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AB-2953 California Financing Law: consumer loans: title loans.(2017-2018)

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Date Published: 03/20/2018 04:00 AM
AB2953:v98#DOCUMENT

Amended  IN  Assembly  March 19, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill
No. 2953

Introduced by Assembly Member Limón

February 16, 2018

An act to amend Section 22202 of, and add Section 22328.5 to, the Financial Code, relating to consumer loans.


LEGISLATIVE COUNSEL'S DIGEST


AB 2953, as amended, Limón. California Financing Law: consumer loans: title loans.
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. The CFL prohibits anyone from engaging in the business of a finance lender or broker without obtaining a license. Existing law defines a finance lender as any person who is engaged in making consumer loans or commercial loans, as defined. A willful violation of the CFL is a crime, except as specified. The CFL prescribes limits on the maximum rate of charges and administrative fees that a licensee may contract for, and receive, on consumer loans of up to $2,500. The CFL requires a licensee, with respect to loans secured by a lien on a motor vehicle, to comply with specified notice requirements related to the disposition of a repossessed or surrendered motor vehicle. The CFL requires that any person who is liable on a consumer loan secured by a lien on a motor vehicle has the right to reinstate the loan in the event of a default by the borrower, subject to certain conditions and exceptions.
This bill would prohibit a licensee from providing a title loan unless the interest rate on that loan does not exceed 36% per calendar year on the unpaid principal amount of that loan and the licensee provides certain disclosures to the borrower. receiving charges under a title loan agreement in an amount that is greater than 3% per month on the unpaid principal balance of the title loan. Because a willful violation of the bill’s provisions would be a crime, the bill would impose a state-mandated local program.
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 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 his or her loan.
(d) Fees paid to a licensee for the privilege of participating in an open-end credit program, which fees are to cover administrative costs and are imposed upon executing the open-end loan agreement and on annual renewal dates or anniversary dates thereafter.
(e) 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 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.
(f) 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, 22328.5, 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.
(g) 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 22328.5 is added to the Financial Code, to read:

22328.5.
 (a) This section shall apply to title loans.
(b) For purposes of this section:
(1) “Motor vehicle” has the same meaning as defined in subdivision (k) of Section 2981 of the Civil Code.
(2) “Title loan” means a nonpurchase money loan with a bona fide principal amount of two thousand five hundred dollars ($2,500) or greater where the lender obtains a security interest in a motor vehicle that is perfected by a first lien. vehicle.
(c) A licensee shall not provide a title loan, unless both of the following requirements are met: receive charges under a title loan agreement in an amount that is greater than 3 percent per month on the unpaid principal balance of the title loan.

(1)The licensee does not receive charges under that loan agreement in an amount that is greater than 36 percent per calendar year on the unpaid principal balance of the title loan.

(2)In addition to the disclosure requirements in subdivision (a) of Section 22337 and subdivision (a) of Section 22338, the licensee provides the consumer with a written disclosure that informs the consumer of all the following:

(A)The interest rate, including any fees or other charges, associated with the title loan.

(B)The consequences for defaulting on the title loan.

(C)A complete amortization schedule indicating the total cost to the consumer over the life of the title loan.

SEC. 3.

 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.