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AB-2984 California Financing Law.(2017-2018)

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Date Published: 05/01/2018 09:00 PM
AB2984:v97#DOCUMENT

Amended  IN  Assembly  May 01, 2018
Amended  IN  Assembly  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2984


Introduced by Assembly Member Limón

February 16, 2018


An act to amend Sections 22001, 22050, 22050.5, 22159, 22701, and 22713 of, and to add Section 22713.1 to, the Financial Code, relating to the California Financing Law.


LEGISLATIVE COUNSEL'S DIGEST


AB 2984, as amended, Limón. California Financing Law.
(1) Existing law, the California Financing Law (CFL), provides for the licensure and regulation of finance lenders and brokers, and, beginning on January 1, 2019, program administrators, by the Commissioner of Business Oversight. A willful violation of the CFL is a crime, except as specified. The CFL provides that it be liberally construed to promote specified purposes and policies.
This bill would revise the purposes and policies of the CFL.
(2)  The CFL requires a finance lender, broker, and, beginning on January 1, 2019, program administrator licensee to file an annual report with the commissioner, on or before March 15, containing relevant information that the commissioner may specify.
This bill would require a licensee to include in the report information on all loans made with the participation of a 3rd party 3rd-party financial institution in connection with a contractual agreement with the licensee.
(3) The CFL authorizes the commissioner to examine specified records of every person engaged in the business of a finance lender, broker, or, beginning on January 1, 2019, program administrator, for the purpose of discovering violations of the CFL or securing information otherwise required in the administration and enforcement of this division.
This bill would require the commissioner to examine the affairs of each finance lender licensee for compliance at least once every 48 months. The bill would authorize the commissioner to conduct the examination under oath. By expanding the crime of perjury, this bill would impose a state-mandated local program. The bill would require the commissioner to provide a written statement of the findings of the examination, to issue a copy of that statement to the licensee’s principals, officers, or directors, and to take appropriate steps to ensure correction of any violations. The bill would authorize the commissioner to decline to disclose specified records relating to the examination in response to a public records act request pursuant to an existing exemption from disclosure. The bill would require the commissioner to assess, and a finance lender licensee to pay, the reasonable expenses of any examination of the licensee and affiliates.
(4) The CFL authorizes the commissioner to bring an action to enjoin, as specified, against a person who, in the commissioner’s estimation, has violated or is about to violate the CFL. Under the CFL, a person who willfully violates its provisions, rules, or regulations adopted pursuant to them, is liable for a civil fine not to exceed $2,500.
This bill would authorize, upon a proper showing, the appointment of a receiver, monitor, conservator, or other designated fiduciary or officer of the court for the defendant, in an action as described above, or for the defendant’s assets. The bill would specify the potential powers of these parties and prohibit any action in law or equity from being maintained against them for exercising the powers or performing their duties. The bill would eliminate the requirement that the penalty provisions, as described above, be willful. The bill would increase the maximum amount of the penalty provisions to $25,000.
This bill would also grant various powers to the commissioner in connection with any violation of the CFL, including imposing an administrative penalty of up to $25,000 for each violation, ordering ancillary relief including restitution, disgorgement, or damages, as specified, and entitling the commissioner in administrative actions to recover attorney’s fees and costs, to be deposited in the State Corporation Fund for use by the department. The bill would prescribe certain requirements and procedures in connection with hearings and court actions in this regard.
(5) By expanding the scope of an existing crime with respect to willful violations of the CFL, this bill would impose a state-mandated local program. This bill would also make clarifying changes in the CFL.
(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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 22001 of the Financial Code, as added by Section 6 of Chapter 475 of the Statutes of 2017, is amended to read:

22001.
 (a) This division shall be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) To help ensure an adequate supply of credit to borrowers in this state.
(2) To simplify, clarify, and modernize the law governing loans made by finance lenders.
(3) To foster competition among finance lenders.
(4) To protect borrowers against unfair lending and brokering practices.
(5) To permit and encourage the development of fair and economically sound lending practices.
(6) To encourage and foster a sound economic climate in this state.
(7) To protect property owners from deceptive and misleading practices in property assessed clean energy financing programs.
(b) Consumer loans, as defined in Sections 22203 and 22204, are subject to this chapter, Chapter 2 (commencing with Section 22200), Article 1 (commencing with Section 22700) of Chapter 4, and Article 2 (commencing with Section 22750) of Chapter 4.
(c) Commercial loans, as defined in Section 22502, are subject to this chapter, Chapter 3 (commencing with Section 22500), Article 1 (commencing with Section 22700) of Chapter 4, and Article 3 (commencing with Section 22780) of Chapter 4.
(d) A program administrator, as defined in Section 22018, is subject to this chapter, Chapter 3.5 (commencing with Section 22680), and Article 1 (commencing with Section 22700) of Chapter 4.
(e) This section shall become operative on January 1, 2019.

SEC. 2.

 Section 22050 of the Financial Code is amended to read:

22050.
 (a) This division does not apply to any person doing business under any law of any state or of the United States relating to banks, trust companies, savings and loan associations, insurance premium finance agencies, credit unions, small business investment companies, community advantage lenders, California business and industrial development corporations when acting under federal law or other state authority, or licensed pawnbrokers when acting under the authority of that license.
“Community advantage lender” means an entity authorized by the United States Small Business Administration to deliver community advantage loans.
(b) This division does not apply to a check casher who holds a valid permit issued pursuant to Section 1789.37 of the Civil Code when acting under the authority of that permit, and shall not apply to a person holding a valid license issued pursuant to Section 23005 of the Financial Code when acting under the authority of that license.
(c) This division does not apply to a college or university making a loan for the purpose of permitting a person to pursue a program or course of study leading to a degree or certificate.
(d) This division does not apply to a broker-dealer acting pursuant to a certificate then in effect and issued pursuant to Section 25211 of the Corporations Code.
(e) This division does not apply to any person who makes five or fewer loans in a calendar year, these loans are commercial loans as defined in Section 22502, and the loans are incidental to the business of the person relying upon the exemption.
(f) This division does not apply to any public corporation as defined in Section 67510 of the Government Code, any public entity other than the state as defined in Section 811.2 of the Government Code, or any agency of any one or more of the foregoing, when making any loan so long as the public corporation, public entity, or agency of any one or more of the foregoing complies with all applicable federal and state laws and regulations.

SEC. 3.

 Section 22050.5 of the Financial Code is amended to read:

22050.5.
 (a) This division does not apply to any person who makes no more than one loan in a calendar year if that loan is a commercial loan as defined in Section 22502.
(b) This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

SEC. 4.

 Section 22159 of the Financial Code, as added by Section 56 of Chapter 475 of the Statutes of 2017, is amended to read:

22159.
 (a) Each finance lender, broker, and program administrator licensee shall file an annual report with the commissioner, on or before March 15th. The report shall include the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee or authorized by the program administrator licensee within the state during the preceding calendar year for each licensed place of business, including, but not limited to, all loans made through a third party third-party financial institution in connection with a contractual agreement with the licensee. The individual annual reports filed pursuant to this section shall be made available to the public for inspection except, upon request in the annual report to the commissioner, the balance sheet contained in the annual report of a sole proprietor or any other nonpublicly traded person. “Nonpublicly traded person” for purposes of this section means persons with securities owned by 35 or fewer individuals. The report shall be made under oath and in the form prescribed by the commissioner.
(b) A licensee shall make other special reports that may be required by the commissioner.
(c) The commissioner may require a licensee that employs one or more mortgage loan originators to submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in the form and shall contain the information as the Nationwide Mortgage Licensing System and Registry may require.
(d) The commissioner may by rule or order require a mortgage loan originator to submit reports of condition to the Nationwide Mortgage Licensing System and Registry, in lieu of the reports of condition required of his or her employer pursuant to subdivision (c).
(e) This section shall become operative on January 1, 2019.

SEC. 5.

 Section 22701 of the Financial Code, as added by Section 75 of Chapter 475 of the Statutes of 2017, is amended to read:

22701.
 (a) (1) The commissioner shall, at least once every 48 months, and as often as the commissioner deems necessary and appropriate, examine the affairs of each finance lender, broker, or program administrator licensee for compliance with this division. The commission may, as often as the commissioner deems necessary and appropriate, examine the books, accounts, records, and files used in the business of every person engaged in the business of a finance lender, broker, or program administrator, whether the person acts or claims to act as principal or agent, or under or without the authority of this division in order to discover violations of this division or to secure information required in order to enforce the division. The commissioner shall appoint suitable persons to perform the examination. For the purpose of examination, the commissioner and his or her representatives shall have free access to the offices and places of business, books, accounts, papers, records, documents, files, safes, and vaults of all these persons, and may examine the officers, directors, and employees of the person being examined, under oath, regarding the person’s operations.
(2) In conducting the examination described in paragraph (1), the commissioner may cooperate with any agency of the state or federal government. The commissioner may accept an examination conducted by a state or federal agency in place of the mandatory 48-month examination required by paragraph (1), unless the commissioner determines that the examination conducted by the state or federal agency does not provide information necessary to enable the commissioner to fulfill his or her responsibilities under this division.
(b) After conducting an examination described in subdivision (a), the commissioner shall do all the following:
(1) Provide a written statement of the findings of the examination.
(2) Issue a copy of that statement to each licensee’s principals, officers, or directors.
(3) Take appropriate steps to ensure correction of any violations of this division.
(c) The commissioner may subject an affiliate of a licensee to examination on the same terms as the licensee, but only when reports from, or examination of, a licensee provides documented evidence of unlawful activity between a licensee and the affiliate benefiting, affecting, or arising from the activities regulated by this division.

(d)The finance lender and broker licensee shall pay, and the commissioner shall assess, the reasonable expenses of any examination of the licensee and affiliates.

(e)The statement of the findings of an examination shall belong to the commissioner and shall not be disclosed to anyone other than the licensee, law enforcement officials, or other state or federal regulatory agencies for further investigation and enforcement. Reports required of licensees by the commissioner under this division and results of examinations performed by the commissioner under this division are the property of the commissioner. The commissioner may decline to disclose records described in this paragraph in response to a request made under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code), pursuant to paragraph (2) of subdivision (b) of Section 6254 of the Government Code.

(f)

(d) This section shall become operative on January 1, 2019.

SEC. 6.

 Section 22713 of the Financial Code is amended to read:

22713.
 (a) (1) Whenever the commissioner believes from evidence satisfactory to the commissioner that any person has violated or is about to violate a provision of this division, or a provision of any order, license, decision, demand, requirement, or any regulation adopted pursuant to this division, the commissioner may, in the commissioner’s discretion, bring an action, or the commissioner may request the Attorney General to bring an action in the name of the people of the State of California, against that person to enjoin that person from continuing that violation or doing any act in furtherance of the violation.
(2) Upon a proper showing, a court shall grant a permanent or preliminary injunction, restraining order, or writ of mandate, as appropriate. The court may also appoint a receiver, monitor, conservator, or other designated fiduciary or officer of the court for the defendant or for the defendant’s assets, and grant any other ancillary relief as appropriate.
(3) A receiver, monitor, conservator, or other designated fiduciary or officer of the court appointed by the superior court pursuant to paragraph (2) may, with the approval of the court, exercise any or all of the powers of the defendant’s officers, directors, partners, trustees or persons who exercise similar powers and perform similar duties, including the filing of a petition for bankruptcy. No action at law or in equity may be maintained by any party against the commissioner, or a receiver, monitor, conservator, or other designated fiduciary or officer of the court, by reason of their exercising these powers or performing these duties described in this subdivision pursuant to the order of, or with the approval of, the superior court.
(b) If the commissioner determines that it is in the public interest, the commissioner may include in any action authorized by subdivision (a) a claim for ancillary relief, including, but not limited to, a claim for restitution, disgorgement, or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action. The court shall have jurisdiction to award additional relief.
(c) Any person who violates any provisions of this division, or who violates any rule or order adopted pursuant to this division, shall be liable for a civil penalty not to exceed twenty-five thousand dollars ($25,000) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the commissioner in any court of competent jurisdiction.
(d) As applied to the penalties for acts in violation of this division, the remedies provided by this section and by other sections of this division are not exclusive, and may be sought and employed in any combination to enforce the provisions of this division.

SEC. 7.

 Section 22713.1 is added to the Financial Code, to read:

22713.1.
 (a) If, upon inspection, examination or investigation, based upon a complaint or otherwise, the commissioner has cause to believe that any person is violating any provision of this division or any provision of any rule, order or regulation adopted pursuant to this division, the commissioner may do one or more of the following:
(1) Issue an order to any person violating any provision of this division or any provision of any rule, order, or regulation adopted pursuant to this division to desist and refrain from further violating this division, rule, order, or regulation issued thereunder. The order shall describe each act or omission of the person that is in violation.
(2) Impose an administrative penalty for each act or omission described in paragraph (1), not to exceed twenty-five thousand dollars ($25,000) per violation. Each violation or failure to comply with this division, or any rule, order, or regulation shall be assessed as a separate penalty. In assessing a penalty, the commissioner shall give due consideration to the appropriateness of the amount of the penalty with respect to factors including the gravity of the violation, whether the person's conduct was negligent, willful, or knowing, and history of the previous violations.
(3) If the commissioner determines it is in the public interest, the commissioner may order ancillary relief against any person for the acts or omissions described in paragraph (1), including, but not limited to, restitution or disgorgement or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action, and the administrative law judge shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this division, the commissioner is entitled to recover costs. Costs include, but are not limited to, reasonable attorneys’ fees and investigative expenses. Any costs recovered under this subdivision shall be deposited into the State Corporations Fund for use by the department.
(c) The sanctions authorized under this section shall be separate from, and in addition to, all other administrative, civil, or criminal remedies.
(d) If the person cited in the order fails to file a written request for a hearing within 30 days from the date of service of the order, the order shall be final.
(e) Any hearing under this section shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner shall have all of the powers granted therein.
(f) After the exhaustion of the review procedures provided in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, the commissioner may apply to the appropriate superior court for a judgment in the amount of any administrative penalty, costs, and ancillary relief awarded in a final decision and order compelling the respondent, or the named or cited person, to comply with the final decision of the commissioner brought under this division. The application, which shall include a certified copy of the final order of the commissioner, shall constitute a sufficient showing to warrant the issuance of the judgment and order by the superior court.

SEC. 8.

 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.