BILL NUMBER: SB 1146 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 22, 2010
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 and to add and repeal Arti cle
3.5 (commencing with Section 22348) of Chapter 2 of Division 9
of, the Financial Code, relating to finance lenders.
LEGISLATIVE COUNSEL'S DIGEST
SB 1146, as amended, 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 of
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 establish the Pilot Program for Affordable
Credit-Building Opportunities for the purpose of increasing the
availability of credit-building opportunities to underbanked
individuals seeking low-dollar-value loans. The bill would require
licensees to file an application with the commissioner to participate
in the program. The bill would authorize a licensee
approved by the commissioner to participate in the program to
impose specified alternative charges, including an
administrative fee and delinquency fees, on loans of less than
$2,500, subject to certain requirements and 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 entering into a
contract with 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 a
violation of these provisions by a finder o r a
finder's employee. The bill would require the commissioner
to report to the Legislature, by January 1, 2014,
summarizing utilization of the Pilot Program for Affordable
Credit-Building Opportunities, as specified .
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
made pursuant to the pilot program .
(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 22351 of the Financial Code,
the filing fee shall be twenty-five dollars ($25).
(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.
(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.
(i) The remainder of the fees collected under subdivisions (b),
(c), (d), and (f) shall be transmitted monthly to the Controller for
deposit in the Trial Court Trust Fund.
(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. review prior to use.
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 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
SEC. 4. Article 3.5 (commencing with Section
22348) is added to Chapter 2 of Division 9 of the Financial Code, to
read:
Article 3.5. Pilot Program for Affordable
Credit-Building Opportunities
22348. (a) The Pilot Program for Affordable Credit-Building
Opportunities is hereby established and is intended to increase the
availability of affordable credit-building opportunities to
underbanked individuals seeking low-dollar-value loans and to help
those individuals move into the financial mainstream.
(b) All references in this article to the program shall mean and
refer to the Pilot Program for Affordable Credit-Building
Opportunities.
22349. Any licensee wishing to participate in the program shall
file an application with the commissioner, in a manner prescribed by
the commissioner, and shall pay a fee to the commissioner, in an
amount calculated by the commissioner to cover its costs to
administer this article.
22350. No licensee may offer or make a loan, nor impose any
charges or fees pursuant to Section 22351, nor use a finder pursuant
to Section 22352, without prior approval from the commissioner to
participate in the program.
22351. (a) As an alternative to the charges authorized by Section
22303 or 22304, a licensee approved by the commissioner to
participate in the program may contract for and receive charges at a
rate not exceeding 3 percent per month on any portion of the unpaid
principal balance of a loan.
(b) Any loan made pursuant to this section shall comply 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).
(c) As to any loan made under this section, a licensee approved by
the commissioner to participate in the program 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
either 5 percent of the principal amount, exclusive of the
administrative fee, or 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.
(d) Notwithstanding subdivision (a) of Section 22320.5, a licensee
approved by the commissioner to participate in the program 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).
(e) 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, that has been previously reviewed and approved by the
commissioner for use in complying with this section; or (B) invite
the borrower to a credit education program or seminar offered by an
independent third party, that has been previously reviewed and
approved by the commissioner for use in complying with this section.
The borrower shall not be required to participate in either of 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 shall underwrite each loan, and shall not make a
loan, if it determines through its underwriting that the borrower's
total monthly debt service payments, at the time of origination,
including the loan for which the borrower is being considered, and
across all outstanding forms of credit known to the licensee, do not
exceed 50 percent of the borrower's gross monthly income.
(f) 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.
22173. 22352. (a) A licensee
who is approved by the commissioner to participate in the program
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. 22353. (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)
(1) 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)
(2) 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)
(3) 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)
(4) Entering information provided by the prospective
borrower on a preprinted or electronic application form or onto
a preformatted computer database 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
(5) Assembling 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)
(6) 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.
(7) Communicating a response that is returned by the licensee's
automated underwriting system to a borrower or a prospective
borrower.
(8) Obtaining a borrower's signature on documents prepared by the
licensee and delivering final copies of the documents to the
borrower.
(b) A finder shall not engage in any of the following activities:
(1) Providing counseling or advice to a borrower or prospective
borrower.
(2) Providing loan-related marketing material that has not
previously been approved by the licensee to a borrower or a
prospective borrower.
(3) 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.
(b)
(c) 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)
(d) A finder shall comply with all laws applicable to
the licensee that impose requirements upon the licensee for
safeguards for information security.
22175. 22354. A finder may be
compensated by the licensee pursuant to the written agreement between
the licensee and the finder, as described in Section 22177.
22356. No licensee shall, directly or indirectly,
pass on to a borrower any fee, or any portion of any fee, that the
licensee pays to a finder in connection with that borrower's loan or
loan application.
22176. 22357. 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.
entering into a contract with a finder, on a form
acceptable to the commissioner, regarding all of the following:
(1) The name and business address of the finder.
(2) The name and contact information for an employee of the finder
who is knowledgeable about, and has the authority to execute, the
contract governing the business relationship between the finder and
the licensee.
(3) The name and contract information for one or more employees of
the finder who is or are responsible for the activities of the
finder at each of its branch locations.
(4) A list of the activities the finder shall perform on behalf of
the licensee.
(5) Any other information requested by the commissioner.
(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. 22358. 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
regulations that are established by the commissioner pursuant to this
article regarding the activities of finders 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. 22359. 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 of each finder shall be attributed
to the commissioner's examination of the licensee. Any violation of
this article by a finder may or a finder's
employee shall 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.
22360. On or before January 1, 2014, the commissioner shall
submit a report to the Legislature, in compliance with Section 9795
of the Government Code summarizing utilization of the Pilot Program
for Affordable Credit-Building Opportunities, and including
recommendations regarding whether the program should be continued
after January 1, 2015. The report shall include, but not be limited
to, the following:
(a) The number of finance lender licensees who applied to
participate in the program.
(b) The number of finance lender licensees accepted to participate
in the program.
(c) The number of loans made pursuant to the program, and the
distribution of interest rates and principal amounts upon origination
among those loans.
(d) Recommendations for improving the program.
(e) Recommendations regarding whether the program should be
continued after January 1, 2015.
22361. This article shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
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. SEC. 5. 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.