancing of a loan unless at least one year
has elapsed since the receipt of a previous administrative fee paid
by the borrower. Only one administrative fee shall be contracted for
or received until the loan has been repaid in full. For purposes of
this section, "bona fide principal amount" shall be determined in
accordance with Section 22251. Section 22305 shall not apply to any
loan made under this section.
(c) Notwithstanding subdivision (a) of Section 22320.5, a licensee
may contract for and receive a delinquency fee not in excess of one
of the following amounts:
(1) For a period in default of not less than seven days, an amount
not in excess of twenty dollars ($20).
(2) For a period in default of not less than 14 days, an amount
not in excess of twenty-five dollars ($25).
(d) The following shall apply to a loan made by a licensee
pursuant to this section:
(1) Prior to disbursement of loan proceeds, the licensee shall
either (A) offer a credit education program or seminar to the
borrower, or (B) invite the borrower to a financial education program
or seminar offered by an independent third party. However, the
borrower shall not be required to attend these education programs or
seminars.
(2) The licensee shall report each borrower's payment performance
to at least one of the three major credit bureaus in the United
States.
(3) The licensee's underwriting of the loan shall determine that
the borrower's total monthly debt service payments, at the time of
origination and across all outstanding forms of credit, do not exceed
50 percent of the borrower's gross monthly income.
(e) This section shall not apply to any loan of a bona fide
principal amount of two thousand five hundred dollars ($2,500) or
more as determined in accordance with Section 22251.
SEC. 6. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.