Bill Text: CA SB235 | 2015-2016 | Regular Session | Amended

California Senate Bill 235 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Small dollar loans: finder duties and compensation.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Passed) 2015-10-05 - Chaptered by Secretary of State. Chapter 505, Statutes of 2015. [SB235 Detail]

Download: California-2015-SB235-Amended.html
BILL NUMBER: SB 235	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MAY 5, 2015

INTRODUCED BY   Senator Block
    (   Coauthor:   Senator   Hill
  ) 

                        FEBRUARY 17, 2015

   An act to amend Sections  22372 and 22374  
22372, 22373, 22374, 22375, and 22377  of the Financial Code,
relating to consumer loans.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 235, as amended, Block. Small dollar loans: finder duties and
 compensation   compensation. 
   Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders by the Commissioner of
Business Oversight and makes a willful violation of its provisions a
crime. Existing law establishes, until January 1, 2018, the Pilot
Program for Increased Access to Responsible Small Dollar Loans for
the purpose of allowing greater access for responsible installment
loans in principal amounts of at least $300 and less than $2,500
administered by the commissioner.
   Existing law authorizes a licensee in the program to use the
services of finders, as defined, to bring licensees and prospective
borrowers together, at the finder's place of business, for the
purpose of negotiating loan contracts, subject to a written agreement
meeting specified requirements.
   This bill would expand the services that a  finder
  finder, licensed or regulated under prescribed
provisions of law,  is authorized to perform to include, among
other things, disbursement of loan proceeds to, and receipt of loan
payments from, the borrower.
   Existing law establishes a maximum  finders's 
 finder's  fee of $45 per loan for the first 40 loans
originated at the finder's location per month, and $40 per loan for
loans thereafter during that month.
   This bill would delete those maximums and would authorize payment
of finder compensation pursuant to a schedule that is mutually agreed
to by the licensee and the  finder   finder,
not to exceed $70 per loan. The bill would require the finder to
assist an applicant in obtaining answers to questions about his or
her loan,  and would make conforming changes.  The bill
would require a licensee to provide the commissioner with prescribed
information relating to each finder, including, but not limited to,
the finder's delinquency rate and default rate, and would authorize
the commissioner to take prescribed action against a finder that is
found to be in violation, including, but not limited to,
disqualifying the finder from providing services under the pilot
program. 
   Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program.
   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 22372 of the Financial Code is amended to read:

   22372.  (a) A finder may perform one or more of the following
services for a licensee at the finder's physical location for
business:
   (1) Distributing, circulating, using, or publishing preprinted
brochures, flyers, factsheets, or other written materials relating to
loans that the licensee may make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their being
distributed, circulated, or published.
   (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.
   (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.
   (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.
   (5) Assembling credit applications and other materials obtained in
the course of a credit application transaction for submission to the
licensee.
   (6) Contacting the licensee to determine the status of a loan
application.
   (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. 
   (9) Providing 
    (b)     A finder that is licensed or 
 regulated pursuant to this division, Division 1.1 (commencing
with Section 1000), Division 1.2 (commencing with Section 2000),
Division 3 (commencing with Section 12000), Division 5 (commencing
with Section 14000), Division 6 (commencing with Section 17000),
Division 7 (commencing with Section 18000), Division 8 (commencing
with Section 21000), Division 10 (commencing with Section 23000), or
Division 20 (commencing with Section 50000) of this code; Chapter 5
(commencing with Section 1621) of Part 2 of Division 1 of the
Insurance Code; Chapter 1 (commencing with Section 5000) of Division
3 of the Business and Professions Code; is an approved agent of a per
  son licensed pursuant to Division 1.2 (commencing with
Section 2000) of this code; or is a federally regulated bank, thrift,
or credit union, may additionally provide any of  the following
services on behalf of the licensee for any loan for which the finder
performed finding activities: 
   (A) 
    (1)  Disbursing loan proceeds to a borrower, if this
method of disbursement is acceptable to the borrower.  Any

    (A)     Any  loan disbursement made by
a finder under this subdivision shall be deemed made by the licensee
on the date the funds are disbursed or otherwise made available by
the finder to the borrower. 
   (B) A finder that disburses loan proceeds to a borrower shall
deliver or cause to be delivered to the borrower at the time loan
proceeds are disbursed a plain and complete receipt showing all of
the following:  
   (i) The date of disbursement.  
   (ii) The total amount disbursed.  
   (iii) The corresponding loan account number.  
   (iv) The following statement, prominently displayed in a type size
equal to or greater than the type size used to display the other
items on the receipt: "If you have any questions about your loan, now
or in the future, you should direct those questions to  name of
licensee] by insert at least two different ways in which a borrower
may contact the licensee]."  
   (B) 
    (2)  Receiving loan payment or payments from the
borrower, if this method of payment is acceptable to the borrower.

   (i) 
    (A)  Any loan payment made by a borrower to a finder
under this subdivision shall be applied to the borrower's loan and
deemed received by the licensee as of the date the payment is
received by the finder. 
   (ii) 
    (B)  A finder  who   that 
receives loan payments under this subdivision shall deliver or cause
to be delivered to the borrower at the time that the payment is made
by the borrower, a plain and complete receipt showing all of the
following: 
   (I) 
    (i)  The date of payment. 
   (II) 
    (ii)  The total payment amount made. 
   (III) 
    (iii)  The corresponding loan account  number 
upon which the payment is being applied. 
   (iv) The following statement, prominently displayed in a type size
equal to or greater than the type size used to display the other
items on the receipt: "If you have any questions about your loan, now
or in the future, you should direct those questions to name of
licensee] by insert at least two different ways in which a borrower
may contact the licensee]."  
   (iii) 
    (C)  A borrower who submits a loan payment to a finder
under this subdivision shall not be liable for any failure or delay
by the finder in transmitting the payment to the licensee. 
   (D) A finder that disburses or receives loan payments pursuant to
this subdivision shall maintain records of all disbursements made and
loan payments received for a period of at least two years or until
one month following the completion of a regular examination by the
commissioner, whichever is later.  
   (C) 
    (3)  Providing any notice or disclosure required to be
provided to the borrower by the licensee. 
   (b) 
    (c)  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. 
   (c) 
    (d)  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.
   (4) Personally contacting or providing services to a borrower or
prospective borrower at any place other than the finder's physical
location for business. 
   (d) 
    (e)  A finder shall comply with all laws applicable to
the licensee that impose requirements upon the licensee for
safeguards for information security.
   SEC. 2.    Section 22373 of the   Financial
Code   is amended to read: 
   22373.  (a) At the time the finder receives or processes an
application for a program loan, the finder shall provide the
following statement to the applicant, on behalf of the licensee, in
no smaller than 10-point type, and shall ask the applicant to
acknowledge receipt of the statement in writing:


   "Your loan application has been referred to us by Name of Finder].
We may pay a fee to Name of Finder] for the successful referral of
your loan application. IF YOU ARE APPROVED FOR THE LOAN, NAME OF
LICENSEE] WILL BECOME YOUR LENDER, AND YOU WILL BE BUILDING A
RELATIONSHIP WITH NAME OF LICENSEE].  If you have any questions
about your loan, now or   in the future, you should direct
those questions to name of licensee   ]  by insert
at least two different ways in which a borrower may contact the
licensee   ]   .  If you wish to report a
complaint about Name of Finder] or Name of Licensee] regarding this
loan transaction, you may contact the Department of Business
Oversight, Division of Corporations at 1-866-ASK-CORP
(1-866-275-2677), or file your complaint online at www.corp.ca.gov."


    
   (b) If the loan applicant has questions about the loan that the
finder is not permitted to answer, the finder shall make a good faith
effort to assist the applicant in making direct contact with the
lender before the loan is consummated. This good faith effort shall,
at a minimum, consist of assisting the applicant in communicating
with the lender in real time via telephone, video chat, or instant
messaging.  
   (b) 
    (c)  If the loan is consummated, the licensee shall
provide the borrower a written copy of the disclosure notice within
two weeks following the date of the loan consummation. A licensee may
include the disclosure within its loan contract, or may provide it
as a separate document to the borrower, via any means acceptable to
the borrower.
   SEC. 2.   SEC. 3.   Section 22374 of the
Financial Code is amended to read:
   22374.  (a) A finder may be compensated by the licensee pursuant
to the written agreement between the licensee and the finder, as
described in Section 22376. Compensation may be paid in accordance
with a compensation schedule that is mutually agreed to by the
licensee and the finder.
   (b) Notwithstanding subdivision (a), the compensation of a finder
by a licensee shall be subject to all of the following requirements:
   (1) No compensation shall be paid to a finder in connection with a
loan application unless that loan is consummated.
   (2) No compensation shall be paid to a finder based upon the
principal amount of the loan. 
   (3) The total compensation paid by a licensee to a finder over the
life of a loan shall not exceed the sum of the origination fee and
interest charges paid by the borrower in connection with that loan.
 
   (4) Subject to the limitations set forth in paragraphs (1) to (3),
inclusive, the total compensation paid by a licensee to a finder
shall not exceed seventy dollars ($70) per loan, whether paid at the
time of consummation, over installments, or in a manner otherwise
agreed upon by the licensee and the finder.  
   (3) 
    (5)  The finder's location for services under this
article and other information required by Section 22375 has been
reported to the commissioner and the finder has not been barred from
providing services at that location by the commissioner.
   (c) No licensee shall, directly or indirectly, pass on to a
borrower any fee or other compensation, or any portion of any fee or
other compensation, that the licensee pays to a finder in connection
with that borrower's loan.
   SEC. 4.    Section 22375 of the   Financial
Code   is amended to read: 
   22375.  A licensee that utilizes the service of a finder shall do
all of the following:
   (a) Notify the commissioner within 15 days of 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   name,
business address, and licensing details  of the finder and all
locations at which the finder will perform services under this
article.
   (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 contact information for one or more employees of
the finder who are responsible for that finder's finding activities
on behalf of the licensee.
   (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   including, for each finder, delinquency and
default rates, number and dollar amount of late fees assessed to
borrowers on consummated loans, and any other  information
pertaining to each finder and the licensee's relationship and
business arrangements with each finder as the commissioner may by
regulation require.
   SEC. 5.    Section 22377 of the   Financial
Code   is amended to read: 
   22377.  (a) 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 of each finder shall be
attributed to the commissioner's examination of the licensee. Any
violation of this article by a finder 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.
   (b) Upon a determination that a finder has acted in violation of
this article, or any implementing regulation,  or upon a
determination that it would be   warranted by the data
reported to the commissioner pursuant to subdivision (c) of Section
22375 for any finder,  the commissioner  shall have the
authority to   may  disqualify a finder from
performing services under this article, bar a finder from performing
services at one or more specific locations of that finder, terminate
a written agreement between a finder and a licensee, and, if the
commissioner deems that action in the public interest, prohibit the
use of that finder by all licensees accepted to participate in the
pilot program.
   (c) In addition to any other penalty allowed by law, the
commissioner may impose an administrative penalty up to two thousand
five hundred dollars ($2,500) for violations of this article
committed by a finder.
   SEC. 3.   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.