Today's Law As Amended


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AB-2500 California Financing Law: consumer loans: charges.(2017-2018)



As Amends the Law Today


SECTION 1.

 Section 22202 of the Financial Code is amended to read:

22202.
 “Charges” do not include any of the following:
(a) Commissions received as a licensed insurance agent or broker in connection with insurance written as provided in Section 22313.
(b) Amounts not in excess of the amounts specified in subdivision (c) of Section 3068 of the Civil Code paid to holders of possessory liens, imposed pursuant to Chapter 6.5 (commencing with Section 3067) of Title 14 of Part 4 of Division 3 of the Civil Code, to release motor vehicles that secure loans subject to this division.
(c) Court costs, excluding attorney’s fees, incurred in a suit and recovered against a debtor who defaults on the debtor’s  his or her  loan.
(d) Amounts received by a licensee from a seller, from whom the borrower obtains money, goods, labor, or services on credit, in connection with a transaction under an open-end credit program that are paid or deducted from the loan proceeds paid to the seller at the direction of the borrower and that which  are an obligation of the seller to the licensee for the privilege of allowing the seller to participate in the licensee’s open-end credit program. Amounts received by a licensee from a seller pursuant to this subdivision may not exceed 6 percent of the loan proceeds paid to the seller at the direction of the borrower.
(e) Actual and necessary fees not exceeding five hundred dollars ($500) paid in connection with the repossession of a motor vehicle to repossession agencies licensed pursuant to Chapter 11 (commencing with Section 7500) of Division 3 of the Business and Professions Code provided that the licensee complies with Sections 22328 and 22329, and actual fees paid to a licensee in conformity with Sections 26751 and 41612 of the Government Code in an amount not exceeding the amount specified in those sections of the Government Code.
(f) Moneys paid to, and commissions and benefits received by, a licensee for the sale of goods, services, or insurance, whether or not the sale is in connection with a loan, that the buyer by a separately signed authorization acknowledges is optional, if sale of the goods, services, or insurance has been authorized pursuant to Section 22154.

SEC. 2.

 Section 22250 of the Financial Code is amended to read:

22250.
 (a) The following sections do not apply to any loan of a bona fide principal amount of ten thousand dollars ($10,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22154, 22155, 22201, 22202,  22307, 22313, 22314, 22315, 22322, 22323,  22325, 22334, and 22752, and the sections enumerated in subdivision (b).
(b) The following sections do not apply to any loan of a bona fide principal amount of five thousand dollars ($5,000) or more, or to a duly licensed finance lender in connection with any such loan or loans, if the provisions of this section are not used for the purpose of evading this division: Sections 22201, 22202,  22300, 22305, and 22306, subdivision (a) of Section 22307, and Sections 22309, 22320.5, 22322, 22323,  22326, 22327, 22400, and 22751.

SEC. 3.

 Section 22304.5 is added to the Financial Code, to read:

22304.5.
 (a) For any loan of a bona fide principal amount of more than two thousand five hundred dollars ($2,500) but less than five thousand dollars ($5,000), as determined in accordance with Section 22251, a licensee may contract for or receive no more than the following amounts:
(1) Moneys paid pursuant to Sections 22313 and 22314, and
(2) Charges, inclusive of moneys paid pursuant to paragraph (1) of subdivision (b) of Section 22305, that in the aggregate amount exceed an annual simple interest rate of 36 percent per annum.
(b) As an alternative to subdivision (a), a licensee may contract for or receive no more than the following amounts:
(1) Moneys paid pursuant to paragraph (2) of subdivision (b) of Section 22305, and
(2) Charges that in the aggregate amount exceed an annual simple interest rate of 36 percent per annum or the sum of 30.75 percent per annum plus the United States Prime Rate, whichever is greater. As used in this paragraph, “United States Prime Rate” means the rate published by the Board of Governors of the Federal Reserve System in its Statistical Release H.15 Selected Interest Rates for bank prime loans and in effect as of the first day of the month immediately preceding the month during which the loan is consummated. If the Federal Reserve System ceases publication of the prime rate, the commissioner shall designate a substantially equivalent index.
(c) This section does not apply to any loan of a bona fide principal amount of five thousand dollars ($5,000) or more.

SEC. 5.SEC. 4.

 Section 22305 of the Financial Code is amended to read:

22305.
 (a)  In addition to the charges authorized by Section 22303, 22304,  22303  or 22304.5, 22304,  a licensee may contract for and receive an administrative fee, which shall be fully earned immediately upon making the loan,  fee  with respect to a loan of a bona fide principal amount of not more than two thousand five hundred dollars ($2,500) at a rate not in excess of 5 percent of the principal amount (exclusive of the administrative fee) or fifty dollars ($50), whichever is less, and with respect to a loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500), at an amount not to exceed seventy-five dollars ($75). No administrative fee may be contracted for or received in connection with the refinancing of a loan unless at least one year has elapsed since the receipt of a previous administrative fee paid by the borrower. Only one administrative fee may be contracted for or received until the loan has been repaid in full. For purposes of this section, “bona fide principal amount” shall be determined in accordance with Section 22251. less. 
(b) With respect to a loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500), a licensee may contract for and receive an administrative fee as follows:
(1) For a loan made pursuant to subdivision (a) of Section 22304.5, an amount not to exceed seventy-five dollars ($75).
(2) For a loan made pursuant to subdivision (b) of Section 22304.5, an amount not to exceed ninety dollars ($90).
(c) A licensee shall not contract for or receive an administrative fee in connection with the refinancing of a loan unless at least one year has elapsed since the receipt of a previous administrative fee paid by the borrower. Only one administrative fee may be contracted for or received until the loan has been repaid in full. The administrative fee may be included in the principal amount and shall be fully earned immediately upon making the loan, except that if the licensee refinances the loan within the first 12 months of the loan term the licensee shall rebate to the borrower a portion of the administrative fee calculated on a pro rata basis according to the remaining term of the loan.
(d) For purposes of this section, “bona fide principal amount” shall be determined in accordance with Section 22251.

SEC. 8.SEC. 5.

 Section 22334 of the Financial Code is amended to read:

22334.
 (a) Except as provided in subdivision (b), a licensee shall not enter into any contract for a loan that provides for a scheduled repayment of principal over more than the maximum terms set forth below opposite the respective size of loans.
Principal amount of loan
Maximum term
Less than $500  ........................
24 months and 15 days
$500 but less than $1,500  ........................
36 months and 15 days
$1,500 but less than $3,000  ........................
48 months and 15 days
$3,000 but less than $10,000  ........................
60 months and 15 days
(b) The maximum loan term of 60 months and 15 days does not apply to a loan  loans  secured by real property of a bona fide principal amount of at least in excess of  five thousand dollars ($5,000).
(c) A licensee shall not enter into any contract for a loan that provides for a scheduled repayment of principal that is less than 12 months. This subdivision applies to a loan of a bona fide principal amount of at least in excess of  two thousand five hundred dollars ($2,500), but less than ten thousand dollars ($10,000).
(d) This section does not apply to an open-end loan,  open-end loans, or to  a student loan made by an eligible lender under the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1070 et seq.), or to  a student loan made pursuant to the Public Health Service Act, as amended (42 U.S.C. Sec. 294 et seq.).

SEC. 6.

 Section 22334.5 is added to the Financial Code, to read:

22334.5.
 A licensee shall not charge, impose, or receive any penalty for the prepayment of a loan. This section does not apply to loans secured by real property.

SEC. 10.SEC. 7.

 Section 22337 of the Financial Code is amended to read:

22337.
 Each licensed finance lender shall:
(a) Deliver or cause to be delivered to the borrower, or any one thereof, at the time the loan is made, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security for the loan, if any, and the agreed rate of charge or the annual percentage rate pursuant to Regulation Z promulgated by the Consumer Financial Protection Bureau (12 C.F.R. 1026).
(b) Obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If the statement discloses that a broker or other person has participated, then the finance lender shall obtain a full statement of all sums paid or payable to the broker or other person. The finance lender shall keep these statements for a period of three years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.
(c) Permit payment to be made in advance in any amount on any contract of loan at any time. The licensee may apply the payment first to any agreed prepayment penalty, then to  all charges due, including charges at the agreed rate or rates up to the date of payment, not to exceed the applicable maximum rate permitted by this article. Moneys paid pursuant to subdivision (f) of Section 22202 shall be subject to paragraph (2) of subdivision (a) of Section 22400. 
(d) Deliver or cause to be delivered to the person making any cash payment, or to the person who requests a receipt at the time of making any payment, at the time payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which the payment is applied.
(e) Upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership, and cancel or plainly mark “paid” and return to the borrower or person making final payment, any note, mortgage, security agreement, trust deed, assignment, or order signed by the borrower, or an optical image reproduction thereof, except those documents that are a part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. When a trust deed on real property has been taken as security for a loan that has been subsequently paid in full, a duly executed request for reconveyance shall be delivered to the trustor or trustee for the purpose of recording a reconveyance. A termination statement, furnished to the borrower as provided for in Sections 9512 and 9513 of the Commercial Code, shall be deemed a release of the security when a financing statement has been filed pursuant to Section 9501 of the Commercial Code.
For purposes of this subdivision, an optical image reproduction shall meet all of the following requirements:
(1) The optical image storage media used to store the document shall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.
(2) The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of Standards and Technology or the Association for Information and Image Management.
(3) Written authentication identifying the optical image reproduction as an exact unaltered copy of the note, trust deed, mortgage, security agreement, assignment or order shall be stamped or printed on the optical image reproduction.
(f) Deliver or cause to be delivered to the potential borrower, or any one thereof, at the time the licensee first requires or accepts any signed instrument or the payment of any fee, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any.

SEC. 8.

 Section 22337.5 is added to the Financial Code, to read:

22337.5.
 Prior to disbursement of loan proceeds in connection with any loan of a bona fide principal amount in excess of two thousand five hundred dollars ($2,500) but less than ten thousand dollars ($10,000), other than a loan secured by real property, 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, or (b) refer 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. 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 section shall be provided at no cost to the borrower.

SEC. 11.SEC. 9.

 Section 22452 of the Financial Code is amended to read:

22452.
 Subject to the written approval of the commissioner of the licensee’s plan of business for making open-end loans as not being misleading or deceptive and subject to regulations the commissioner may adopt with respect to open-end loans under Section 22150, a licensee may make open-end loans pursuant to this article and may contract for and receive thereon charges as set forth in Sections 22303, 22304, 22304.5, and 22308.  and 22308, and in subdivision (b) of Section 22304.5.  These charges may be calculated on an amount not exceeding the greater of:
(a) The actual daily unpaid balances of the open-end account in the billing cycle for which the charge is made, in which case one-thirtieth of the monthly rate may be charged for each day the unpaid balance is outstanding.
(b) The average daily unpaid balance of the open-end account in the billing cycle for which the charge is made, which is the sum of the amount unpaid each day during that cycle divided by the number of days in that cycle. The amount unpaid on a day is determined by adding to any balance unpaid as of the beginning of that day all advances and other debits and deducting all payments and other credits made or received as of that day. The billing cycle shall be monthly. A billing cycle is monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from the regular date.
This section does not apply to any open-end loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22467.
SEC. 10.
 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.