22350.

 (a) This article shall apply to an unsecured consumer loan of a maximum principal balance upon origination of three thousand dollars ($3,000) or less. Any other sections in this division that are in conflict with this article shall not apply to these loans.

(b)  This article shall not apply to any loan made pursuant to Article 3.6 (commencing with Section 22365).

22350.5.

 (a) Any unsecured consumer loan of a maximum principal balance upon origination of three thousand dollars ($3,000) or less shall comply with all of 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 both of 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 shall not contain a prepayment penalty or balloon payment.

(4) For a loan that has a minimum principal amount upon origination of one hundred fifty dollars ($150), a term of not less than the following:

(A) Thirty days for loans with a principal balance upon origination of three hundred dollars ($300) or less.

(B) Sixty days for loans with a principal balance upon origination as more than three hundred dollars ($300) but no more than six hundred dollars ($600).

(C) Ninety days for loans with a principal balance upon origination of more than six hundred dollars ($600) but no more than one thousand dollars ($1,000).

(D) One hundred twenty days for loans with a principal balance upon origination of more than one thousand dollars ($1,000) but no more than one thousand eight hundred dollars ($1,800).

(E) One hundred eighty days for loans with a principal balance upon origination of more than one thousand eight hundred dollars ($1,800) but no more than two thousand five hundred dollars ($2,500).

(F) Three hundred sixty-five days for loans with a principal balance upon origination of more than two thousand five hundred dollars ($2,500) but no more than three thousand dollars ($3,000).

(b) A licensee may contract for and receive charges for an unsecured consumer loan up to one thousand dollars ($1,000) at rates not exceeding the following:

(1) For loans up to three hundred dollars ($300), a charge not to exceed 15 percent of the loan amount.

(2) For loans of more than three hundred dollars ($300) but no more than six hundred dollars ($600), a charge not to exceed 12 percent of the loan amount.

(3) For loans of more than six hundred dollars ($600) but no more than one thousand dollars ($1,000), a charge not to exceed 10 percent of the loan amount.

(c) A licensee may contract for and receive charges for an unsecured consumer loan of more than one thousand dollars ($1,000) but no more than three thousand dollars ($3,000) at a rate not exceeding the following:

(1) Twelve and one-half percent per month on that portion of the unpaid principal balance of the loan in excess of one thousand dollars ($1,000) but not in excess of one thousand eight hundred dollars ($1,800).

(2) Ten percent per month on that portion of the unpaid principal balance of the loan in excess of one thousand eight hundred dollars ($1,800) but not in excess of three thousand dollars ($3,000).

(d) Notwithstanding subdivision (c), for unsecured consumer loans of more than one thousand dollars ($1,000) but no more than three thousand dollars ($3,000) with interest rates in excess of 8.25 percent per month, a licensee shall reduce the interest rate after every three on-time payments until the rate is reduced to 36 percent annual percentage rate or other performance based pricing as may be approved by the commissioner.

(e) A borrower who has made on-time payments and successfully completed a previous loan shall receive a discounted rate for subsequent loans.

(f) 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 subject to this article unless all of the following conditions are met at the time the borrower submits an application to refinance:

(1) The borrower has repaid at least 60 percent of the outstanding principal remaining on his or her loan.

(2) The borrower is current on his or her outstanding loan.

(3) The licensee underwrites the new loan in accordance with subdivision (l).

(4) 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.

(g) A borrower that is unable to successfully pay back a loan of no more than six hundred dollars ($600) may request, and the licensee shall provide, a no-cost repayment plan that converts the loan to a minimum repayment period of at least 120 days.

(h) (1) Notwithstanding Section 22305, no administrative fee may be imposed for a loan subject to this article except as provided in paragraph (2).

(2) As to any loan made with a rate of less than 8.25 percent per month, 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 either 6 percent of the principal amount, exclusive of the administrative fee, or seventy-five dollars ($75), whichever is less. A licensee shall not charge the same borrower more than one administrative fee in any six-month period. 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. Only one administrative fee shall be contracted for or received until the loan has been repaid in full.

(i) A licensee may contract for and receive a delinquency fee in one of the following amounts:

(1) For a period in default of not less than seven days, an amount not in excess of twelve dollars ($12).

(2) For a period in default of not less than 14 days, an amount not in excess of eighteen dollars ($18).

(j) If a licensee opts to impose a delinquency fee, it shall use the delinquency fee schedule described in subdivision (i), 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.

(k) The licensee shall report each borrower’s payment performance to at least one of the national credit reporting agencies or any alternative consumer credit reporting agency designated by the commissioner in the United States. 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.

(l) (1) The licensee shall underwrite each loan to determine a borrower’s ability and willingness to repay the loan pursuant to the loan term 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.

(2) (A) In making a determination of the borrower's ability to repay the loan, the licensee shall verify the information provided by the borrower using a credit report from at least one of the three major credit bureaus or through an alternative consumer credit reporting agency approved by the commissioner. Notwithstanding this section, a licensee may use a proprietary underwriting model, approved by the commissioner, to determine a borrower's ability to repay.

(B) The licensee shall not be required to consider, for purposes of debt-to-income ratio evaluation, loans from friends or family.

(3) The licensee shall also verify the borrower’s income that the licensee relies on to determine the borrower’s debt-to-income ratio and shall document in the loan file the source of the information used to make the determination.

(m) No person in connection with or incidental to the making of any loan made pursuant to this article may 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.

(n) (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 such waiver by a borrower must be knowing, voluntary, in writing, and expressly not made a condition of doing business with the licensee. Any such 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.

22351.

 (a) A licensee, with prior approval from the commissioner, may use the services of one or more referral partners as provided in this article with respect to unsecured loans of three thousand dollars ($3,000) or less that the licensee may make or negotiate.

(b) For purposes of this article, a “referral partner” means an entity that, at the referral partner’s physical location for business, brings a licensee and a prospective borrower together for the purpose of negotiating a loan contract.

22351.5.

 (a) A referral partner may perform one or more of the following services for a licensee at the referral partner’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 referral partner 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 into 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 referral partner 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, or 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, or is registered as a referral partner in a manner and on a form as prescribed by the commissioner may additionally provide any of the following services on behalf of the licensee for any loan for which the referral partner performed finding activities:

(1) (A) Disbursing loan proceeds to a borrower, if this method of disbursement is acceptable to the borrower.

(B) Any loan disbursement made by a referral partner under this paragraph shall be deemed made by the licensee on the date the funds are disbursed or otherwise made available by the referral partner to the borrower.

(C) A referral partner 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) (A) Receiving a loan payment or payments from the borrower, if this method of payment is acceptable to the borrower.

(B) Any loan payment made by a borrower to a referral partner under this paragraph shall be applied to the borrower’s loan and deemed received by the licensee as of the date the payment is received by the referral partner.

(C) A referral partner that receives loan payments under this paragraph 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 referral partner.

(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 referral partner under this paragraph shall not be liable for any failure or delay by the referral partner in transmitting the payment to the licensee.

(D) A referral partner that disburses or receives loan payments pursuant to this paragraph 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 an examination of the licensee by the commissioner, whichever is later. The commissioner shall determine when an examination is complete.

(3) Providing any notice or disclosure required to be provided to the borrower by the licensee, other than the notice required to be provided by the licensee to the borrower pursuant to subdivision (d) of Section 22373. A licensee that uses a referral partner to provide notices or disclosures to borrowers shall maintain a record of which notices and disclosures each referral partner provides to borrowers on its behalf, for the purpose of facilitating the commissioner’s examination of the licensee.

(c) A referral partner 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.

22352.

 (a) At the time the referral partner receives or processes an application for a program loan, the referral partner 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 Referral Partner]. We may pay a fee to [Name of Referral Partner] 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 Referral Partner] 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 referral partner is not permitted to answer, the referral partner 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) 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.

22352.5.

 (a) A referral partner may be compensated by the licensee pursuant to the written agreement between the licensee and the referral partner, as described in Section 22353.5. Compensation may be paid in accordance with a compensation schedule that is mutually agreed to by the licensee and the referral partner.

(b) Notwithstanding subdivision (a), the compensation of a referral partner by a licensee shall be subject to all of the following requirements:

(1) No compensation shall be paid to a referral partner in connection with a loan application unless that loan is consummated.

(2) No compensation shall be paid to a referral partner based upon the principal amount of the loan.

(3) Subject to the limitations set forth in paragraphs (1) and (2), the total compensation paid by a licensee to a referral partner for the services set forth in subdivision (a) of Section 22351.5 shall not exceed sixty-five dollars ($65) per loan, on average, assessed annually, whether paid at the time of consummation, over installments, or in a manner otherwise agreed upon by the licensee and the referral partner, plus two dollars ($2) per payment received by the referral partner on behalf of the licensee for the duration of the loan, when the referral partner receives borrower loan payments on the licensee’s behalf in accordance with subdivision (b) of Section 22351.5.

(4) 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 referral partner in connection with that borrower’s loan.

22353.

 A licensee that utilizes the service of a referral partner shall do all of the following:

(a) Notify the commissioner within 15 days of entering into a contract with a referral partner, on a form acceptable to the commissioner, regarding all of the following:

(1) The name, business address, and licensing details of the referral partner and all locations at which the referral partner will perform services under this article.

(2) The name and contact information for an employee of the referral partner who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the referral partner and the licensee.

(3) The name and contact information for one or more employees of the referral partner who are responsible for that referral partner’s finding activities on behalf of the licensee.

(4) A list of the activities the referral partner shall perform on behalf of the licensee.

(5) Any other information requested by the commissioner.

(b) Pay an annual referral partner registration fee to the commissioner in an amount to be established by the commissioner by regulation for each referral partner utilized by the licensee.

(c) Submit an annual report to the commissioner including any information pertaining to each referral partner and the licensee’s relationship and business arrangements with each referral partner 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.

22353.5.

 All arrangements between a licensee and a referral partner shall be set forth in a written agreement between the parties. The agreement shall contain a provision establishing that the referral partner agrees to comply with all regulations that are established by the commissioner pursuant to this article regarding the activities of referral partner and that the commissioner shall have access to all of the referral partner’s books and records that pertain to the referral partner’s operations under the agreement with the licensee.

22354.

 (a) The commissioner may examine the operations of each licensee and each referral partner to ensure that the activities of the licensee and the referral partner are in compliance with this article. The costs of the commissioner’s examination of each referral partner shall be attributed to the commissioner’s examination of the licensee. Any violation of this article by a referral partner or a referral partner’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 referral partner 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 22353 for any referral partner, the commissioner may disqualify a referral partner from performing services under this article, bar a referral partner from performing services at one or more specific locations of that referral partner, and terminate a written agreement between a referral partner and a licensee.

(c) In addition to any other penalty allowed by law, the commissioner may impose an administrative penalty of up to two thousand five hundred dollars ($2,500) for violations committed by a referral partner.