Code Section Group

Financial Code - FIN

DIVISION 7. INDUSTRIAL LOAN COMPANIES [18000 - 18707]

  ( Division 7 repealed and added by Stats. 1976, Ch. 964. )

CHAPTER 7. Guarantee of Thrift Accounts [18475 - 18538]

  ( Chapter 7 added by Stats. 1976, Ch. 964. )

ARTICLE 2. General [18490 - 18512]
  ( Article 2 added by Stats. 1976, Ch. 964. )

18490.
  

When the property and business of a member, other than a special member, has been liquidated or is in the process of liquidation by the commissioner and the proceeds of liquidation distributed ratably are insufficient to pay up to fifty thousand dollars ($50,000) of each thrift obligation specified in Section 18523, the commissioner shall direct Guaranty Corporation to pay and Guaranty Corporation shall pay each such deficiency at the direction of and in amounts as directed by the commissioner within 10 days from the date the commissioner makes demand for payment. If the total funds available from Guaranty Corporation at that time are insufficient to pay in full the amounts provided by Section 18523, the amount paid to each thriftholder shall be ratably reduced in proportion to the amount by which the fund is deficient, and thereafter further payments shall be made ratably to such thriftholders in accordance with the directions of the commissioner as additional funds are paid into the fund from assessments or otherwise. If the thrift obligations are paid, each member’s account and special member’s account shall be reduced ratably based on the account balance for the total amount paid.

(Amended by Stats. 1985, Ch. 142, Sec. 13. Effective July 1, 1985.)

18491.
  

(a) When the property and business of a member, other than a special member, is being liquidated, the commissioner may direct Guaranty Corporation to pay each thrift obligation of the member specified in Section 18523 up to fifty thousand dollars ($50,000). Guaranty Corporation shall pay the thrift obligations at the direction of, and in the amounts directed by, the commissioner within 10 days from the date the commissioner makes demand for payment under this section. If the total funds available from Guaranty Corporation at that time are insufficient to pay in full the amounts provided by Section 18523, the amount paid to each thriftholder shall be ratably reduced in proportion to the amount by which the fund is deficient, and thereafter further payments shall be made ratably to those thriftholders in accordance with the directions of the commissioner as additional funds become available to Guaranty Corporation.

(b) When any thrift obligation is paid up to the guaranteed amount as provided in subdivision (a), Guaranty Corporation shall be assigned all rights, title, and interest to each individual thrift obligation up to the amount paid by Guaranty Corporation to each individual thriftholder.

(c) Guaranty Corporation shall first receive ratable liquidation proceeds up to the amount paid by Guaranty Corporation to a thriftholder prior to any payment of liquidation proceeds to a thriftholder whose account was in excess of fifty thousand dollars ($50,000).

(d) Each member’s account and each special member’s account shall be reduced ratably based on the account balance for the total amount paid pursuant to subdivision (a). Liquidation proceeds paid to Guaranty Corporation pursuant to subdivision (c) shall ratably increase each member and special member account based on the account balance for the total amount paid pursuant to subdivision (a).

(Amended by Stats. 1985, Ch. 142, Sec. 14. Effective July 1, 1985.)

18493.
  

Whenever it appears to the commissioner that Guaranty Corporation has:

(a) Violated its articles of incorporation or any law of this state;

(b) Not paid amounts as directed by the commissioner pursuant to Section 18490;

(c) Invested its funds in violation of Section 18497;

(d) Not levied assessments as required by Sections 18535 and 18536;

(e) Has not brought and diligently prosecuted an action to enforce payment as required by Section 18538;

(f) Violated any section of this chapter; or

(g) Neglected or refused to submit its books, papers, and affairs to the inspection of any examiner;
the commissioner may forthwith take possession of the property and business of Guaranty Corporation and retain possession until Guaranty Corporation satisfies the commissioner that it will operate in conformity with this chapter. During the time the commissioner has such possession he shall perform the duties and carry out the obligations of Guaranty Corporation.

(Added by Stats. 1976, Ch. 964.)

18494.
  

Whenever the commissioner has taken possession of the property and business of Guaranty Corporation, Guaranty Corporation within 10 days after such taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the head office of Guaranty Corporation is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined, and after a hearing and a determination of the facts upon the merits, may dismiss such application or enjoin the commissioner from further proceedings and direct him to surrender the property and business to Guaranty Corporation, or make such further order as may be just.

(Added by Stats. 1976, Ch. 964.)

18495.
  

An appeal may be taken from the judgment of the court by the commissioner or by Guaranty Corporation in the manner provided by law for appeals from the judgment of a superior court to the court of appeal. An appeal from the judgment of the court does not operate as a stay of the judgment unless the court, on good cause, so orders.

(Amended by Stats. 1998, Ch. 931, Sec. 150. Effective September 28, 1998.)

18496.
  

(a) Guaranty Corporation shall have independent authority to approve membership, or suspend or revoke the right to participate in Guaranty Corporation by any member for cause and to submit reports and make recommendations to the commissioner regarding the financial condition of any member and shall also do so if requested by the commissioner. These reports and recommendations shall not be public documents. There shall be no liability on the part of, and no cause of action of any nature shall arise against, Guaranty Corporation or its members, directors, officers, employees or agents, or the commissioner or his or her authorized representatives, for any statements made by them in any reports or recommendations made hereunder.

(b) In order to permit Guaranty Corporation to fulfill its obligations under subdivision (a), upon the written request of Guaranty Corporation the commissioner may furnish to Guaranty Corporation a copy of financial statements or reports filed by a member or an industrial loan company making application to participate in Guaranty Corporation and a copy of the commissioner’s analysis of an industrial loan company’s receivables. Except for reports filed under Sections 18407 and 18410, such statements and reports shall not be public documents, and the information contained therein shall be privileged, and confidential to Guaranty Corporation for its sole use in carrying out its statutory functions. There shall be no liability on the part of, and no cause of action of any nature shall arise against the State of California, the commissioner or members of the commissioner’s staff or the commissioner’s authorized representatives, for the release of any information furnished to Guaranty Corporation pursuant to this subdivision.

(c) By written consent of a majority of its directors, Guaranty Corporation, in order to fulfill its obligations under subdivision (a), may appoint an independent certified public accountant or public accountant to prepare an audit report containing audited financial statements, together with such other information as Guaranty Corporation, in good faith, requires regarding the financial condition of any member. For the purposes of examination and investigation the certified public accountant or public accountant appointed by Guaranty Corporation shall have free access to the offices and places of business, books, accounts, papers, records, files, safes and vaults of the member.

(d) By written consent of a majority of its directors, Guaranty Corporation, in order to fulfill its obligations under subdivision (a), may hire or appoint specialized committees or employees to investigate the operations of a member company. Guaranty Corporation may have its specialized employees or committees investigate the affairs and examine the books, accounts, records and files used in the business of the member. For the purposes of examination and investigation the specialized employees and committees of Guaranty Corporation shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of the member.

(e) Costs and expenses for such audit report or special investigation report shall be paid by Guaranty Corporation.

(f)  Any person who uses any information obtained under subdivision (b), (c) or (d) for any purpose not authorized by subdivision (a) is guilty of a misdemeanor.

(g) The powers granted to the Guaranty Corporation by this section may not be exercised in connection with special members.

(Amended by Stats. 1985, Ch. 142, Sec. 16. Effective July 1, 1985.)

18496.1.
  

(a) A director, officer, employee, or agent of Thrift Guaranty Corporation shall be subject to liability for acts of fraud, willful misconduct, or reckless or criminal acts arising out of, or in connection with, the performance of his or her duties on behalf of Thrift Guaranty Corporation, but shall not be subject to liability or causes of action for acts other than those set forth in this section.

(b) The board of directors shall exercise reasonable efforts to obtain directors, officers, employees, and agents, errors and omissions liability insurance coverage and shall within 30 days from the end of each fiscal year submit to the commissioner its reports, advising the commissioner of the terms and costs of such coverage, if available.

(Added by Stats. 1985, Ch. 1349, Sec. 1. Effective October 1, 1985.)

18497.
  

Guaranty Corporation may invest its funds only in readily marketable securities as provided by rules of the commissioner.

Upon request of the commissioner, Guaranty Corporation shall furnish an authorization for disclosure to the commissioner of financial records of such funds pursuant to Section 7473 of the Government Code.

(Amended by Stats. 1985, Ch. 142, Sec. 17. Effective July 1, 1985.)

18498.
  

Income from investments shall be recorded in an income account and be used to defray expenses of administration. Income from investments that exceeds an amount determined by the board of directors to be adequate to provide for current expenses may be credited to members’ accounts. Each member’s account shall receive credit ratably based on the account balance, for the amount of the excess. Income received by Guaranty Corporation, whether or not credited to members’ accounts, shall be subject to a demand of the commissioner made pursuant to Section 18490 except as to that portion reserved by the board of directors for expenses of administration during the calendar year.

(Added by Stats. 1976, Ch. 964.)

18499.
  

Expenses of administration that exceed income from investments at year end shall be charged to members’ accounts. Each member’s account shall be charged ratably based on the account balance for the amount of the excess.

(Added by Stats. 1976, Ch. 964.)

18500.
  

Guaranty Corporation shall have authority to:

(a)  Borrow funds when necessary to effectuate the provisions of this chapter.

(b) Make loans to, deposits in, purchase assets or securities of, assume liabilities of, or make contributions to any Guaranty Corporation member to minimize the deficiency payments that might be required under Article 2 (commencing with Section 18490).

(c) Organize a new thrift company to assume the thrift obligations and temporarily perform the functions of the closed company. The commissioner may waive any provision of the Industrial Loan Law necessary to enable Guaranty Corporation to organize a new thrift company.

(d) Act as a conservator or receiver of a member company that the commissioner has taken possession of.

(e) Guaranty Corporation may use the fund, or any portion of the fund, in exercising its authority.

(f) Employ consultants, advisors, and others to assist Guaranty Corporation in fulfilling its obligations and objectives.

(Amended by Stats. 1985, Ch. 142, Sec. 18. Effective July 1, 1985.)

18501.
  

The commissioner shall give prompt notice to Guaranty Corporation when the commissioner takes possession of the property and business of a member and shall give further prompt notice when the commissioner determines to liquidate the property and business of a member.

(Added by Stats. 1976, Ch. 964.)

18502.
  

Memberships issued by Guaranty Corporation shall be nontransferable and shall be exempt from the provisions of the Corporate Securities Law of 1968.

(Added by Stats. 1976, Ch. 964.)

18503.
  

The commissioner and the commissioner’s duly designated representatives may at any time investigate the affairs and examine the books, accounts, records and files used by Guaranty Corporation. The commissioner and the commissioner’s duly designated representatives shall have free access to the offices, books, accounts, papers, records, files, safes, and vaults of Guaranty Corporation.

(Amended by Stats. 1985, Ch. 142, Sec. 19. Effective July 1, 1985.)

18504.
  

Any member or industrial loan company making application to participate in Guaranty Corporation aggrieved by any action or decision of Guaranty Corporation may appeal to the commissioner within 30 days from the action or decision.

(Amended by Stats. 1985, Ch. 142, Sec. 20. Effective July 1, 1985.)

18505.
  

(a) After consultation with, and approval by, the Thrift Guaranty Corporation, the commissioner shall adopt rules and regulations regarding information to be given to holders of investment certificates of industrial loan companies including, but not limited to, information containing any reference to a guarantee or insurance program of investment certificates, and the time and conditions for payments to the holders of investment certificates, in the event an industrial loan company is taken over by the commissioner. These regulations shall include the means for informing investment certificate holders of their rights.

(b) It is the intent of the Legislature that the commissioner authorize information which can be clearly understood by a typical investment certificate holder. In addition, the information may in no way imply that the State of California stands behind or is involved with any type of guarantee or insurance program for industrial loan companies investment certificate holders.

(c) These rules and regulations shall be adopted on an emergency basis within 60 days of the effective date of this section.

(Repealed and added by Stats. 1985, Ch. 142, Sec. 21.5. Effective July 1, 1985.)

18506.
  

No person shall advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, in any manner any statement or representation with regard to its membership in Guaranty Corporation or that any of its thrift obligations are in any manner guaranteed.

(Amended by Stats. 1989, Ch. 583, Sec. 3.)

18507.
  

In order to permit Guaranty Corporation to fulfill its obligations under this chapter, the commissioner shall furnish to Guaranty Corporation a list of all industrial loan companies that are not insured companies which have outstanding thrift obligations and one copy of the independent audit report on each such industrial loan company filed with him as of the preceding December 31 and not later than April 1 of each year.

(Amended by Stats. 1986, Ch. 1011, Sec. 5. Effective September 23, 1986.)

18508.
  

An industrial loan company or its successor shall not be entitled to receive a refund, return, withdrawal, or distribution of the amount in its member’s account or of any assessments paid by it except upon liquidation of Guaranty Corporation.

(Repealed and added by Stats. 1989, Ch. 583, Sec. 5.)

18509.
  

(a) Guaranty Corporation may elect to wind up and dissolve upon approval of the commissioner, the board, and the members in accordance with Section 8610 of the Corporations Code, after (1) each industrial loan company has become a member of the Federal Deposit Insurance Corporation or redeemed all of its outstanding thrift obligations or (2) Guaranty Corporation has satisfied its guarantee of thrift obligations as provided in this chapter.

(b) Upon liquidation, after complying with the provisions of Section 8713 of the Corporations Code and notwithstanding Section 8717 of the Corporations Code, the assets of Guaranty Corporation shall be distributed to its members, past and present, including special members, ratably based on the balance of the members’ accounts, as established by resolution of the Board of Directors of Guaranty Corporation in accordance with the following:

(1) The account of each member, past and present, including special members, shall be credited with all assessments paid by the member to Guaranty Corporation.

(2) For each fiscal year, all current and prior expenses of administration of Guaranty Corporation shall be charged to the accounts of all members, past and present, including special members, ratably based on the balance of each account.

(3) With respect to the account of each member to whom Guaranty Corporation has advanced funds or on whose behalf Guaranty Corporation has paid claims and expenses, the following adjustments shall be made:

(A) The member’s account shall be charged in the amount of the funds advanced or paid as of the date of advance or payment.

(B) If the amount advanced or paid exceeds the balance of the member’s account, then (i) the member’s account shall be deemed to have been closed, and the excess shall be allocated and charged ratably to the accounts of all other members, past and present, including special members, and (ii) if the member continued to operate after the date of the advance or payment, whether under new ownership or management or under the management of Guaranty Corporation, then a new member account shall, for purposes of this section, be deemed to have been established for the member with a zero balance, which shall be credited with subsequent assessments paid.

(Repealed and added by Stats. 1989, Ch. 583, Sec. 7.)

18510.
  

The Board of Directors of Guaranty Corporation shall be composed of five members, at least two of which shall be public members. The five members shall be appointed by the commissioner. The commissioner shall consult with the President of Thrift Guaranty Corporation before making an appointment. Public members shall not be affiliated with any company or affiliate of any company or employed by any state agency. A public member shall not be a relative of any officer or director of any company or its affiliates.

(Amended by Stats. 1996, Ch. 1064, Sec. 614. Effective January 1, 1997. Operative July 1, 1997.)

18511.
  

Guaranty Corporation shall establish a permanent office in this state.

(Added by Stats. 1985, Ch. 142, Sec. 25. Effective July 1, 1985.)

18512.
  

The commissioner may require Guaranty Corporation to obtain a bond, insurance, or reinsurance which provides additional protection against losses to its members’ thriftholders. The type, amount, and form of this protection is subject to the commissioner’s written approval.

(Added by Stats. 1985, Ch. 142, Sec. 26. Effective July 1, 1985.)

FINFinancial Code - FIN2.