Today's Law As Amended

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AB-642 California Financing Law.(2019-2020)



SECTION 1.

 Section 22004 of the Financial Code is amended to read:

22004.
 (a)  “Broker” includes any person who is engaged in the business of negotiating or  performing any act as broker  of the following acts  in connection with loans made by a finance lender. lender, unless that person is otherwise exempt from this division pursuant to Sections 22050 or 22050.5: 
(1) Transmitting confidential data about a prospective borrower to a finance lender with the expectation of compensation, in connection with making a referral.
(2) Making a referral to a finance lender under an agreement with the finance lender that a prospective borrower referred by the person to the finance lender meet certain criteria involving confidential data.
(3) Participating in any loan negotiation between a finance lender and prospective borrower.
(4) Counseling, advising, or making recommendations to a prospective borrower about a loan based on the prospective borrower’s confidential data.
(5) Participating in the preparation of any loan documents, including loan applications, other than providing a prospective borrower blank copies of loan documents. Transmitting information that is not confidential data to a finance lender at the request of a prospective borrower shall not, by itself, constitute participation in the preparation of loan documents within the meaning of this paragraph.
(6) Communicating to a prospective borrower a finance lender’s loan approval decisions.
(7) Charging a fee to a prospective borrower for any services related to a prospective borrower’s application for a loan from a finance lender.
(b) “Broker” does not include any of the following:
(1) A person who performs an act described in subdivision (a) five or fewer times in a calendar year in connection with a consumer loan.
(2) A finance lender that performs an act described in paragraphs (1) and (2) of subdivision (a) following the denial of a prospective borrower’s loan application in order to help the declined borrower obtain a loan from another finance lender, if the finance lender performing the act described in subdivision (a) does both of the following:
(A) Provides the prospective borrower a clear and conspicuous statement informing the prospective borrower that the referring lender may be compensated by the other finance lender or, if applicable, that compensation will only occur if the prospective borrower enters into a funded loan with the other finance lender. For purposes of this requirement, “clear and conspicuous” has the meaning provided in subdivision (c) of Section 22337.5.
(B) Obtains the prospective borrower’s acknowledgment of receipt of the statement described in subparagraph (A) and express consent to engage in the act described in subdivision (a).
(c) The following shall not constitute acts of a broker under this section:
(1) Performing “administrative or clerical tasks” in support of the performance by a licensed broker of any of the activities described in paragraphs (5) through (7) of subdivision (a). For purposes of this paragraph, “administrative or clerical tasks” means support tasks, including typing, word processing, data entry, filing, billing, answering phone calls, taking and receiving messages, and scheduling.
(2) The furnishing of a consumer report to a licensee by a consumer reporting agency in accordance with Sections 604(a) or 604(c) of the Fair Credit Reporting Act (15 U.S.C. 1681b(a), (c)).
(3) The furnishing of a consumer credit report, as defined in subdivision (c) of Section 1785.3 of the Civil Code, to a licensee by a consumer credit reporting agency in accordance with subdivision (a), or paragraph (1) of subdivision (b), of Section 1785.11 of the Civil Code.
(4) The furnishing of a prequalifying report, as defined in subdivision (k) of Section 1785.3 of the Civil Code, to a licensee by a consumer credit reporting agency in accordance with paragraph (2) of subdivision (b) of Section 1785.11 of the Civil Code.
(5) Performing any of the acts described in subdivision (a) in connection with a loan made, or to be made, by a person not required to be licensed as a finance lender under this division.
(6) The distribution or dissemination to a prospective borrower of a finance lender’s marketing materials or factual information about the finance lender, its lending activities, or its loan products, such as the finance lender’s interest rates, minimum or maximum loan amounts or loan periods, or a general description of the finance lender’s underwriting criteria.
(7) Any of the acts described in paragraphs 3 through 6, inclusive, of subdivision (a) performed by a licensed finance lender when making a loan to a borrower.

SEC. 2.

 Section 22005.2 is added to the Financial Code, to read:

22005.2.
 (a) For purposes of this division, “confidential data” means any of the following:
(1) Bank account number.
(2) Bank statement.
(3) Credit or debit card account number.
(4) Credit score, as defined in subdivision (b) of Section 1785.15.1 of the Civil Code.
(5) Social security number, including both a person’s full social security number or a partial number.
(6) Personal or business income information, including information self-reported by the person.
(7) Taxpayer or employer identification number.
(b) In connection with a commercial loan, confidential data does not include self-reported income of a business or the self-reported credit score of a business owner.

SEC. 3.

 Section 22005.5 is added to the Financial Code, to read:

22005.5.
 For purposes of this division, “express consent” means an affirmative action taken by a person to authorize one or more specific acts by others in connection with that person’s confidential data. Express consent may be written, electronic, or oral but cannot be implied or inferred.

SEC. 4.

 Section 22010.5 is added to the Financial Code, to read:

22010.5.
 “Referral” means the introduction of a prospective borrower to a finance lender or the delivery of a prospective borrower’s contact information to a finance lender for the purposes of making an introduction.

SEC. 6.SEC. 5.

 Section 22059 of the Financial Code is amended to read:

22059.
 (a)  A license to act as a broker under this division does not authorize the licensee to negotiate or perform any act as a broker in connection with loans made or to be made by a lender not licensed as a finance lender under this division.
(b) Notwithstanding subdivision (a), a license to act as a broker under this division does not prohibit the licensee from performing any of the acts described in subdivision (a) of Section 22004 in connection with loans made or to be made by a person not required to be licensed as a finance lender under this division.

SEC. 7.SEC. 6.

 Section 22100 of the Financial Code is amended to read:

22100.
 (a) No A  person shall not  engage in the business of a finance lender or broker without obtaining a license from the commissioner.
(b) Every licensee engaging in the business of making or brokering residential mortgage loans shall require that every mortgage loan originator employed or compensated by that licensee obtains and maintains a mortgage loan originator license from the commissioner under this division or Division 20 (commencing with Section 50000), or has first obtained a license endorsement from the Commissioner of Real Estate pursuant to Article 2.1 (commencing with Section 10166.01) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code.
(c) Except as provided in subdivisions (a) and (e) of Section 22602, a finance lender shall not compensate a person for any of the acts described in subdivision (a) of Section 22004 unless that person is a licensed broker or is not required to be licensed as a broker pursuant to this division.
(d) A licensed broker shall not perform an act described in subdivision (a) of Section 22004 without first obtaining the prospective borrower’s express consent for that purpose. A licensed broker shall be deemed to be in compliance with this subdivision if the broker obtained the consent of the prospective borrower before the operative date of the act adding this subdivision and that consent was not revoked.
(e) A licensed finance lender shall not compensate a broker for an act described in subdivision (a) of Section 22004 if the finance lender has actual knowledge at the time the compensation is to be made that the broker has committed any violation of this division or any rule or order adopted pursuant to this division in connection with that loan.
(f) A licensed finance lender shall not, in connection with any consumer loan subject to this division for which the finance lender paid or would pay a referral fee in connection with an act described in paragraph (1) or (2) of subdivision (a) of Section 22004, pass through an additional fee attributable to the referral fee. A licensed finance lender may, in connection with any consumer or commercial loan subject to this division, charge a borrower additional fees or costs attributable to the performance of any of the acts described in paragraphs (3) to (7), inclusive, of subdivision (a) of Section 22004 if the finance lender pays another person or entity for performing any of those acts.
(c) (g)  A finance lender or broker shall not employ a mortgage loan originator whose license or license endorsement has lapsed.
(d) (h)  A finance lender or broker may not make or broker a residential mortgage loan unless that loan is offered by, negotiated by, or applied for through a licensed mortgage loan originator.
(e) (i)  Every licensee engaged in the business of making or brokering residential mortgage loans and every mortgage loan originator licensed under this division shall register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.
(f) (j)  An individual shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this state without first obtaining and maintaining annually a license in accordance with the requirements of this division and any rules promulgated by the commissioner under this chapter.
(g) (k)  A registered mortgage loan originator, as defined in subdivision (c) of Section 22013, is exempt from licensure under this section when he or she  the registered mortgage loan originator  is employed by:
(1) A depository institution.
(2) A subsidiary of a depository institution that is owned and controlled by a depository institution and regulated by a federal banking agency.
(3) An institution regulated by the Farm Credit Administration.

SEC. 8.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  anyone  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  Except in connection with an act described in paragraph (1) or (2) of subdivision (a) of Section 22004, 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.  person by the borrower, if any.  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.
(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 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  anyone  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.
 (a) Before making a loan to a prospective borrower who was referred by a licensed broker through an act described in paragraph (1) or (2) of subdivision (a) of Section 22004, and before the prospective borrower is obligated on the loan, the licensed finance lender shall provide to the prospective borrower a statement in a clear and conspicuous manner that provides all of the following:
(1) Identifies the name and license number of the broker who referred the prospective borrower.
(2) Discloses that the finance lender may pay a fee to the broker who referred the prospective borrower for the referral.
(3) Affirms that, if the licensed finance lender pays a fee for a referral, the licensed finance lender will not pass through to the prospective borrower an additional fee attributable to the referral fee. However, the licensed finance lender may charge a borrower additional fees or costs as described in subdivision (f) of Section 22100.
(4) Affirms that the prospective borrower should not be charged a fee by the broker who referred the prospective borrower to the licensed finance lender for a referral described in paragraph (1) or (2) of subdivision (a) of Section 22004.
(5) Affirms that the finance lender, not the broker who referred the prospective borrower, is the party authorized to make a loan to the prospective borrower.
(6) Provides a statement substantially similar to the following:

“If you wish to report a complaint about the manner in which you were referred to us, you may contact the Department of Business Oversight at 866-275-2677 or file a complaint online at www.dbo.ca.gov.”

(b) A licensed finance lender who provides the statement described in subdivision (a) shall have prospective borrowers acknowledge receipt of the statement.
(c) For purposes of this section, “clear and conspicuous” means either of the following:
(1) If the statement is provided in text, that the text is at least 10-point size, is not obscured by techniques such as graphical displays, shading, coloration, or other devices, and is displayed in a manner that allows a prospective borrower to read the text.
(2) If the statement is provided in an online format, that the text is clearly legible to an average person, is not obscured by techniques such as graphical displays, shading, coloration, or other devices, and is displayed in a manner that allows a prospective borrower to read the text.
(3) If the statement is an oral statement, whether provided by telephone or other medium, that the statement is given at a speed and volume sufficient for a prospective borrower to hear and comprehend the disclosure.

SEC. 10.SEC. 9.

 Section 22338 of the Financial Code is amended to read:

22338.
 Each  In connection with any of the acts described in paragraphs (3) to (7), inclusive, of subdivision (a) of Section 22004, each  licensed broker shall:
(a) Deliver to the borrower, or any one  anyone  thereof, at the time the final negotiation or arrangement is made, a statement showing in clear and distinct terms the name, address, and license number of the broker and the finance lender. The statement shall show the date, amount, and terms of the agreement with the broker, and all amounts paid or to be paid to the broker by the prospective borrower  and to any person other than the finance lender.
(b) Deliver to the finance lender making the loan a copy of the statement referred to and described in subdivision (a).
(c) Deliver to the person making any payment to the broker to be retained by the broker, a plain and complete receipt for each payment made, at the time it is made, showing the total amount received, and identifying the brokerage agreement and the loan contract upon which the payment is applied. If the payment is made by a person other than the finance lender, a copy of the receipt shall be delivered to the finance lender.
(d) When the borrower pays the loan in full, ensure that the finance lender fully complies with subdivision (e) of Section 22337.
(e) (d)  Deliver to the potential borrower or borrowers, 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 broker and finance lender.

SEC. 10.

 Section 22338.5 is added to the Financial Code, to read:

22338.5.
 (a) Before performing an act described in paragraph (1) or (2) of subdivision (a) of Section 22004, a licensed broker shall do the following:
(1) Provide to the prospective borrower a statement in a clear and conspicuous manner that provides all of the following:
(A) Identifies the name of each person to whom the prospective borrower may be referred by the licensed broker.
(B) Discloses whether the compensation that would be paid by finance lenders to whom the prospective borrower may be referred by the licensed broker may be contingent on the making of a loan to the prospective borrower and whether the compensation may vary based on the principal amount of the loan or the charges provided by the loan agreement.
(C) Discloses that, regardless of the nature of the compensation paid by a finance lender to the licensed broker, the prospective borrower will not be charged a separate fee attributable to that compensation pursuant to subdivision (f) of Section 22100.
(D) Discloses that lenders to whom the prospective borrower is referred are not necessarily the best lending options available to the prospective borrower.
(E) Discloses that lenders to whom the prospective borrower is referred may separately contact the prospective borrower. This disclosure shall not be required if the licensed broker has an agreement with the finance lender to whom the prospective borrower is referred restricting the finance lender from contacting the borrower, unless the borrower or broker has submitted a loan application with the finance lender.
(F) Provides a statement substantially similar to the following:

“If you wish to report a complaint about the services of any entity with which you interacted in connection with this loan, you may contact the Department of Business Oversight at 866-275-2677 or file a complaint online at www.dbo.ca.gov.”

(G) Affirms that the licensed broker will not charge the prospective borrower a fee for the referral.
(2) Obtain from the prospective borrower both of the following:
(A) The prospective borrower’s acknowledgment that the prospective borrower received the statement provided pursuant to paragraph (1).
(B) The prospective borrower’s express consent for the licensed broker to perform an act described in paragraph (1) or (2) of subdivision (a) of Section 22004.
(b) A licensed broker may contemporaneously obtain from a prospective borrower the acknowledgment and consent required under paragraph (2) of subdivision (a) through a single action performed by the prospective borrower that follows or accompanies the statement required by paragraph (1) of subdivision (a).
(c) A licensed broker shall be deemed to be in compliance with subdivision (a) if the broker obtained the consent of the prospective borrower before the operative date of the act adding this section and that consent was not revoked.
(d) For purposes of this section, “clear and conspicuous” means the following:
(1) If the statement is provided in text, that the text is at least 10-point size, is not obscured by techniques such as graphical displays, shading, coloration, or other devices, and is not displayed in a manner that impedes the prospective borrower’s ability to notice and comprehend the text.
(2) If the statement is provided in an online format, that the text is clearly legible to an average person, is not obscured by techniques such as graphical displays, shading, coloration, or other devices, and is displayed in a manner that allows a prospective borrower to read the text.
(3) If the statement is an oral statement, whether provided by telephone or other medium, that the statement is given at a speed and volume sufficient for a prospective borrower to hear and comprehend the disclosure.

SEC. 11.

 Section 22348 is added to the Financial Code, to read:

22348.
 (a) A licensed broker who compensates unlicensed persons for referrals that would have required the unlicensed person to obtain a license under paragraph (1) or (2) of subdivision (a) of Section 22004 had those referrals been made to a licensed finance lender shall develop, maintain, and implement policies and procedures intended to:
(1) Identify and correct any business practices maintained by those unlicensed persons that violate this division or that would violate this division if those business practices were maintained by the licensed broker.
(2) Identify and correct any statements, representations, or acts made by those unlicensed persons that would violate Section 22161 if those statements, representations, or acts were made by the licensed broker.
(3) Ensure that the licensed broker receives and monitors complaints by prospective borrowers regarding those unlicensed persons.
(4) Ensure that those unlicensed persons who collect confidential data from a prospective borrower provides the prospective borrower a disclosure that includes the following:
(A) An explanation of the process for how the confidential data of a prospective borrower may be viewed by, used by, or transferred between other unlicensed persons and that the confidential data may be provided to a licensed broker for the purpose of making a referral to a finance lender.
(B) An explanation of how the unlicensed person and other unlicensed persons that may view, use, or transfer the prospective borrower’s confidential data to identify a finance lender that may offer a loan to the prospective borrower.
(5) Ensure that those unlicensed persons shall not collect confidential data from a prospective borrower without first obtaining the prospective borrower’s express consent for that purpose. Express consent provided by a prospective borrower to one unlicensed person may be used to satisfy this paragraph with respect to other unlicensed persons, if both of the following conditions are met:
(A) The prospective borrower authorizes the use of that prospective borrower’s confidential data by multiple persons.
(B) The persons who rely on that express consent engage only in the specific acts authorized by the prospective borrower’s express consent.
(6) Ensure that the licensed broker does not pay compensation to any of those unlicensed persons for referrals made in a manner that would have violated this division if the licensed broker had made the referral to a finance lender. However, a licensed broker is not required to ensure that an unlicensed person provide the disclosure required pursuant to Section 22338.5.
(b) A licensed broker shall not engage in a business relationship with an unlicensed person who demonstrates repeated, uncorrected failures to adhere to the broker’s policies and procedures.
(c) A licensed broker is not in violation of subdivision (a) or (b) solely for the reason that an unlicensed person commits isolated acts that are in violation of this division.
(d) A licensed broker shall provide the commissioner a copy of the policies and procedures required by subdivision (a) upon request by the commissioner.
(e) A licensed broker who compensates unlicensed persons described in subdivision (a) shall maintain books and records documenting the identities of both of the following:
(1) All unlicensed persons the broker compensates for referrals.
(2) All unlicensed persons with whom the broker severs a business relationship due to the repeated, uncorrected failure of the unlicensed person to adhere to the broker’s policies and procedures.

SEC. 13.SEC. 12.

 Section 22602 of the Financial Code is amended to read:

22602.
 (a) A licensee that is a  Notwithstanding subdivision (c) of Section 22100, a licensed  finance lender may pay compensation to a person that is not licensed pursuant to this division in connection with the referral of  a referral, as described in paragraphs (1) and (2) of subdivision (a) of Section 22004, of  one or more prospective borrowers to the licensee, when  licensee only if  all of the following conditions are met:
(1) The referral by the unlicensed person leads to the consummation of a commercial loan, as defined in Section 22502, between the licensee and the prospective borrower referred by the unlicensed person.
(2) The commercial  loan contract provides for an annual percentage rate that does not exceed 36 percent.
(3) Before approving the commercial  loan, the licensee does both of the following:
(A) Obtains documentation from the prospective borrower documenting the borrower’s commercial status. Examples of acceptable forms of documentation include, but are not limited to, a seller’s permit, business license, articles of incorporation, income tax returns showing business income, or bank account statements showing business income.
(B) Performs underwriting and obtains documentation to ensure that the prospective borrower will have sufficient monthly gross revenue with which to repay the loan pursuant to the loan terms, and does not make a loan if it determines through its underwriting that the prospective borrower’s total monthly expenses, including debt service payments on the loan for which the prospective borrower is being considered, will exceed the prospective borrower’s monthly gross revenue. Examples of acceptable forms of documentation for verifying current and projected gross monthly revenue and monthly expenses include, but are not limited to, tax returns, bank statements, merchant financial statements, business plans, business history, and industry-specific knowledge and experience. If the prospective borrower is a sole proprietor or a corporation and the loan will be secured by a personal guarantee provided by the owner of the corporation, a credit report from at least one consumer credit reporting agency that compiles and maintains files on consumers on a nationwide basis shall also be considered.
(4) The licensee maintains records of all compensation paid to unlicensed persons in connection with the referral of borrowers for a period of at least four years.
(5) The licensee annually submits information requested by the commissioner regarding the payment of compensation in the report required pursuant to Section 22159.
(b) A licensee that pays compensation to a person that is not licensed pursuant to this division in connection with a referral for a commercial loan made by that licensee to a borrower shall be liable for any misrepresentation made to that borrower in connection with that loan.
(c) The following activities by an unlicensed person are not authorized by this section:
(1) Participating in any loan negotiation.
(2) Counseling or advising the borrower about a loan.
(3) Participating in the preparation of any loan documents, including credit applications.
(4) Contacting the licensee on behalf of the borrower other than to refer the borrower.
(5) Gathering loan documentation from the borrower or delivering the documentation to the licensee.
(6) Communicating lending decisions or inquiries to the borrower.
(7) Participating in establishing any sales literature or marketing materials.
(8) Obtaining the borrower’s signature on documents.
(d) (b)  The prohibitions in subdivision (c) do not apply if the unlicensed  This section shall not authorize an unlicensed person to perform any of the activities described in paragraphs (3) to (7), inclusive, of subdivision (a) of Section 22004, unless the  person meets one or more of the following criteria:
(1) Is exempt from licensure under this division.
(2) Is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code.
(3) Is a business assistance organization recognized by the United States Small Business Administration.
(4) Is engaged in one or more of the activities described in paragraphs (1) (3)  to (8), (7),  inclusive, of subdivision (c)  (a) of Section 22004  in connection with five or fewer commercial loans in a 12-month period calendar year  made by persons licensed under this division.
(e) (c)  The commissioner may adopt regulations under this section to impose conditions on the referral activity authorized under this section. The commissioner may classify persons, loans, loan terms, referral methods, and other matters within his or her  the commissioner’s  jurisdiction, and may prescribe different requirements for different classes of loans.
(f) (d)  Nothing in this section shall authorize the payment of a referral fee to an unlicensed person for a residential mortgage loan, nor the payment of a referral fee to a person required to be licensed under Section 10131 or 10131.1 of the Business and Professions Code, unless such that  person is licensed by the Bureau of Real Estate pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code.
(g) (e)  For the purposes of this section, “referral” means either the introduction of the borrower and the finance lender or the delivery to the finance lender of the borrower’s contact information. Notwithstanding subdivision (c) of Section 22100, a licensed finance lender may, pursuant to this section, pay compensation to an unlicensed person to provide services described in subdivision (b) of Section 22004. A licensed finance lender that pays compensation pursuant to this subdivision shall not be subject to the requirements of paragraphs (1) through (5), inclusive, of subdivision (a). 

SEC. 14.SEC. 13.

 Section 22604 of the Financial Code is amended to read:

22604.
 (a) Any person that receives compensation in connection with a referral, as described in Section 22602, that leads to the consummation of a commercial loan under this division may  pursuant to subdivision (a) or (e) of Section 22602 shall  not do any of the following:
(1) Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a prospective loan.
(2) Advertise, print, display, publish, distribute, or broadcast any statement or representation with regard to the conditions for making or negotiating a loan that is false, misleading, or deceptive, or that omits material information that is necessary to make the statements made not false, misleading, or deceptive.
(3) Engage in any act in violation of Section 17200 of the Business and Professions Code.
(4) Commit an act that constitutes fraud or dishonest dealings.
(5) Fail to safeguard a prospective borrower’s personally identifiable information. confidential data. 
(b) In addition to the prohibitions set forth in subdivision (a), a person who receives compensation pursuant to subdivision (a) of Section 22602 shall comply with both of the following:
(b) (1)  For purposes of this section, “personally identifiable information” means information that is not publicly available, that a prospective borrower provides  Shall not collect a prospective borrower’s confidential data  for the purpose of obtaining a loan or other financial product. Personally identifiable information includes information a prospective borrower provides on an application to obtain a loan, credit card, or other financial product or service. performing an act described in paragraph (1) or (2) of subdivision (a) of Section 22004 without first obtaining the prospective borrower’s express consent for that purpose. 
(2) Shall, before making the referral, provide the prospective borrower with a written disclosure that shows in clear and distinct terms, the method of compensation provided by the licensed finance lender to that person, including whether the compensation is based on the size of the loan or contingent upon the referral resulting in a consummated loan.
(c) Whenever, in the opinion of the commissioner, any person is engaged in the business of soliciting borrowers for a loan to be made by a licensee under this division, and the person is not in compliance with this section, Section 22602, Section 22603,  who receives compensation pursuant to subdivision (a) or (e) of Section 22602, violates this section  or any other provision of this division authorizing such activity or exempting the person from this division, the commissioner may order the person to desist and to refrain from engaging in the business or further violating this division.
SEC. 14.
 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.