Bill Text: CA AB2500 | 2017-2018 | Regular Session | Amended

---

Bill Title: California Financing Law: consumer loans: charges.

Spectrum: Partisan Bill (Democrat 12-0)

Status: (Introduced - Dead) 2018-05-31 - Read third time. Refused passage. (Ayes 27. Noes 30. Page 5657.). [AB2500 Detail]

Download: California-2017-AB2500-Amended.html

---

Amended  IN  Assembly  May 29, 2018

Amended  IN  Assembly  March 23, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill

No. 2500

---

Introduced by Assembly Member Kalra
(Principal coauthors: Senators Bradford and Mitchell)
(Coauthors: Assembly Members Bloom, Bonta, Chiu, Chu, Gonzalez Fletcher, Jones-Sawyer, McCarty, Mark Stone, and Ting)

February 14, 2018

---

An act to amend Sections 22202, 22250, 22303, 22304, 22305, 22307, 22308, 22334, 22337, and 22452 of, and to add Section 22334.5 Sections 22304.5, 22334.5, and 22337.5 to, the Financial Code, relating to consumer loans.

LEGISLATIVE COUNSEL'S DIGEST

AB 2500, as amended, Kalra. Consumer California Financing Law: consumer loans: charges.

(1) The California Financing Law (CFL) provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight. The CFL prohibits anyone from engaging in the business of a finance lender or broker without obtaining a license. A willful violation of the CFL is a crime, except as specified. Under existing law, a licensee who lends any sum of money is authorized to contract for and receive charges at a maximum rate that does not exceed specified sums on the unpaid principal balance per month, ranging from 2 ¹/₂% to 1%, based on the consumer loan amount, as specified. This provision, however, does not apply to any loan of a bona fide principal amount of $2,500 or more, as determined in accordance with a provision governing regulatory ceilings and evasion of the CFL.

This bill would modify the maximum interest rate for which a licensee is authorized to contract. The bill would permit interest of 1% per month on that part of the unpaid principal balance of a loan that is between $1,650 to $2,500, 3% per month on that part of the unpaid principal balance of a loan that is between $2,500 to $5,000, and 2% per month on that part of the unpaid principal balance of a loan that is between $5,000 to $10,000. The bill would also increase the threshold amount for loans that are exempt from this provision to $10,000 or more.

(2)The

The CFL also authorizes a licensee, as an alternative to the above-described rate charges for consumer loan amounts, to instead contract for and receive charges at the greater of a rate not exceeding 1.6% per month on the unpaid principal balance or a rate not exceeding ⁵/₆ of 1% per month, plus a specified percentage per month, as established by the Federal Reserve Bank of San Francisco, on advances to member banks under federal law, or if there is no single determinable rate, the closest counterpart of this rate. Under existing law, these provisions do not apply to a loan of a bona fide principal amount of $2,500 or more, as specified. The CFL authorizes a licensee to contract for and receive an administrative fee of a specified amount that varies with the bona fide principal amount of the loan, including authorizing a licensee to receive an administrative fee of $75 with respect to a loan of a bona fide principal amount in excess of $2,500.

This bill would increase the threshold amount of loans that are exempt from this provision to $10,000 or more. authorize a licensee, with respect to a loan of a bona fide principal amount of $2,500 or more but less than $5,000, to contract for or receive no more than moneys paid for specified insurance and for charges, inclusive of an administrative fee that does not exceed $75, which in the aggregate amount exceed an annual simple interest rate of 36%. The bill would also authorize a licensee, as an alternative to these provisions, to contract for or receive no more than moneys paid for an administrative fee that does not exceed $90 and for charges, which in the aggregate amount do not exceed an annual simple interest rate of 36% or the sum of 30.75% plus the United States Prime Rate.

(3)The CFL authorizes a licensee to contract for and receive an administrative fee of a specified amount that varies with the bona fide principal amount of the loan, including authorizing a licensee receive an administrative fee of $75 with respect to a loan of a bona fide principal amount in excess of $2,500.

This bill would modify the maximum administrative fee to be charged with respect to a loan of bona fide principal amount in excess of $2,500 to authorize the licensee to receive an amount that does not exceed 7% of the principal amount of the loan or $90, whichever is less.

(4)The CFL requires, subject to specified exceptions, that all charges on consumer loans be computed and paid as a percentage per month of the unpaid principal balance or portions thereof.

This bill would also require that charges on a consumer loan be computed at a rate sufficient to ensure that it be fully amortized, as defined. The bill would also prohibit a licensee from including in a contract for a consumer loan any provision that provides for negative amortization or that provides that the monthly rate to be charged on the loan will substantially increase over the term of that loan. The bill would make conforming changes to that effect.

(5)

(2) Existing law prohibits licensees subject to the CFL from entering into a contract for a consumer loan that provides for a scheduled repayment of principal over more than the maximum terms set forth in relation to the respective size of the loan. Among other things, this provision prohibits a loan of $3,000 but less than $5,000 from exceeding a maximum term of 60 months and 15 days.

This bill would increase the maximum principal loan amount under the above schedule to $10,000. The bill would also prohibit a licensee from entering into a contract for a consumer loan that is in excess of $2,500 but not more less than $10,000 that provides for a scheduled repayment of principal that is less than 12 months.

By expanding the application of the CFL to cover more loans, the bill would expand the scope of an existing crime, thereby imposing a state-mandated local program.

(6)

(3) The CFL requires a statement showing in clear and distinct terms specified information relating to the loan to be delivered to the buyer when it is made.

This bill would also require each license finance lender to include within that statement information on any certified financial coaches, as defined, that are available to the borrower. licensee, prior to disbursement of loan proceeds in connection with certain loans exceeding $2,500 but less than $10,000, to offer a free credit education program or seminar to each borrower in accordance with certain conditions.

(7)

(4) The CFL requires a licensed finance lender to permit payment to be made in advance in any amount on any contract of any loan at any time and authorizes the licensee to apply that payment first to any agreed prepayment penalty.

This bill would prohibit a licensee from including in any contract for a consumer loan any form of prepayment penalty charging, imposing, or receiving any penalty for the prepayment of a loan, except as specified, and would make conforming changes to that effect. The bill would also make certain moneys paid to, and commissions and benefits received by, a licensee in connection with a loan that a buyer separately authorized as optional subject to adjustment and rebate if a loan contract is paid in full, as prescribed.

(8)The CFL requires a licensed finance lender, upon repayment of any loan in full, to take specified actions related to that loan, including releasing all security for the loan and making it as paid.

This bill would require a licensed finance lender, if a borrower repays a loan in full before the end of the term of the loan, to refund, at a pro rata or actuarial basis, any remaining charges that the borrower would have owed to the licensed finance lender under the provisions of that loan contract. The bill would also require a licensed finance lender, upon entering into a contract to refinance an existing loan, to refund, at a pro rata or actuarial basis, any remaining charges that the borrower would have owed to the licensed finance lender under the provisions of the existing loan before entering into a new loan contract with that borrower. The bill would make conforming changes to that effect.

(9)

(5) The CFL defines charges for its purposes to include aggregate interest, fees, bonuses, commissions, brokerage, discounts, expenses, and other forms of costs charged, contracted for, or received by a licensee or any other person in connection with the investigating, arranging, negotiating, procuring, guaranteeing, making, servicing, collecting, and enforcing of a loan or forbearance of money, credit, goods, or things in action, or any other service rendered. Existing law also specifies that charges do not include, among other things, fees paid to a licensee for the privilege of participating in an open-end-credit program, which fees are to cover administrative costs and are imposed upon executing the open-end loan agreement and on annual renewal dates or anniversary dates.

This bill would delete the above exception for fees paid to a licensee for the privilege of participating in an open-end credit program, as specified.

(10)The CFL also defines charges as not including, among other things, moneys paid to, and commissions and benefits received by, a licensee for the sale of goods, services, or insurance, as described.

This bill would revise that provision to specify that it applies to insurance other than credit insurance, as defined.

(11)

(6) 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.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

---

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 22202 of the Financial Code is amended to read:

22202.

 “Charges” do not include any of the following:

(a) Commissions received as a licensed insurance agent or broker in connection with insurance written as provided in Section 22313.

(b) Amounts not in excess of the amounts specified in subdivision (c) of Section 3068 of the Civil Code paid to holders of possessory liens, imposed pursuant to Chapter 6.5 (commencing with Section 3067) of Title 14 of Part 4 of Division 3 of the Civil Code, to release motor vehicles that secure loans subject to this division.

(c) Court costs, excluding attorney’s fees, incurred in a suit and recovered against a debtor who defaults on his or her loan.

(d) Amounts received by a licensee from a seller, from whom the borrower obtains money, goods, labor, or services on credit, in connection with a transaction under an open-end credit program that are paid or deducted from the loan proceeds paid to the seller at the direction of the borrower and which are an obligation of the seller to the licensee for the privilege of allowing the seller to participate in the licensee’s open-end credit program. Amounts received by a licensee from a seller pursuant to this subdivision may not exceed 6 percent of the loan proceeds paid to the seller at the direction of the borrower.

(e) Actual and necessary fees not exceeding five hundred dollars ($500) paid in connection with the repossession of a motor vehicle to repossession agencies licensed pursuant to Chapter 11 (commencing with Section 7500) of Division 3 of the Business and Professions Code provided that the licensee complies with Sections 22328 and 22329, and actual fees paid to a licensee in conformity with Sections 26751 and 41612 of the Government Code in an amount not exceeding the amount specified in those sections of the Government Code.

(f) Moneys paid to, and commissions and benefits received by, a licensee for the sale of goods, services, or insurance, other than credit insurance as defined in Section 22314, whether or not the sale is in connection with a loan, that the buyer by a separately signed authorization acknowledges is optional, if sale of the goods, services, or insurance has been authorized pursuant to Section 22154.

SEC. 2.

 Section 22250 of the Financial Code is amended to read:

22250.

 (a) The following sections do not apply to any loan of a bona fide principal amount of ten thousand dollars ($10,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22154, 22155, 22307, 22313, 22314, 22315, 22325, 22334, and 22752, and the sections enumerated in subdivision (b).

(b) The following sections do not apply to any loan of a bona fide principal amount of five thousand dollars ($5,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22201, 22202, 22300, 22305, and 22306, subdivision (a) of Section 22307, and Sections 22309, 22320.5, 22322, 22323, 22325, 22326, 22327, 22400, and 22751.

SEC. 3.Section 22303 of the Financial Code is amended to read:

22303.

Every licensee who lends any sum of money may contract for and receive charges at a rate not exceeding the sum of the following:

(a)Two and one-half percent per month on that part of the unpaid principal balance of any loan up to, including, but not in excess of two hundred twenty-five dollars ($225).

(b)Two percent per month on that portion of the unpaid principal balance in excess of two hundred twenty-five dollars ($225) up to, including, but not in excess of nine hundred dollars ($900).

(c)One and one-half percent per month on that part of the unpaid principal balance in excess of nine hundred dollars ($900) up to, including, but not in excess of one thousand six hundred fifty dollars ($1,650).

(d)One percent per month on that part of the unpaid principal balance in excess of one thousand six hundred fifty dollars ($1,650), but not more than two thousand five hundred dollars ($2,500).

(e)Three percent per month on that part of the unpaid principal balance more than two thousand five hundred dollars ($2,500), but not more than five thousand dollars ($5,000).

(f)Two percent per month on that part of the unpaid principal balance more than five thousand dollars (5,000), but not more than ten thousand dollars ($10,000).

This section does not apply to any loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22251.

SEC. 4.Section 22304 of the Financial Code is amended to read:

22304.

As an alternative to the charges authorized by Section 22303, a licensee may contract for and receive charges at the greater of the following:

(a)A rate not exceeding 1.6 percent per month on the unpaid principal balance.

(b)A rate not exceeding five-sixths of 1 percent per month plus a percentage per month equal to one-twelfth of the annual rate prevailing on the 25th day of the second month of the quarter preceding the quarter in which the loan is made, as established by the Federal Reserve Bank of San Francisco, on advances to member banks under Sections 13 and 13A of the Federal Reserve Act, as now in effect or hereafter from time to time amended, or if there is no single determinable rate for advances, the closest counterpart of this rate as shall be determined by the Commissioner of Financial Institutions. Charges shall be calculated on the unpaid principal balance.

(c)This section does not apply to any loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22251.

SEC. 3.

 Section 22304.5 is added to the Financial Code, to read:

22304.5.

 (a) For any loan of a bona fide principal amount of more than two thousand five hundred dollars ($2,500) but less than five thousand dollars ($5,000), as determined in accordance with Section 22251, a licensee may contract for or receive no more than the following amounts:

(1) Moneys paid pursuant to Sections 22313 and 22314, and

(2) Charges, inclusive of moneys paid pursuant to paragraph (1) of subdivision (b) of Section 22305, that in the aggregate amount exceed an annual simple interest rate of 36 percent per annum.

(b) As an alternative to subdivision (a), a licensee may contract for or receive no more than the following amounts:

(1) Moneys paid pursuant to paragraph (2) of subdivision (b) of Section 22305, and

(2) Charges that in the aggregate amount exceed an annual simple interest rate of 36 percent per annum or the sum of 30.75 percent per annum plus the United States Prime Rate, whichever is greater. As used in this paragraph, “United States Prime Rate” means the rate published by the Board of Governors of the Federal Reserve System in its Statistical Release H.15 Selected Interest Rates for bank prime loans and in effect as of the first day of the month immediately preceding the month during which the loan is consummated. If the Federal Reserve System ceases publication of the prime rate, the commissioner shall designate a substantially equivalent index.

(c) This section does not apply to any loan of a bona fide principal amount of five thousand dollars ($5,000) or more.

SEC. 5.SEC. 4.

 Section 22305 of the Financial Code is amended to read:

22305.

 (a) In addition to the charges authorized by Section 22303 or 22304, a licensee may contract for and receive an administrative fee with respect to a loan of a bona fide principal amount of not more than two thousand five hundred dollars ($2,500) at a rate not in excess of 5 percent of the principal amount (exclusive of the administrative fee) or fifty dollars ($50), whichever is less.

(b) In addition to the charges authorized by Section 22303 or 22304, a licensee may contract for and receive an administrative fee with With respect to a loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500), at an amount not to exceed 7 percent of the principal amount (exclusive of the administrative fee) or ninety dollars ($90), whichever is less. a licensee may contract for and receive an administrative fee as follows:

(1) For a loan made pursuant to subdivision (a) of Section 22304.5, an amount not to exceed seventy-five dollars ($75).

(2) For a loan made pursuant to subdivision (b) of Section 22304.5, an amount not to exceed ninety dollars ($90).

(c) A licensee shall not contract for or receive an administrative fee 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 may be contracted for or received until the loan has been repaid in full. The administrative fee may be included in the principal amount and shall be fully earned immediately upon making the loan, except that if the licensee refinances the loan within the first 12 months of the loan term the licensee shall rebate to the borrower a portion of the administrative fee calculated on a pro rata basis according to the remaining term of the loan.

(d) For purposes of this section, “bona fide principal amount” shall be determined in accordance with Section 22251.

SEC. 6.Section 22307 of the Financial Code is amended to read:

22307.

(a)Except as provided in Section 22305 and Article 4 (commencing with Section 22400), all charges on loans made under this division shall be computed and paid only as a percentage per month of the unpaid principal balance or portions thereof, shall be computed at a rate sufficient to be a fully amortized loan, and shall be so expressed in every obligation signed by the borrower. The charges on loans shall be computed on the basis of the number of days actually elapsed. For the purpose of these computations, a month is any period of 30 consecutive days.

(b)The loan contract shall provide for payment of the aggregate amount contracted to be paid in substantially equal periodical installments, the first of which shall be due not less than 15 days nor more than one month and 15 days from the date the loan is made. This subdivision shall not apply to a loan made to a graduate student at an accredited college or university while the student is actively pursuing a study program leading to a postbaccalaureate degree, or to a student loan made by an eligible lender under the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1070 et seq.), or to a student loan made pursuant to the Public Health Service Act, as amended (42 U.S.C. Sec. 294 et seq.).

(c)For purposes of this section, “fully amortized loan” means a loan in which, at inception of the loan, the entire principal balance, together with accrued interest, shall be payable with the scheduled term of the loan in substantially equal installments, excepting the last payment, which may be smaller than a regular scheduled payment.

(d)This section shall not apply to open-end loans.

SEC. 7.Section 22308 of the Financial Code is amended to read:

22308.

Notwithstanding Section 22307, a licensee may contract for and receive charges on the unpaid principal balance at a single annual percentage rate, applied on the basis of the number of days actually elapsed, if the annual rate would produce a finance charge at the maturity of the contract not in excess of the finance charge resulting from the application of the graduated rates specified in Section 22303, when the loan is paid according to its terms, and charges are computed on the basis that a month is any period of 30 consecutive days, as provided in Section 22307. However, if prepayment in full occurs on or before the third installment date, all charges shall be refunded pursuant to subdivision (e) of Section 22337.

SEC. 8.SEC. 5.

 Section 22334 of the Financial Code is amended to read:

22334.

 (a) A Except as provided in subdivision (b), a licensee shall not enter into any contract for a loan that provides for a scheduled repayment of principal over more than the maximum terms set forth below opposite the respective size of loans.

Principal amount of loan	Maximum term
Less than $500  ........................	24 months and 15 days
$500 but less than $1,500  ........................	36 months and 15 days
$1,500 but less than $3,000  ........................	48 months and 15 days
$3,000 but less than $10,000  ........................	60 months and 15 days

(b) The maximum loan term of 60 months and 15 days does not apply to loans secured by real property of a bona fide principal amount in excess of five thousand dollars ($5,000).

(b)

(c) A licensee shall not enter into any contract for a loan that provides for a scheduled repayment of principal that is less than 12 months. This subdivision applies to a loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500), but not in excess of less than ten thousand dollars ($10,000.) ($10,000).

(c)

(d) This section does not apply to open-end loans, or to a student loan made by an eligible lender under the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1070 et seq.), or to a student loan made pursuant to the Public Health Service Act, as amended (42 U.S.C. Sec. 294 et seq.).

SEC. 9.SEC. 6.

 Section 22334.5 is added to the Financial Code, to read:

22334.5.

 A licensee shall not enter into a contract for a consumer loan that contains any of the following provisions: charge, impose, or receive any penalty for the prepayment of a loan. This section does not apply to loans secured by real property.

(a)A provision for negative amortization in which the payment schedule for regular monthly payments causes the principal amount of the loan to increase.

(b)A provision that provides that the monthly interest rate to be charged on the loan will substantially increase over the term of that loan.

(c)A provision that authorizes any form of prepayment penalty.

SEC. 10.SEC. 7.

 Section 22337 of the Financial Code is amended to read:

22337.

 Each licensed finance lender shall:

(a) Deliver or cause to be delivered to the borrower, or any one thereof, at the time the loan is made, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security for the loan, if any, and the agreed rate of charge or the annual percentage rate pursuant to Regulation Z promulgated by the Consumer Financial Protection Bureau (12 C.F.R. 1026). The statement shall also provide the borrower with information on, including the address and phone number of, any certified financial coaches that are available to the borrower. For purposes of this subdivision, “certified financial coaches” means a financial coach located in California that the commissioner determines was certified by the Consumer Financial Protection Bureau under the Financial Coaching Initiative.

(b) Obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If the statement discloses that a broker or other person has participated, then the finance lender shall obtain a full statement of all sums paid or payable to the broker or other person. The finance lender shall keep these statements for a period of three years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.

(c) Permit payment to be made in advance in any amount on any contract of loan at any time. The licensee may apply the payment first to all charges due, including charges at the agreed rate or rates up to the date of payment, not to exceed the applicable maximum rate permitted by this article. Moneys paid pursuant to subdivision (f) of Section 22202 shall be subject to paragraph (2) of subdivision (a) of Section 22400.

(d) Deliver or cause to be delivered to the person making any cash payment, or to the person who requests a receipt at the time of making any payment, at the time payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which the payment is applied.

(e) (1)Upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership, and cancel or plainly mark “paid” and return to the borrower or person making final payment, any note, mortgage, security agreement, trust deed, assignment, or order signed by the borrower, or an optical image reproduction thereof, except those documents that are a part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. When a trust deed on real property has been taken as security for a loan that has been subsequently paid in full, a duly executed request for reconveyance shall be delivered to the trustor or trustee for the purpose of recording a reconveyance. A termination statement, furnished to the borrower as provided for in Sections 9512 and 9513 of the Commercial Code, shall be deemed a release of the security when a financing statement has been filed pursuant to Section 9501 of the Commercial Code.

(2)If a borrower repays a loan in full before the end date of the term limit of that loan, refund, at a pro rata or actuarial basis, any remaining charges that the borrower would have owed to the licensed finance lender under the provisions of that loan contract.

(f)Upon entering into a contract to refinance an existing loan, refund, at a pro rata or actuarial basis, any remaining charges that the borrower would have owed to the licensed finance lender under the provisions of the existing loan before entering into a new loan contract with that borrower.

For purposes of this subdivision, an optical image reproduction shall meet all of the following requirements:

(1) The optical image storage media used to store the document shall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.

(2) The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of Standards and Technology or the Association for Information and Image Management.

(3) Written authentication identifying the optical image reproduction as an exact unaltered copy of the note, trust deed, mortgage, security agreement, assignment or order shall be stamped or printed on the optical image reproduction.

(g)

(f) Deliver or cause to be delivered to the potential borrower, or any one thereof, at the time the licensee first requires or accepts any signed instrument or the payment of any fee, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any.

SEC. 8.

 Section 22337.5 is added to the Financial Code, to read:

22337.5.

 Prior to disbursement of loan proceeds in connection with any loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500) but less than ten thousand dollars ($10,000), other than a loan secured by real property, 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, or (b) refer 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. The borrower shall not be required to participate in either of these education programs or seminars. A credit education program or seminar offered pursuant to this section shall be provided at no cost to the borrower.

SEC. 11.SEC. 9.

 Section 22452 of the Financial Code is amended to read:

22452.

 Subject to the written approval of the commissioner of the licensee’s plan of business for making open-end loans as not being misleading or deceptive and subject to regulations the commissioner may adopt with respect to open-end loans under Section 22150, a licensee may make open-end loans pursuant to this article and may contract for and receive thereon charges as set forth in Sections 22303, 22304, and 22308. 22308, and in subdivision (b) of Section 22304.5. These charges may be calculated on an amount not exceeding the greater of:

(a) The actual daily unpaid balances of the open-end account in the billing cycle for which the charge is made, in which case one-thirtieth of the monthly rate may be charged for each day the unpaid balance is outstanding.

(b) The average daily unpaid balance of the open-end account in the billing cycle for which the charge is made, which is the sum of the amount unpaid each day during that cycle divided by the number of days in that cycle. The amount unpaid on a day is determined by adding to any balance unpaid as of the beginning of that day all advances and other debits and deducting all payments and other credits made or received as of that day. The billing cycle shall be monthly. A billing cycle is monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from the regular date.

This section does not apply to any open-end loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22467.

SEC. 12.SEC. 10.

 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.