Today's Law As Amended

PDF |Add To My Favorites | print page

AB-3010 Financial transactions: finance lenders and deferred deposit transactions.(2017-2018)

As Amends the Law Today


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

 (a) As an alternative to the charges authorized by Sections 22303 and 22304, a licensee may contract for and receive charges as follows:
(1) A note rate not to exceed 36 percent.
(2) A monthly servicing fee of 5 percent of the originally contracted loan amount, not to exceed twenty-five dollars ($25) per month, provided that the fee is not added to the loan balance on which interest is charged.
(3) The total loan charges, including interest and servicing fees, on any loan shall not exceed 50 percent of the original loan principal. “Total loan charges” means all charges made in connection with the loan, except an allowable returned check or late fee as described in subdivision (j) of Section 22304.6.
(4) The total required monthly payment shall not exceed the greater of 5 percent of the borrower’s verified gross monthly income or 6 percent of the borrower’s verified net monthly income. Income shall be verified according to rules established by the department, which shall include guidance for reasonably relying on evidence of recurring deposits to a depository account or one or more paystubs.
(b) This section does not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,5000) or more, as determined in accordance with Section 22251.
(c) A licensee shall not charge any fee not expressly permitted by this section or other law. No fee may be charged for brokering of a loan, insurance, or other ancillary products.
(d) Loans made under this section do not qualify as loans, extensions of credit, or any other services for purposes of Section 1789.12 of the Civil Code.
(e) A monthly maintenance fee shall not be charged to active duty military personnel of the United States Armed Forces or their dependents.

SEC. 2.

 Section 22304.6 is added to the Financial Code, to read:

 A licensee engaged in lending pursuant to Section 22304.5 shall comply with all of the following:
(a) The licensee shall provide a written notice at least three business days prior to each lender-initiated attempt to collect from a consumer’s account. For purposes of this subdivision, “written notice” includes an email or text notice, provided the notice complies with the Electronic Signatures in Global and National Commerce Act (E-Sign Act). A notice provided pursuant to this section shall include detailed information regarding the account and forthcoming payment collection attempt.
(b) The licensee shall not attempt to collect from a consumer’s account after two consecutive attempts have failed unless the lender has obtained in writing a new payment authorization from the consumer.
(c) The licensee shall not originate more than two loans to any single consumer within any 12-month period. A licensee shall not originate a loan to the consumer if the consumer already has an outstanding loan with the licensee.
(d) The licensee shall disclose the following to the consumer in writing at the time of application:
(1) The initial disclosure statement required by Regulation Z, including periodic payment amount, total repayment, total loan costs, annual percentage rate (APR) inclusive of monthly fees, and loan duration.
(2) The consumer’s right to revoke ACH payment authorization.
(3) The consumer’s right to rescind the loan by notifying the licensee of the consumer’s intent to rescind the loan and by returning the principal advanced by the end of the business day following the date the loan is consummated.
(e) Each loan shall be precomputed and payable in substantially equal installments of principal, fees, interest, and charges combined.
(f) The minimum loan duration for any loan shall be the greater of 60 days or the number of months equal to the sum of the loan principal and all applicable charges divided by the maximum allowable monthly payment described in paragraph (4) of subdivision (a) of Section 22304.5.
(g) The licensee may obtain authorization signed by the consumer to transfer or withdraw funds from the consumer’s account.
(h) The licensee shall accept prepayment from a consumer prior to the loan due date and shall not charge the consumer a penalty if the consumer elects to prepay the loan.
(i) Upon prepayment, renewal, or refinancing, all finance charges, inclusive of interest, and all fees are pro rata refundable. A prorated monthly fee shall be based on a daily calculation.
(j) The licensee may collect one returned-check or late fee per loan. The maximum fee is the lesser of 5 percent of the original loan principal or twenty-five dollars ($25), plus any amount passed on from another financial institution.
(k) Upon 10-day delinquency and notice to the consumer, the licensee may accelerate the loan balance, but collect only prorated interest and fees earned to date.


 Section 23001 of the Financial Code is amended to read:

 As used in this division, the following terms have the following meanings:
(a) “Deferred deposit transaction” means a transaction whereby a person defers depositing a customer’s personal check until a specific date, pursuant to a written agreement for a fee or other charge, as provided in Section 23035.
(b) “Commissioner” means the Commissioner of Business Oversight.
(c) “Database” means a common database established pursuant to Section 23036.5.
(d) “Deferred deposit originator” means a person who offers, originates, or makes a deferred deposit transaction.
(c) (e)  “Department” means the Department of Business Oversight.
(d) (f)  “Licensee” means any person who offers, originates, or makes a deferred deposit transaction, who arranges a deferred deposit transaction for a deferred deposit originator, who acts as an agent for a deferred deposit originator, or who assists a deferred deposit originator in the origination of a deferred deposit transaction. However, “licensee” does not include a state or federally chartered bank, thrift, savings association, industrial loan company, or credit union. “Licensee” also does not include a retail seller engaged primarily in the business of selling consumer goods, including consumables, to retail buyers that cashes checks or issues money orders for a minimum fee not exceeding two dollars ($2) as a service to its customers that is incidental to its main purpose or business. “Licensee” also does not include an employee regularly employed by a licensee at the licensee’s place of business. An employee, when acting under the scope of the employee’s employment, shall be exempt from any other law from which the employee’s employer is exempt.
(e) (g)  “Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization, a government entity, or a political subdivision of a government entity.
(f) “Deferred deposit originator” means a person who offers, originates, or makes a deferred deposit transaction.

SEC. 2.SEC. 4.

 Section 23016 of the Financial Code is amended to read:

 (a) Each licensee shall pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of this division, as estimated by the commissioner, for the ensuing year and any deficit actually incurred or anticipated in the administration of the program in the year in which the assessment is made. The assessment will shall  be based on the number of locations. The assessment shall include an amount that is sufficient to cover the reasonable regulatory costs of the commissioner to develop and administer the database. 
(b) On or before the 20th day of May  May 20  in each year, the commissioner shall notify each licensee by mail of the amount assessed and levied against it and that amount shall be paid within 30 days thereafter. If payment is not made within 30 days, the commissioner may assess and collect a penalty, in addition to the assessment, of 1 percent of the assessment for each month or part of a month that the payment is delayed or withheld.
(c) If a licensee fails to pay the assessment on or before the 30th day of June  June 30  following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the licensee. If, after an order is made, a request for hearing is filed in writing within 30 days, and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a licensee shall not conduct business pursuant to this division except as may be  permitted by order of the commissioner. However, the revocation, suspension, or surrender of a certificate shall not affect the powers of the commissioner as provided in this division.

SEC. 3.SEC. 5.

 Section 23036 of the Financial Code is amended to read:

 (a) A fee for a deferred deposit transaction shall not exceed 15 percent of the face amount of the check.
(b) A licensee may allow an extension of time, or a payment plan, for repayment of an existing deferred deposit transaction but may not charge any additional fee or charge of any kind in conjunction with the extension or payment plan. A licensee that complies with the provisions of this subdivision shall not be deemed to be in violation of subdivision (g) of Section 23037.
(c) A licensee shall not enter into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. effect with any licensee, as reflected by the database established pursuant to Section 23036.5. 
(d) A licensee who enters into a deferred deposit transaction agreement, or any assignee of that licensee, shall not be entitled to recover damages for that transaction in any action brought pursuant to, or governed by, Section 1719 of the Civil Code.
(e) A fee not to exceed fifteen dollars ($15) may be charged for the return of a dishonored check by a depositary institution in a deferred deposit transaction. A single fee charged pursuant to this subdivision is the exclusive charge for a dishonored check. No A  fee may not  be added for late payment.
(f) No amount in excess of the amounts authorized by this section shall be directly or indirectly charged by a licensee pursuant to a deferred deposit transaction.
(g) A licensee shall be subject to the provisions of Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code.

SEC. 6.

 Section 23036.5 is added to the Financial Code, to read:

 (a) For purposes of this section:
(1) “Database provider” means a third-party vendor that has entered into an agreement with the commissioner to administer a database.
(2) “Outstanding deferred deposit transaction” means a deferred deposit transaction listed in the database that has not been paid in full.
(b) (1) The commissioner shall, by July 1, 2019, develop, operate, and maintain an Internet Web site and common database in which a licensee shall, by the time period described below, record each deferred deposit transaction for the purpose of preventing violations of this division. The database shall do all of the following:
(A) Allow licensees real-time access to information on deferred deposit transactions entered into the database through an Internet connection.
(B) Retain data in the database only as necessary to ensure compliance with this division.
(2) The commissioner may, consistent with existing contracting requirements, contract with a database provider to develop, operate, or maintain the database described in paragraph (1) on behalf of the department. If the commissioner does so, the commissioner shall include the following provisions in the contract:
(A) A provision requiring data to be archived 365 calendar days after it was first entered, and to allow the commissioner access to that archived data as necessary.
(B) A provision requiring the database provider to ensure that the data is confidential, except as otherwise authorized by this section.
(C) A provision requiring the database provider to comply with all requirements of this section relating to the database.
(c) On or after July 1, 2019, a licensee, before entering into any deferred deposit transaction, shall conduct a search on the database to ensure that the customer does not have any outstanding deferred deposit transactions. If that customer has an outstanding deferred deposit transaction, the licensee shall not enter into a deferred deposit transaction with that customer.
(d) If the search conducted by the licensee under subdivision (c) reveals that the customer does not have any outstanding deferred deposit transaction, and that transaction otherwise meets all other requirements of this division, the licensee may enter into an agreement for that transaction with the customer. After entering into that agreement, the licensee shall submit the following:
(1) The applicant’s social security number. If the applicant cannot provide a social security number, the licensee shall submit an individual taxpayer identification number.
(2) When a deferred deposit transaction was initiated.
(3) When a deferred deposit transaction that was recorded in the database is paid in full.
(e) A licensee shall immediately correct any incorrect data that was previously entered into the database, including any information that the licensee becomes aware needs to be updated.
(f) If a licensee is unable to access the database due to technical difficulties, the licensee shall not be in violation of any obligation to immediately record data pursuant to this section so long as the licensee records that data on the next business day following the day that the database becomes accessible, or complies with any alternate process to record that data established by the commissioner.
(g) A licensee shall maintain generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database, as determined by the commissioner.
(h) (1) The information contained in the database is confidential and not subject to public inspection, and the database and its contents are not subject to requests under the California Public Records Act, Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code. A licensee may not disclose the information except as otherwise provided by law, including paragraph (2).
(2) Notwithstanding paragraph (1), the commissioner may publicly release aggregate data maintained in the database if the commissioner finds that the release is in the public interest. However, that release shall, in no instance, include personally identifying information of any customer or licensee, including a licensee that is a business or corporation.
SEC. 7.
 The Legislature finds and declares that Section 6 of this act, which adds Section 23036.5 to the Financial Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following finding to demonstrate the interest protected by this limitation and the need for protecting the interest:
Records of deferred deposit transaction customers include personal financial information, which must be protected to avoid identity theft and other misuse. Therefore, the health and safety of the people of California are enhanced by limiting access of deferred deposit transaction data to ensure that customer information remains confidential.
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.