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

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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

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BILL NUMBER: SB 235	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JULY 15, 2015
	AMENDED IN ASSEMBLY  JULY 8, 2015
	AMENDED IN SENATE  MAY 5, 2015

INTRODUCED BY   Senator Block
   (Coauthor: Senator Hill)
    (   Coauthor:   Assembly Member  
Chiu   ) 

                        FEBRUARY 17, 2015

   An act to amend Sections 22370, 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.
   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, 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.
    This bill would require the licensee to develop and implement
policies and procedures designed to respond to questions raised by
applicants and borrowers regarding their loans, including those
involving finders.
   Existing law establishes a maximum 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  for certain services  pursuant to a
schedule that is mutually agreed to by the licensee and the finder,
not to exceed  $70   $65  per 
loan.   loan, plus $2 per payment received by the finder
on behalf of the licensee for the duration of the loan when the
finder receives borrower loan payments on the licensee's behalf, as
specified.  The bill would require, if a loan applicant has
questions that the finder is not permitted to answer, the finder to
assist an applicant in making direct contact with the lender before
the loan is consummated, and would require the licensee to ensure
that a loan is not consummated until the licensee completes a 2-way
communication, as defined, with the applicant. 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 upon
determination that it would be warranted by reported data, 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 22370 of the Financial Code is amended to read:

   22370.  (a) Any loan made pursuant to this section shall comply
with the following requirements:
   (1) The loan shall be unsecured.
   (2) Interest on the loan shall accrue on a simple-interest basis,
through the application of a daily periodic rate to the actual unpaid
principal balance each day.
   (3) The licensee shall disclose the following to the consumer in
writing, in a type face no smaller than 12-point type, at the time of
application:
   (A) The amount borrowed; the total dollar cost of the loan to the
consumer if the loan is paid back on time, including the sum of the
administrative fee, principal amount borrowed, and interest payments;
the corresponding annual percentage rate, calculated in accordance
with Federal Reserve Board Regulation Z (12 C.F.R. 226); the periodic
payment amount; the delinquency fee schedule; and the following
statement: "Repaying your loan early will lower your borrowing costs
by reducing the amount of interest you will pay. This loan has no
prepayment penalty."
   (B) A statement that the consumer has 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 the loan is consummated.
   (4) A licensee may provide the borrower with the disclosures
required by paragraph (3) in a mobile or other electronic
application, on which the size of the type face of the disclosure can
be manually modified by a prospective borrower, if the prospective
borrower is given the option to print the disclosure in a type face
of at least 12-point size or is provided by the licensee with a
hardcopy of the disclosure in a type face of at least 12-point size
before the loan is consummated.
   (5) The loan shall have a minimum principal amount upon
origination of three hundred dollars ($300) and a term of not less
than the following:
   (A) Ninety days for loans whose principal balance upon origination
is less than five hundred dollars ($500).
   (B) One hundred twenty days for loans whose principal balance upon
origination is at least five hundred dollars ($500), but is less
than one thousand five hundred dollars ($1,500).
   (C) One hundred eighty days for loans whose principal balance upon
origination is at least one thousand five hundred dollars ($1,500).
   (b) 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 for a loan made
pursuant to this section at an annual simple interest rate not to
exceed the following:
   (1) The lesser of 36 percent or the sum of 32.75 percent plus the
United States prime lending rate, as of the date of loan origination,
on that portion of the unpaid principal balance of the loan up to
and including, but not in excess of, one thousand dollars ($1,000).
The interest rate calculated as of the date of loan origination shall
be fixed for the life of the loan.
   (2) The lesser of 35 percent or the sum of 28.75 percent plus the
United States prime lending rate, as of the date of loan origination,
on that portion of the unpaid principal balance of the loan in
excess of one thousand dollars ($1,000), but less than two thousand
five hundred dollars ($2,500). The interest rate calculated as of the
date of loan origination shall be fixed for the life of the loan.
   (c) (1) 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 to exceed
the applicable of the following:
   (A) Seven percent of the principal amount, exclusive of the
administrative fee, or ninety dollars ($90), whichever is less, on
the first loan made to a borrower.
   (B) Six percent of the principal amount, exclusive of the
administrative fee, or seventy-five dollars ($75), whichever is less,
on the second and subsequent loans made to that borrower.
   (2) A licensee shall not charge the same borrower an
administrative fee more than once in any four-month period.
   (3) For purposes of this section, "refinance" means the
replacement or revision of an existing loan contract with a borrower
that results in an extension of additional principal to that
borrower. A licensee shall not refinance a loan made under this
section, unless all of the following conditions are met at the time
the borrower submits an application to refinance:
   (A) The borrower has repaid at least 60 percent of the outstanding
principal remaining on his or her loan.
   (B) The borrower is current on his or her outstanding loan.
   (C) The licensee underwrites the new loan in accordance with
paragraph (4) of subdivision (f).
   (D) If the loan proceeds of both the original loan and the
refinance loan are to be used for personal, family, or household
purposes, the borrower has not previously refinanced the outstanding
loan more than once.
   (4) Notwithstanding paragraph (3), an administrative fee shall not
be contracted for or received in connection with the refinancing of
a loan unless at least eight months have elapsed since the receipt of
a previous administrative fee paid by the borrower. With the
exception of a loan that is refinanced, only one administrative fee
may be contracted for or received until the loan has been repaid in
full. 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
require reimbursement from a borrower for the actual insufficient
funds fees incurred by that licensee due to actions of the borrower,
and may contract for and receive a delinquency fee that is one of the
following amounts:
   (1) For a period of delinquency of not less than seven days, an
amount not in excess of fourteen dollars ($14).
   (2) For a period of delinquency of not less than 14 days, an
amount not in excess of twenty dollars ($20).
   (e) If a licensee opts to impose a delinquency fee, it shall use
the delinquency fee schedule described in subdivision (d), subject to
all of the following:
   (1) No more than one delinquency fee may be imposed per delinquent
payment.
   (2) No more than two delinquency fees may be imposed during any
period of 30 consecutive days.
   (3) No delinquency fee may be imposed on a borrower who is 180
days or more past due if that fee would result in the sum of the
borrower's remaining unpaid principal balance, accrued interest, and
delinquency fees exceeding 180 percent of the original principal
amount of the borrower's loan.
   (4) The licensee or any of its wholly owned subsidiaries shall
attempt to collect a delinquent payment for a period of at least 30
days following the start of the delinquency before selling or
assigning that unpaid debt to an independent party for collection.
   (f) The licensee shall develop and implement policies and
procedures designed to respond to questions raised by applicants and
borrowers regarding their loans, including those involving finders,
and to address customer complaints as soon as reasonably practicable.

   (g) 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. A credit education program or seminar
offered pursuant to this paragraph shall be provided at no cost to
the borrower.
   (2) The licensee shall report each borrower's payment performance
to at least one consumer reporting agency that compiles and maintains
files on consumers on a nationwide basis, upon acceptance as a data
furnisher by that consumer reporting agency. For purposes of this
section, a consumer reporting agency that compiles and maintains
files on consumers on a nationwide basis is one that meets the
definition in Section 603(p) of the federal Fair Credit Reporting Act
(15 U.S.C. Sec. 1681a(p)). Any licensee that is accepted as a data
furnisher after admittance into the program must report all borrower
payment performance since its inception of lending under the program,
as soon as practicable after its acceptance into the program, but in
no event more than six months after its acceptance into the program.

   (A) The commissioner may approve a licensee for the program,
before that licensee has been accepted as a data furnisher by a
consumer reporting agency, if the commissioner has a reasonable
expectation, based on information supplied by the licensee, of both
of the following:
   (i) The licensee will be accepted as a data furnisher, once it
achieves a lending volume required of data furnishers of its type by
a consumer reporting agency.
   (ii) That lending volume will be achieved within the first six
months of the licensee commencing lending.
   (B) Notwithstanding subparagraph (A), the commissioner shall
withdraw approval for pilot program participation from any licensee
that fails to become accepted as a data furnisher by a consumer
reporting agency within six months of commencing lending under the
pilot program.
   (3) The licensee shall provide each borrower with the name of the
consumer reporting agency or agencies to which it will report the
borrower's payment history. A licensee that is accepted as a data
furnisher after admittance into the program shall notify its
borrowers, as soon as practicable following acceptance as a data
furnisher, regarding the name of the consumer reporting agency or
agencies to which it will report that borrower's payment history.
   (4) (A) The licensee shall underwrite each loan to determine a
borrower's ability and willingness to repay the loan pursuant to the
loan terms, 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 that can be independently verified by the licensee, exceed 50
percent of the borrower's gross monthly income.
   (B) (i) The licensee shall seek information and documentation
pertaining to all of a borrower's outstanding debt obligations during
the loan application and underwriting process, including loans that
are self-reported by the borrower but not available through
independent verification. The licensee shall verify that information
using a credit report from at least one consumer reporting agency
that compiles and maintains files on consumers on a nationwide basis
or through other available electronic debt verification services that
provide reliable evidence of a borrower's outstanding debt
obligations.
   (ii) Notwithstanding the verification requirement in subparagraph
(A), the licensee shall request from the borrower and include all
information obtained from the borrower regarding outstanding deferred
deposit transactions in the calculation of the borrower's
outstanding debt obligations.
   (iii) The licensee shall not be required to consider, for purposes
of debt-to-income ratio evaluation, loans from friends or family.
   (C) The licensee shall also verify the borrower's income that the
licensee relies on to determine the borrower's debt-to-income ratio
using information from either of the following:
   (i) Electronic means or services that provide reliable evidence of
the borrower's actual income.
   (ii) Internal Revenue Service Form W-2, tax returns, payroll
receipts, bank statements, or other third-party documents that
provide reasonably reliable evidence of the borrower's actual income.

   (5) The licensee shall notify each borrower, at least two days
prior to each payment due date, informing the borrower of the amount
due, and the payment due date. Notification may be provided by any
means mutually acceptable to the borrower and the licensee. A
borrower shall have the right to opt out of this notification at any
time, upon electronic or written request to the licensee. The
licensee shall notify each borrower of this right prior to disbursing
loan proceeds.
   (h) (1) Notwithstanding Sections 22311 to 22315, inclusive, no
person, in connection with, or incidental to, the making of any loan
made pursuant to this article, may offer, sell, or require the
borrower to contract for "credit insurance" as defined in paragraph
(1) of subdivision (a) of Section 22314 or insurance on tangible
personal or real property of the type specified in Section 22313.
   (2) Notwithstanding Sections 22311 to 22315, inclusive, no
licensee, finder, or any other person that participates in the
origination of a loan under this article shall refer a borrower to
any other person for the purchase of "credit insurance" as defined in
paragraph (1) of subdivision (a) of Section 22314 or insurance on
tangible personal or real property of the type specified in Section
22313.
   (i) (1) No licensee shall require, as a condition of providing the
loan, that the borrower waive any right, penalty, remedy, forum, or
procedure provided for in any law applicable to the loan, including
the right to file and pursue a civil action or file a complaint with
or otherwise communicate with the commissioner or any court or other
public entity, or that the borrower agree to resolve disputes in a
jurisdiction outside of California or to the application of laws
other than those of California, as provided by law. Any waiver by a
borrower must be knowing, voluntary, and in writing, and expressly
not made a condition of doing business with the licensee. Any waiver
that is required as a condition of doing business with the licensee
shall be presumed involuntary, unconscionable, against public policy,
and unenforceable. The licensee has the burden of proving that a
waiver of any rights, penalties, forums, or procedures was knowing,
voluntary, and not made a condition of the contract with the
borrower.
   (2) No licensee shall refuse to do business with or discriminate
against a borrower or applicant on the basis that the borrower or
applicant refuses to waive any right, penalty, remedy, forum, or
procedure, including the right to file and pursue a civil action or
complaint with, or otherwise notify, the commissioner or any court or
other public entity. The exercise of a person's right to refuse to
waive any right, penalty, remedy, forum, or procedure, including a
rejection of a contract requiring a waiver, shall not affect any
otherwise legal terms of a contract or an agreement.
   (3) This subdivision shall not apply to any agreement to waive any
right, penalty, remedy, forum, or procedure, including any agreement
to arbitrate a claim or dispute, after a claim or dispute has
arisen. Nothing in this subdivision shall affect the enforceability
or validity of any other provision of the contract.
   (j) 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. For purposes of
this subdivision, "bona fide principal amount" shall be determined in
accordance with Section 22251.
  SEC. 2.  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.
   (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 person 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:
   (1) Disbursing loan proceeds to a borrower, if this method of
disbursement is acceptable to the borrower.
   (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 identification.
   (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]."
   (2) Receiving loan payment or payments from the borrower, if this
method of payment is acceptable to the borrower.
   (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.
   (B) A finder 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) The name of the finder.
   (ii) The total payment amount received.
   (iii) The date of payment.
   (iv) The corresponding loan account identification upon which the
payment is being applied.
   (v) The loan balance prior to and following application of the
payment.
   (vi) The amount of the payment that was applied to principal,
interest, and fees.
   (vii) The type of payment, such as cash, automated clearing house
(ACH) transfer, check, money order, or debit card.
   (viii) 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]."
   (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.
   (3) Providing any notice or disclosure required to be provided to
the borrower by the licensee.
   (c) A finder shall not engage in either 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.
   (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.
   (e) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.
  SEC. 3.  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 at
866-275-2677, or file your complaint online at www.dbo.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 licensee as soon as reasonably practicable, which shall at a
minimum include a "two-way communication." For purposes of this
section, "two-way communication" includes telephone, electronic mail,
or another form of communication that allows the applicant to
communicate with the licensee.
   (c) Using the policies developed pursuant to subdivision (f) of
Section 22370, the licensee shall ensure that a loan is not
consummated until the licensee has completed a "two-way communication"
with the applicant. Sending a voicemail or electronic message to the
applicant, without a prior or subsequent response from the
applicant, shall not constitute a "two-way communication."
   (d) 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. 4.  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
 for the services set forth in subdivision (a) of Section 22372
 shall not exceed  seventy dollars ($70)  
sixty   -five   dollars ($65)  per loan,
whether paid at the time of consummation, over installments, or in a
manner otherwise agreed upon by the licensee and the  finder.
  finder, plus two dollars ($2) per payment received by
the finder on behalf of the licensee for the duration of the loan,
when the finder receives
borrower loan payments on the licensee's behalf in accordance with
subdivision (b) of Section 22372. 
   (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. 5.  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, 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, for
each finder, the information listed in paragraph (12) and
subparagraph (A) of paragraph (13) of subdivision (d) of Section
22380, 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. The information
disclosed to the commissioner for the report described in this
subdivision is exempted from any requirement of public disclosure by
paragraph (2) of subdivision (d) of Section 6254 of the Government
Code.
  SEC. 6.  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 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. 7.  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.