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SB-869 Commercial financing.(2023-2024)

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Date Published: 01/03/2024 02:00 PM
SB869:v96#DOCUMENT

Amended  IN  Senate  January 03, 2024
Amended  IN  Senate  September 13, 2023
Amended  IN  Senate  April 27, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 869

Introduced by Senators Glazer and Limón

February 17, 2023

An act to amend Sections 22001, 22007, 22010, 22101, 22101.5, 22102, 22103, 22104, 22105, 22106, 22107, 22109, 22112, 22151, 22152, 22153, 22154, 22155, 22156, 22157, 22157.1, 22159, 22161, 22162, 22163, 22164, 22168, 22169, 22700, 22701, 22712, and 22714 of, to add Sections 22021, 22022, 22100.6, and 22167.5 to, and to add Chapter 3.1 (commencing with Section 22655) to Division 9 of, the Financial Code, relating to financing.


LEGISLATIVE COUNSEL'S DIGEST


SB 869, as amended, Glazer. Commercial financing.
The California Financing Law (CFL) provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Financial Protection and Innovation. Innovation, including by regulating the provision of commercial loans, as defined. A willful violation of the CFL is a crime, except as specified.
This bill would, beginning January 1, 2026, generally provide for the regulation under the CFL of commercial financing, which the bill would define to mean an accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, or lease financing, intended by the recipient for use primarily for a purpose other than a personal, family, or household purpose. The bill would prohibit a person from engaging in the business of a commercial financing provider, as defined, or commercial financing broker, as defined, without obtaining a license from the commissioner. The bill would prohibit a commercial financing provider or a commercial financing broker from, among other things, taking an instrument in which blanks are left to be filled in after execution. The bill would require a licensed commercial financing provider to do certain things, including permitting payment to be made in advance in any amount on any commercial financing transaction at any time. The bill would require a licensed commercial financing broker to do certain things, including delivering to the recipient 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 commercial financing broker and the commercial financing provider, as prescribed. By expanding the scope of the crime of willfully violating the CFL, this bill would impose a state-mandated local program. The bill would make various conforming changes to the CFL.
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 22001 of the Financial Code is amended to read:

22001.
 (a) This division shall be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) To ensure an adequate supply of credit to borrowers in this state.
(2) To simplify, clarify, and modernize the law governing loans made by finance lenders.
(3) To foster competition among finance lenders.
(4) To protect borrowers against unfair practices by some lenders, having due regard for the interests of legitimate and scrupulous lenders.
(5) To permit and encourage the development of fair and economically sound lending practices.
(6) To encourage and foster a sound economic climate in this state.
(7) To protect property owners from deceptive and misleading practices that threaten the efficacy and viability of property assessed clean energy financing programs.
(8) To protect small businesses against unfair practices by some commercial financing providers, having due regard for the interest of legitimate and scrupulous commercial financing providers.
(b) Consumer loans, as defined in Sections 22203 and 22204, are subject to this chapter, Chapter 2 (commencing with Section 22200), Article 1 (commencing with Section 22700) of Chapter 4, and Article 2 (commencing with Section 22750) of Chapter 4.
(c) Commercial loans, as defined in Section 22502, are subject to this chapter, Chapter 3 (commencing with Section 22500), Article 1 (commencing with Section 22700) of Chapter 4, and Article 3 (commencing with Section 22780) of Chapter 4.
(d) A program administrator, as defined in Section 22018, is subject to this chapter, Chapter 3.5 (commencing with Section 22680), and Article 1 (commencing with Section 22700) of Chapter 4.
(e) Commercial financing, as defined in Section 22655, is subject to this chapter, Chapter 3.1 (commencing with Section 22655), and Article 1 (commencing with Section 22700) and Article 3 (commencing with Section 22780) of Chapter 4.
(f) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 2.

 Section 22007 of the Financial Code is amended to read:

22007.
 (a) “Licensee” means any finance lender, broker, commercial financing provider, commercial financing broker, or program administrator who receives a license in accordance with this division.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 3.

 Section 22010 of the Financial Code is amended to read:

22010.
 (a) “Finance lender,” “broker,” “commercial financing provider,” “commercial financing broker,” and “program administrator” do not include employees regularly employed at the location specified in the license of the finance lender, broker, commercial financing provider, commercial financing broker, or program administrator, except that an employee, when acting within the scope of the employee’s employment, shall be exempt from any other law from which the employee’s employer is exempt.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 4.

 Section 22021 is added to the Financial Code, to read:

22021.
 (a) Except in Section 22064, “recipient” has the same meaning as defined in Section 22655.
(b) This section shall become operative on January 1, 2026.

SEC. 5.

 Section 22022 is added to the Financial Code, to read:

22022.
 (a) “Commercial financing,” “commercial financing provider,” and “commercial financing broker” have the same meanings as defined in Section 22655.
(b) This section shall become operative on January 1, 2026.

SEC. 6.

 Section 22100.6 is added to the Financial Code, to read:

22100.6.
 (a) A person shall not engage in the business of a commercial financing provider or commercial financing broker without obtaining a license from the commissioner.
(b) This section shall become operative on January 1, 2026.

SEC. 7.

 Section 22101 of the Financial Code is amended to read:

22101.
 (a) An application for a license as a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator under this division shall be in the form and contain the information that the commissioner may by rule or order require and shall be filed upon payment of the fee specified in Section 22103.
(b) Notwithstanding any other law, an applicant who does not currently hold a license as a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator under this division shall furnish, with their application, a full set of fingerprints and related information for purposes of the commissioner conducting a criminal history record check. The commissioner shall obtain and receive criminal history information from the Department of Justice and the Federal Bureau of Investigation pursuant to Section 22101.5.
(c) This section does not prevent a licensee from engaging in the business of a finance lender or program administrator through a subsidiary corporation if the subsidiary corporation is licensed pursuant to this division.
(d) For purposes of this section, “subsidiary corporation” means a corporation that is wholly owned by a licensee.
(e) A new application shall not be required for a change in the address of an existing location previously licensed under this division. However, the licensee shall comply with the requirements of Section 22153.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require an application to be made through the Nationwide Mortgage Licensing System and Registry, and may require fees, fingerprints, financial statements, supporting documents, changes of address, and any other information, and amendments or modifications thereto, to be submitted in the same manner.
(g) Notwithstanding any other law, the commissioner may by rule or order prescribe circumstances under which to accept electronic records or electronic signatures. This section does not require the commissioner to accept electronic records or electronic signatures.
(h) For purposes of this section, the following terms have the following meanings:
(1) “Electronic record” means an initial license application, or material modification of that license application, and any other record created, generated, sent, communicated, received, or stored by electronic means. “Electronic records” also includes, but is not limited to, all of the following:
(A) An application, amendment, supplement, and exhibit, filed for any license, consent, or other authority.
(B) A financial statement, a report, or advertising.
(C) An order, license, consent, or other authority.
(D) A notice of public hearing, accusation, and statement of issues in connection with any application, license, consent, or other authority.
(E) A proposed decision of a hearing officer and a decision of the commissioner.
(F) The transcripts of a hearing and correspondence between a party and the commissioner directly relating to the record.
(G) A release, newsletter, interpretive opinion, determination, or specific ruling.
(H) Correspondence between a party and the commissioner directly relating to any document listed in subparagraphs (A) to (G), inclusive.
(2) “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.
(i) The Legislature finds and declares that the Department of Financial Protection and Innovation has continuously implemented methods to accept records filed electronically, and is encouraged to continue to expand its use of electronic filings to the extent feasible, as budget, resources, and equipment are made available to accomplish that goal.
(j) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 8.

 Section 22101.5 of the Financial Code is amended to read:

22101.5.
 (a) The commissioner shall submit to the Department of Justice fingerprint images and related information required by the Department of Justice of all finance lender, broker, commercial financing provider, commercial financing broker, or program administrator license candidates, as defined by subdivision (a) of Section 22101, for purposes of obtaining information as to the existence and content of a record of state or federal convictions, state or federal arrests, and information as to the existence and content of a record of state or federal arrests for which the Department of Justice establishes that the person is free on bail or on the person’s own recognizance pending trial or appeal.
(b) When received, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received pursuant to this section. The Department of Justice shall review the information returned from the Federal Bureau of Investigation and compile and disseminate a response to the commissioner.
(c) The Department of Justice shall provide a response to the commissioner pursuant to paragraph (1) of subdivision (p) of Section 11105 of the Penal Code.
(d) The commissioner shall request from the Department of Justice subsequent arrest notification service, as provided pursuant to Section 11105.2 of the Penal Code, for license candidates described in subdivision (a).
(e) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this section.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require fingerprints submitted by an applicant to be submitted to the Nationwide Mortgage Licensing System and Registry in addition to the Department of Justice.
(g) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 9.

 Section 22102 of the Financial Code is amended to read:

22102.
 (a) A finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee seeking to engage in business at a new location shall submit an application for a branch office license to the commissioner at least 10 days before engaging in business at a new location and pay the fee required by Section 22103. The commissioner may require an applicant seeking to engage in business at a new location to submit its application, or parts thereof, through the Nationwide Mortgage Licensing System and Registry.
(b) The licensee may engage in business at the new location 10 days after the date of submission of a branch office application.
(c) (1) The commissioner shall approve or deny the person responsible for the lending or financing activity at the new location in accordance with Section 22109, and shall notify the licensee of this decision within 90 days of the date of receipt of the application.
(2) If the commissioner denies the application, the licensee shall, within 10 days of the date of receipt of notification of the commissioner’s denial, submit a new application to the commissioner designating a different person responsible for the lending or financing activity at the new location. The commissioner shall approve or deny the different person as provided in paragraph (1).
(d) A licensee shall not engage in business at a new location in a name other than a name approved by the commissioner.
(e) The commissioner may adopt regulations to implement the requirements of this section.
(f) A branch office license to engage in business at a new location shall be issued in accordance with this section. A change of street address of a place of business designated in a license shall be made in accordance with Section 22153 and shall not constitute a new location subject to the requirements of this section.
(g) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 10.

 Section 22103 of the Financial Code is amended to read:

22103.
 (a) At the time of filing the application for a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or branch office license, the applicant shall pay to the commissioner the sum of one hundred dollars ($100) as a fee for investigating the application, plus the cost of fingerprint processing and the criminal history record check under Section 22101.5, and two hundred dollars ($200) as an application fee. The investigation fee, including the amount for the criminal history record check, and the application fee are not refundable if an application is denied or withdrawn.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 11.

 Section 22104 of the Financial Code is amended to read:

22104.
 (a) The applicant shall file with the application for a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator license financial statements prepared in accordance with generally accepted accounting principles and acceptable to the commissioner that indicate a net worth of at least twenty-five thousand dollars ($25,000). Except as provided in subdivisions (b) and (c), a licensee shall maintain a net worth of at least twenty-five thousand dollars ($25,000) at all times.
(b) A licensed finance lender or broker, that employs one or more mortgage loan originators and that makes residential mortgage loans, shall continuously maintain a minimum net worth of at least two hundred fifty thousand dollars ($250,000).
(c) A licensed finance broker, that employs one or more mortgage loan originators and that arranges, but does not make, residential mortgage loans, shall continuously maintain a minimum net worth of at least fifty thousand dollars ($50,000).
(d) The commissioner may promulgate rules or regulations with respect to the requirements for minimum net worth, as are necessary to accomplish the purposes of this division and comply with the SAFE Act.
(e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 12.

 Section 22105 of the Financial Code is amended to read:

22105.
 (a) Upon the filing of an application pursuant to Section 22101 and the payment of the fees, the commissioner shall investigate the applicant and its general partners and persons owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or any person responsible for the conduct of the applicant’s lending, financing, or program administration activities in this state, if the applicant is a partnership. If the applicant is a corporation, trust, limited liability company, or association, including an unincorporated organization, the commissioner shall investigate the applicant, its principal officers, directors, managing members, and persons owning or controlling, directly or indirectly, 10 percent or more of the outstanding equity securities or any person responsible for the conduct of the applicant’s lending or financing activities or for administering PACE programs for the applicant in this state. Upon the filing of an application pursuant to Section 22102 and the payment of the fees, the commissioner shall investigate the person responsible for the lending or financing activity of the licensee, or for administering one or more PACE programs for the licensee, at the new location described in the application. The investigation may be limited to information that was not included in prior applications filed pursuant to this division. If the commissioner determines that the applicant has satisfied this division and does not find facts constituting reasons for denial under Section 22109, the commissioner shall issue and deliver a license to the applicant.
(b) For the purposes of this section, “principal officers” shall mean president, chief executive officer, treasurer, and chief financial officer, as may be applicable, and any other officer with direct responsibility for the conduct of the applicant’s lending or financing activities or for PACE program administration for the applicant within the state.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 13.

 Section 22106 of the Financial Code is amended to read:

22106.
 (a) The finance lender, broker, commercial financing provider, commercial financing broker, or program administrator license shall state the name of the licensee, and if the licensee is a partnership, the names of its general partners, and if a corporation or an association, the date and place of its incorporation or organization, and the address of the licensee’s principal business location. On the approval and licensing of a location pursuant to Section 22101 or 22102, the commissioner shall issue an original license endorsed to show the address of the authorized location and, if applicable, the name of the subsidiary corporation licensed to operate the location. The license shall state whether the licensee is licensed as a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator.
(b) (1) An application for a license for a business location outside this state shall constitute an agreement by the applicant to do all of the following:
(A) Make the licensee’s books, accounts, papers, records, and files available to the commissioner or the commissioner’s representatives in this state.
(B) Pay the reasonable expenses for travel, meals, and lodging of the commissioner or the commissioner’s representatives incurred during any investigation or examination made at the licensee’s location outside this state.
(2) A licensee located outside this state is not required to maintain books and records regarding licensed loans or licensed commercial financing transactions separate from those for other loans or other commercial financing transactions if the licensed loans or licensed commercial financing transactions can be readily identified.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 14.

 Section 22107 of the Financial Code is amended to read:

22107.
 (a) Each finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee shall pay to the commissioner its pro rata share of all costs and expenses, including the costs and expenses associated with the licensing of mortgage loan originators it employs, 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 pro rata share shall be the proportion that a licensee’s gross income bears to the aggregate gross income of all licensees as shown by the annual financial reports to the commissioner, for the costs and expenses remaining after the amount assessed pursuant to subdivision (c).
(b) On or before September 30th in each year, the commissioner shall notify each licensee of the amount assessed and levied against it and that amount shall be paid by October 31. If payment is not made by October 31, the commissioner shall 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) In the levying and collection of the assessment, a licensee shall neither be assessed for nor be permitted to pay less than two hundred fifty dollars ($250) per licensed location per year.
(d) If a licensee fails to pay the assessment on or before the October 31st, the commissioner may by order summarily suspend or revoke the certificate issued to the licensee. If, after an order is made, a request for a 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 finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee and any mortgage loan originator licensee employed by the finance lender or broker 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.
(e) The commissioner shall, by rule, establish the timelines, fees, and assessments applicable to applicants for original mortgage loan originator licenses, license renewals, and license changes under this division.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require licensees to pay assessments through the Nationwide Mortgage Licensing System and Registry.
(g) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 15.

 Section 22109 of the Financial Code is amended to read:

22109.
 (a) Upon reasonable notice and opportunity to be heard, the commissioner may deny the application for a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator license for any of the following reasons:
(1) A false statement of a material fact has been made in the application.
(2) The applicant or an officer, director, general partner, person responsible for the applicant’s lending or financing activities or administering PACE programs for the applicant in this state, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant has, within the last 10 years, been convicted of or pleaded nolo contendere to a crime, or committed an act involving dishonesty, fraud, or deceit, if the crime or act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with this division.
(3) The applicant or an officer, director, general partner, person responsible for the applicant’s lending or financing activities or administering PACE programs for the applicant in this state, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant has violated any provision of this division or the rules thereunder or any similar regulatory scheme of the State of California or a foreign jurisdiction.
(4) The applicant employs a mortgage loan originator who is not licensed, or has not initiated an application to become licensed, pursuant to this division.
(b) The application shall be considered withdrawn within the meaning of this section if the applicant fails to respond to a written notification of a deficiency in the application within 90 days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a full and complete application for a license with the fees, either issue a license or file a statement of issues prepared in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(d) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 16.

 Section 22112 of the Financial Code is amended to read:

22112.
 (a) A licensee shall maintain a surety bond in accordance with this subdivision in a minimum amount of twenty-five thousand dollars ($25,000). The bond shall be payable to the commissioner and issued by an insurer authorized to do business in this state. An original surety bond, including any and all riders and endorsements executed subsequent to the effective date of the bond, shall be filed with the commissioner within 10 days of execution. For licensees with multiple licensed locations, only one surety bond is required. The bond shall be used for the recovery of expenses, fines, and fees levied by the commissioner in accordance with this division or for losses or damages incurred by borrowers, recipients, or consumers as the result of a licensee’s noncompliance with the requirements of this division.
(b) When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond. Immediately upon recovery of any action on the bond, the licensee shall file a new bond. Failure to file a new bond within 10 days of the recovery on a bond, or within 10 days after notification by the commissioner that a new bond is required, constitutes sufficient grounds for the suspension or revocation of the license.
(c) The commissioner may by rule require a higher bond amount for a licensee who employs one or more mortgage loan originators and who makes or arranges residential mortgage loans, based on the dollar amount of residential mortgage loans originated by that licensee and any mortgage loan originators employed by that licensee. Every mortgage loan originator employed by the licensee shall be covered by the surety bond.
(d) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 17.

 Section 22151 of the Financial Code is amended to read:

22151.
 (a) A finance lender license, broker license, commercial financing provider license, commercial financing broker license, program administrator license, and the license of every mortgage loan originator employed by a lender or finance broker, along with any currently effective order of the commissioner approving a different name pursuant to Section 22155, shall be conspicuously posted in the place of business authorized by the license.
(b) A license is not transferable or assignable. A license issued to a partnership or a limited partnership is not transferred or assigned within the meaning of this section by the death, withdrawal, or admission of a partner, general partner, or limited partner, unless the death, withdrawal, or admission dissolves the partnership to which the license was issued.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 18.

 Section 22152 of the Financial Code is amended to read:

22152.
 (a) A finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee shall maintain only one place of business under a duplicate or original license issued pursuant to Section 22101 or 22102. The commissioner may issue more than one license to the same licensee upon compliance with all the provisions of this division governing an original issuance of a license.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 19.

 Section 22153 of the Financial Code is amended to read:

22153.
 (a) If a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee seeks to change its place of business to a street address other than that designated in its license, the licensee shall provide notice to the commissioner at least 10 days before the change. The commissioner shall notify the licensee within 10 days if the commissioner disapproves the change, and if the commissioner does not notify the licensee of disapproval within 10 days, the change in address shall be deemed approved. The commissioner may require an applicant to submit its application to change its place of business through the Nationwide Mortgage Licensing System and Registry.
(b) If notice is not given at least 10 days before the change of a street address of a place of business, as required by subdivision (a), or notice is not given at least 10 days before engaging in business at a new location, as required by Section 22102, the commissioner may assess a civil or administrative penalty on the licensee not to exceed five hundred dollars ($500).
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 20.

 Section 22154 of the Financial Code is amended to read:

22154.
 (a) Subject to Section 22157.1, a licensee shall not conduct the business of making loans or commercial financing transactions or administering a PACE program under this division within any office, room, or place of business in which any other business is solicited or engaged in, or in association or conjunction therewith, except as is authorized in writing by the commissioner upon the commissioner’s finding that the character of the other business is such that the granting of the authority would not facilitate evasions of this division or of the rules and regulations made pursuant to this division. An authorization, once granted, remains in effect until revoked by the commissioner. The commissioner may authorize the other business through the Nationwide Mortgage Licensing System and Registry.
(b) The products or services of an affiliated corporation of the licensee that is a supervised financial institution, or a parent or subsidiary of a supervised financial institution that is an affiliate of the licensee, may be provided, offered, or sold at the licensed location of the licensee without authorization by the commissioner pursuant to subdivision (a) if both of the following are met:
(1) The activity is not prohibited by, or in violation of, the laws applicable to the affiliate or supervised financial institution.
(2) The products and services are not offered and sold in a manner that restricts the ability of the borrower, recipient, or customer to individually select or reject a product or service that is offered.
(c) The following definitions govern the construction of this section:
(1) “Affiliated” or “affiliate” means the following: A corporation is an affiliate of, or a corporation is affiliated with, another specified corporation if it directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the other specified corporation.
(2) “Supervised financial institution” means any commercial bank, industrial bank, credit card bank, trust company, savings and loan association, savings bank, credit union, California finance lender, residential mortgage lender or servicer, or insurer, provided that the institution is subject to supervision by an official or agency of this state or of the United States.
(d) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 21.

 Section 22155 of the Financial Code is amended to read:

22155.
 (a) Subject to Section 22157.1, a finance lender, broker, commercial financing provider, commercial financing broker, mortgage loan originator, or program administrator licensee shall not transact the business licensed or make any loan or commercial financing transaction or administer any PACE program provided for by this division under any other name or at any other place of business than that named in the license except pursuant to a currently effective written order of the commissioner authorizing the other name or other place of business. The commissioner’s order, while effective, shall be deemed to amend the original license issued pursuant to Section 22105 or 22109.1.
(b) Notwithstanding subdivision (a), a finance lender, program administrator, broker, commercial financing provider, commercial financing broker, or mortgage loan originator licensee may make any loan or commercial financing transaction and engage in any other business provided for by this division, other than the business described in subdivision (b) of Section 22154, at a place other than the licensed location under either of the following conditions:
(1) The borrower or recipient requests, either orally or in writing, that a loan or commercial financing transaction be initiated or made at a location other than the licensee’s licensed location. The use by the licensee of a preprinted solicitation form returned to the licensee by the borrower or recipient shall not constitute a request by the borrower or recipient that a loan or commercial financing transaction be initiated or made at a location other than the licensee’s licensed location.
(2) The licensee makes a solicitation or advertises for, or makes an offer of, a loan, commercial financing transaction, or assessment contract displayed on “home pages” or similar methods by the licensee on the internet, the World Wide Web, or similar proprietary or common carrier electronic systems, and the prospective borrower, recipient, or property owner may transmit information over these electronic systems to the licensee in connection with the licensee’s offer to make a loan, commercial financing transaction, or assessment contract.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 22.

 Section 22156 of the Financial Code is amended to read:

22156.
 (a) Finance lender, broker, commercial financing provider, commercial financing broker, program administrator, and mortgage loan originator licensees shall keep and use in their business, books, accounts, and records which will enable the commissioner to determine if the licensee is complying with the provisions of this division and with the rules and regulations made by the commissioner. On any loan secured by real property in which loan proceeds were disbursed to an independent escrowholder, the licensee shall retain records and documents as set forth by rules of the commissioner adopted pursuant to Section 22150. Upon request of the commissioner, licensees shall file an authorization for disclosure to the commissioner of financial records of the licensed business pursuant to Section 7473 of the Government Code.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 23.

 Section 22157 of the Financial Code is amended to read:

22157.
 (a) Finance lender, broker, commercial financing provider, commercial financing broker, and mortgage loan originator licensees shall preserve their books, accounts, and records, if any, for at least three years after making the final entry on any loan or commercial financing transaction recorded therein.
(b) Except as otherwise specified by applicable law, including paragraph (3) of subdivision (b) of Section 5913 of the Streets and Highways Code, program administrator licensees shall preserve their books, accounts, and records for at least three years after the extinguishment of a PACE assessment is recorded therein.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 24.

 Section 22157.1 of the Financial Code is amended to read:

22157.1.
 (a) For purposes of this section:
(1) “Encrypted” has the same meaning as provided in paragraph (4) of subdivision (i) of Section 1798.82 of the Civil Code.
(2) “Remote location” means a personal residence or a temporary, nonpublic location not owned or leased by the licensee or an affiliate of the licensee that is not simultaneously accessible by anyone other than a single employee and individuals who maintain a common household with the employee.
(b) A licensee may designate an employee, when acting within the scope of employment, to perform work on the licensee’s behalf at a remote location if the licensee does all of the following:
(1) Prohibits in-person consumer interactions, including the physical receipt of cash or other monetary value or the disbursement of loan or commercial financing transaction proceeds, at a remote location and does not designate a remote location to the public as a business location.
(2) Prohibits records required pursuant to Section 22156 from being physically mailed to, shipped to, or stored at a remote location except for storage on an encrypted device or encrypted media.
(3) Prohibits the physical receipt of mail related to the licensee’s licensed business at a remote location.
(4) Prohibits a consumer’s personal information from being physically stored at a remote location except for storage on an encrypted device or encrypted media.
(5) Provides an employee working at a remote location with appropriate equipment, which may include encrypted devices, virtual private networks, and similar technology, to perform work and safeguard licensee records and consumer personal information.
(6) Adopts and adheres to appropriate, as determined by the department, written policies and procedures to supervise and maintain appropriate control over the work of employees at remote locations and safeguard the licensee’s records and consumer personal information in connection with work at a remote location, including, but not limited to, all of the following elements:
(A) Employee data security training.
(B) Maintenance of security logs of remote logins.
(C) Procedures designed to detect suspicious logins or attempted logins and to suspend access by potentially compromised accounts or equipment.
(D) Data breach response procedures.
(7) (A) Records telephone calls with consumers conducted from a remote location to the same extent as telephone calls with consumers conducted from licensed locations.
(B) This paragraph does not require telephone call recording if the licensee does not do so in the normal course of business for the employee or business in question.
(8) All books, records, and persons that the commissioner is entitled to examine, inspect, or interview shall be made available to the commissioner at a licensed location.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 25.

 Section 22159 of the Financial Code is amended to read:

22159.
 (a) (1) Each finance lender, broker, commercial financing provider, commercial financing broker, and program administrator licensee shall file an annual report with the commissioner, on or before March 15th, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee or authorized by the program administrator licensee within the state during the preceding calendar year for each licensed place of business. The individual annual reports filed pursuant to this section shall be made available to the public for inspection except, upon request in the annual report to the commissioner, the balance sheet contained in the annual report of a sole proprietor or any other nonpublicly traded person. The report shall be made under oath and in the form prescribed by the commissioner.
(2) As used in this subdivision, “nonpublicly traded person” means a person with securities owned by 35 or fewer individuals.
(b) A licensee shall make other special reports required by the commissioner.
(c) The commissioner may require a licensee that employs one or more mortgage loan originators to submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in the form and shall contain the information as the Nationwide Mortgage Licensing System and Registry may require.
(d) The commissioner may by rule or order require a mortgage loan originator to submit reports of condition to the Nationwide Mortgage Licensing System and Registry, in lieu of the reports of condition required of the mortgage loan originator’s employer pursuant to subdivision (c).
(e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 26.

 Section 22161 of the Financial Code is amended to read:

22161.
 (a) A person subject to this division shall not do any of the following:
(1) Make a materially false or misleading statement or representation to a borrower or recipient about the terms or conditions of that borrower’s loan or that recipient’s commercial financing transaction when making or brokering the loan or commercial financing transaction.
(2) Make a materially false or misleading statement or representation to a property owner about the terms or conditions of an assessment contract.
(3) 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 the business subject to the provisions of this division, including the rates, terms, or conditions for making or negotiating loans, making or negotiating commercial financing transactions, or for making or negotiating assessment contracts, that is false, misleading, or deceptive, or that omits material information that is necessary to make the statements not false, misleading, or deceptive, or in the case of a licensee, that refers to the supervision of the business by the state or any department or official of the state.
(4) Commit an act in violation of Section 1695.13 of the Civil Code.
(5) Engage in any act in violation of Section 17200 of the Business and Professions Code.
(6) Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party.
(7) Commit an act that constitutes fraud or dishonest dealings.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 27.

 Section 22162 of the Financial Code is amended to read:

22162.
 (a) A finance lender, broker, commercial financing provider, commercial financing broker, or mortgage loan originator licensee shall not place an advertisement disseminated primarily in this state for a loan or commercial financing transaction unless the licensee discloses in the printed text of the advertisement, or in the oral text in the case of a radio or television advertisement, the license under which the loan or commercial financing transaction would be made or arranged.
(b) A program administrator licensee shall not place an advertisement disseminated primarily in this state for an assessment contract unless the licensee discloses in the printed text of the advertisement, or in the oral text in the case of a radio or television advertisement, the license under which the assessment contract would be administered.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 28.

 Section 22163 of the Financial Code is amended to read:

22163.
 (a) The commissioner may require that rates of charge, if stated by a licensee, be stated fully and clearly in the manner that the commissioner deems necessary to prevent misunderstanding by prospective borrowers, recipients, or property owners.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 29.

 Section 22164 of the Financial Code is amended to read:

22164.
 (a) If any person engaged in the business regulated by this division refers in any advertising to rates of interest, charges, or cost of loans, commercial financing transactions, or assessment contracts, the commissioner shall require that the rates, charges, or costs are stated fully and clearly in the manner that the commissioner deems necessary to give adequate information to prospective borrowers or property owners. If the rates or costs advertised do not apply to loans or assessment contracts of all classes made or negotiated by the person, this fact shall be clearly indicated in the advertisement.
(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 30.

 Section 22167.5 is added to the Financial Code, to read:

22167.5.
 (a) A licensed commercial financing provider may act as a commercial financing broker, as defined in Section 22655, at its licensed place of business without obtaining an additional license as a commercial financing broker under this division only if the licensee has notified the commissioner of the action in writing.
(b) This section shall become operative on January 1, 2026.

SEC. 31.

 Section 22168 of the Financial Code is amended to read:

22168.
 (a) The commissioner may, after appropriate notice and opportunity for hearing, suspend for a period not to exceed 12 months or bar a person from any position of employment with a licensee if the commissioner finds that the person has willfully used or claimed without authority a designation or certification of special education, practice, or skill that the person has not attained, or willfully held out to the public a confusingly similar designation or certification for the purpose of misleading the public regarding the person’s qualifications or experience.
(b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code). Upon receiving a request, the matter shall be set for hearing to commence within 30 days after receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of the notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.
(c) Upon receipt of a notice of intention to issue an order pursuant to subdivision (a), the person who is the subject of the proposed order is immediately prohibited from engaging in any activities subject to licensure under this division.
(d) Persons suspended or barred under this section are prohibited from participating in any business activity of a licensed finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, and from engaging in any business activity on the premises where a licensed finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator is conducting its business. This subdivision does not prohibit suspended or barred persons from having their personal transactions processed by a licensed finance lender, broker, commercial financing provider, commercial financing broker, mortgage loan originator, or program administrator.
(e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 32.Section 22169 of the Financial Code is amended to read:
22169.

(a)The commissioner may, after appropriate notice and opportunity for hearing, by order, censure or suspend for a period not exceeding 12 months, or bar a person, including a mortgage loan originator, from any position of employment with, or management or control of, any finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or any other person, if the commissioner finds either of the following:

(1)That the censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, or to the public.

(2)That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense involving dishonesty, fraud, or deceit, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with the provisions of this division.

(b)Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a) or (b), the person may request a hearing under the Administrative Procedure Act (Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.

(c)Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any activities subject to licensure under the law.

(d)Persons suspended or barred under this section are prohibited from participating in any business activity of a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, and from engaging in any business activity on the premises where a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator is conducting business.

(e)The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 33.Section 22700 of the Financial Code is amended to read:
22700.

(a)Finance lender, broker, commercial financing provider, commercial financing broker, and program administrator licenses issued under this division shall remain in effect until they are surrendered, revoked, or suspended.

(b)Mortgage loan originator licenses issued under this division shall be renewed annually upon the payment of an annual assessment, and, if renewed by the licensee, shall remain in effect until they are surrendered, revoked, or suspended.

(c)Surrender of a license becomes effective 30 days after receipt of an application to surrender the license or within a shorter period of time that the commissioner may determine, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the surrender is instituted within 30 days after the application is filed. If a proceeding is pending or instituted, surrender of a license becomes effective at the time and upon the conditions that the commissioner determines.

(d)The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 34.Section 22701 of the Financial Code is amended to read:
22701.

(a)For the purpose of discovering violations of this division or securing information required by the commissioner in the administration and enforcement of this division, the commissioner may at any time investigate the loans, commercial financing transactions, assessment contracts, and business, and examine the books, accounts, records, and files used in the business, of every person engaged in the business of a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator, whether the person acts or claims to act as principal or agent, or under or without the authority of this division. For the purpose of examination, the commissioner and the commissioner’s representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of all these persons.

(b)The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 35.Section 22712 of the Financial Code is amended to read:
22712.

(a)(1)Whenever, in the opinion of the commissioner, any person is engaged or has engaged in business as a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, as defined in this division, without a license from the commissioner, or any licensee is violating or has violated any provision of this division, any provision of an order, or any regulation adopted pursuant to this division, the commissioner may order that person or licensee to desist and to refrain from engaging in the business or further continuing that violation. In addition, the commissioner may include a claim for ancillary relief. The ancillary relief may include, but not be limited to, refunds, restitution or disgorgement, or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action. If, within 30 days after the order is served, a written request for a hearing is filed and no hearing is held within 30 days thereafter, the order is rescinded.

(2)For purposes of this subdivision, “licensee” includes a mortgage loan originator.

(b)Notwithstanding subdivision (a), if, after an investigation, the commissioner has reasonable grounds to believe that a person is conducting or has conducted business in an unsafe or injurious manner, the commissioner shall, by written order addressed to that person, direct the discontinuance of the unsafe or injurious practices. The order shall be effective immediately but shall not become final except in accordance with the provisions of Section 22717.

(c)The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 36.Section 22714 of the Financial Code is amended to read:
22714.

(a)The commissioner shall suspend or revoke any license, upon notice and reasonable opportunity to be heard, if the commissioner finds any of the following:

(1)The licensee has failed to comply with any demand, ruling, or requirement of the commissioner made pursuant to and within the authority of this division.

(2)The licensee has violated any provision of this division or any rule or regulation made by the commissioner under and within the authority of this division.

(3)A fact or condition exists that, if it had existed at the time of the original application for the license, reasonably would have warranted the commissioner in refusing to issue the license originally.

(4)There has been repeated failure by the finance lender, when making or negotiating loans, to take into consideration in determining the size and duration of loans, the financial ability of the borrower to repay the loan in the time and manner provided in the loan contract, or to refinance the loan at maturity.

(5)There has been repeated failure by the program administrator, when administering assessment contracts, to take into consideration in determining the size and duration of the assessment contracts, the property owner’s ability to meet the annual PACE obligations in the time and manner provided in the contract.

(6)There has been repeated failure by the commercial financing provider, when making or negotiating commercial financing transactions, to take into consideration in determining the size, duration, and repayment features, the financial ability of the recipient to repay the commercial financing transaction in the time and manner provided in the commercial financing agreement or contract or to refinance the commercial financing transaction at maturity.

(b)A master license shall not be suspended or revoked pursuant to this section as a result of any action or failure to act by a subsidiary licensee unless grounds exist for the suspension or revocation of the master license pursuant to this section. An order suspending or revoking a license or imposing sanctions against a licensee shall not affect other licensed locations unless expressly stated in the order.

(c)The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 32.

 Section 22169 of the Financial Code is amended to read:

22169.
 (a) The commissioner may, after appropriate notice and opportunity for hearing, by order, censure or suspend for a period not exceeding 12 months, or bar a person, including a mortgage loan originator, from any position of employment with, or management or control of, any finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or any other person, if the commissioner finds either of the following:
(1) That the censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, or to the public.
(2) That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense involving dishonesty, fraud, or deceit, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with the provisions of this division.
(b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.
(c) Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any activities subject to licensure under the law.
(d) Persons suspended or barred under this section are prohibited from participating in any business activity of a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, and from engaging in any business activity on the premises where a finance lender, broker, program administrator, or mortgage loan originator is conducting business.

(e)This section shall become operative on January 1, 2019.

(e) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 37.SEC. 33.

 Chapter 3.1 (commencing with Section 22655) is added to Division 9 of the Financial Code, to read:
CHAPTER  3.1. Commercial Financing for Small Businesses
Article  1. Definitions

22655.
 As used in this chapter:
(a) “Accounts receivable purchase transaction” has the same meaning as defined in Section 22800.
(b) “Asset-based lending transaction” has the same meaning as defined in Section 22800.
(c) (1) “Charge” includes the aggregate interest, fees, bonuses, commissions, brokerage, discounts, expenses, and other forms of costs charged, contracted for, or received by a licensee or any other person in connection with the investigating, arranging, negotiating, procuring, guaranteeing, making, servicing, collecting, and enforcing of a commercial financing transaction or forbearance of money, credit, goods, or things in action, or any other service rendered.
(2) “Charge” includes a profit or advantage of any kind that a licensee may contract for, collect, receive, or obtain by a collateral sale, purchase, or agreement, in connection with negotiating, arranging, making, or otherwise in connection with any commercial financing transaction.
(d) “Commercial financing” means an accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, or lease financing, intended by the recipient for use primarily for a purpose other than a personal, family, or household purpose.
(e) “Commercial financing broker” means a person who is engaged in the business of performing any of the following acts in connection with commercial financing made by a commercial financing provider:
(1) Transmitting sensitive data about a prospective recipient to a commercial financing provider with the expectation of compensation in connection with making a referral.
(2) Making a referral to a commercial financing provider under an agreement with the commercial financing provider that a prospective recipient referred by the person to the commercial financing provider meets certain criteria involving sensitive data.
(3) Participating in a commercial financing negotiation between a commercial financing provider and prospective recipient.
(4) Counseling, advising, or making recommendations to a prospective recipient about a commercial financing transaction based on the prospective recipient’s sensitive data.
(5) (A) Participating in the preparation of commercial financing documents, including commercial financing applications, other than providing a prospective recipient blank copies of commercial financing documents.
(B) Transmitting information that is not sensitive data to a commercial financing provider at the request of a prospective recipient shall not, by itself, constitute participation in the preparation of commercial financing documents within the meaning of this paragraph.
(6) Communicating to a prospective recipient a commercial financing provider’s commercial financing approval decisions.
(7) Charging a fee to a prospective recipient for services related to a prospective recipient’s application for a commercial financing transaction from a commercial financing provider.
(f) “Commercial financing provider” means a person who extends a specific offer of commercial financing to a recipient, including, but not limited to, a nondepository institution that enters into a written agreement with a depository institution to arrange for the extension of commercial financing by the depository institution to a recipient via an online lending platform administered by the nondepository institution.
The fact that a commercial financing provider extended a specific offer of commercial financing on behalf of a depository institution shall not be construed to mean that the commercial financing provider engaged in, or originated, that financing.
(g) “Commercial loan” has the same meaning as defined in Section 22502.

(g)

(h) “Factoring” has the same meaning as defined in Section 22800.

(h)

(i) “Lease financing” has the same meaning as defined in Section 22800.

(i)

(j) “Recipient” means a small business or small business owner who is presented a specific commercial financing offer by a commercial financing provider that is equal to or less than five hundred thousand dollars ($500,000).

(j)

(k) “Referral” means the introduction of a prospective recipient to a commercial financing provider, or the delivery of a prospective recipient’s contact information to a commercial financing provider, for the purpose of making an introduction.

(k)

(l) “Sensitive data” means any of the following:
(1) A bank account number.
(2) A bank statement.
(3) A credit or debit card account number.
(4) A credit score, as defined in Section 1785.15.1 of the Civil Code.
(5) All of, or a portion of, a social security number.
(6) Personal or business income information, including information self-reported by the person.
(7) A taxpayer or employer identification number.

(l)

(m) “Small business” means an independently owned and operated business that is not dominant in its field of operation and meets all of the following criteria:
(1) The principal office of the business is located in California.
(2) The officers of the business are domiciled in California.
(3) The business, together with its affiliates, has 100 or fewer employees.
(4) The business had average annual gross receipts of fifteen million dollars ($15,000,000) or less over the previous three years years.

Article  2. Exemptions

22656.
 This chapter does not apply to any of the following:

(a)Activities related to the making of, or brokering of, a commercial loan, as defined in Section 22502.

(b)

(a) A commercial financing provider that is a lender regulated under Chapter 23 (commencing with Section 2001) of Title 12 of the United States Code.

(c)

(b) A commercial financing transaction secured by real property.

(d)

(c) A commercial financing transaction in which the recipient is either of the following:
(1) A dealer, as defined in Section 285 of the Vehicle Code, or an affiliate of a dealer.
(2) A vehicle rental company, or an affiliate of a vehicle rental company, pursuant to a specific commercial financing offer or commercial open-end credit plan of at least fifty thousand dollars ($50,000), including a commercial loan made pursuant to that commercial financing transaction.

(e)

(d) A person who makes one or fewer commercial financing transactions in the state in a 12-month period.

(f)

(e) A person who makes five or fewer commercial financing transactions in the state in a 12-month period that are incidental to the business of the person relying upon the exemption.

Article  3. Regulations

22657.
 (a) Section 1670.5 of the Civil Code applies to the provisions of a commercial financing contract that is subject to this chapter.
(b) A commercial financing transaction found to be unconscionable pursuant to Section 1670.5 of the Civil Code shall be deemed to be in violation of this division and subject to the remedies specified in this division.
(c) For the purpose of determining whether financing is commercial financing within the meaning of this section, the commercial financing provider may rely on a written statement of intended purposes signed by the recipient. The statement may be a separate statement signed by the recipient or may be contained in a loan application or other document signed by the recipient. The commercial financing provider shall not be required to ascertain that the proceeds of the commercial financing are used in accordance with the statement of intended purposes.

22658.
 A person who, in this state, contracts for or negotiates a commercial financing transaction with a recipient domiciled in this state to be made outside the state for the purpose of evading or avoiding this division is subject to this division.

22659.
 (a) A commercial financing provider or a commercial financing broker shall not take a confession of judgment or any power of attorney at any time before a default by a recipient under the terms of a commercial financing transaction agreement or contract.
(b) A commercial financing provider or a commercial financing broker shall not include a provision in a commercial financing transaction agreement or contract that authorizes a commercial financing provider or commercial financing broker to attach or garnish any of a recipient’s money held in an account in a depository institution.

22660.
 A commercial financing provider or a commercial financing broker shall not do any of the following:
(a) Take an instrument in which blanks are left to be filled in after execution.
(b) Include a provision in a contract or agreement with a recipient that limits or restricts the recipient from disclosing information that the recipient gains from the recipient’s business activities with the licensee, including, but not limited to, terms or conditions of a product or service offered by the licensee.
(c) Violate Title 1.90 (commencing with 1799.300) of Part 4 of Division 3 of the Civil Code.
(d) Collect a charge based on the source of funds for the repayment of a commercial financing transaction.

22661.
 A licensed commercial financing provider shall do all of the following:
(a) Comply with the requirements of Division 9.5 (commencing with Section 22800).
(b) (1) (A) Obtain from the recipient a signed statement as to whether a person has performed an act as a commercial financing broker in connection with the making of the commercial financing transaction.
(B) If the statement described in subparagraph (A) discloses that a commercial financing broker or other person has participated, then the commercial financing provider shall obtain a full statement of all sums paid or payable to the commercial financing broker or other person.
(2) The commercial financing provider shall keep any statement made pursuant to paragraph (1) for three years from the date the commercial financing transaction was paid in full, or matured according to its terms, or was charged off.
(c) Permit payment to be made in advance in any amount on any commercial financing transaction at any time.
(d) At the time payment is made on account of a commercial financing transaction, deliver, or cause to be delivered, to the person making a cash payment, or to the person who requests a receipt at the time of making a payment, a plain and complete receipt showing the total amount received and identifying the commercial financing transaction agreement or contract upon which the payment is applied.
(e) (1) Subject to paragraph (2), upon repayment in full of a commercial financing transaction, release any security for the commercial financing transaction, endorse and return any certificate of ownership, and cancel or plainly mark “paid” and return to the recipient or person making final payment any note, mortgage, security agreement, trust deed, assignment, or order signed by the recipient, except a document that is a part of the court record in an action, or that has been delivered to a third person for the purpose of carrying out its terms, or a security agreement that secures any other indebtedness or obligations of a borrower to the licensee, or original documents otherwise required by law.
(2) (A) For the purpose of meeting the requirements of subparagraph (A), a commercial financing provider or a commercial financing broker may return to the recipient or person making final payment an optical image reproduction of any note, mortgage, security agreement, trust deed, assignment, or order signed by the recipient.
(B) For purposes of this paragraph, an optical image reproduction shall meet all of the following requirements:
(i) 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.
(ii) 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.
(iii) 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 recipient 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 commercial financing provider and any commercial financing broker.
(g) (1) Upon a request in writing from a recipient, deliver, or cause to be delivered, to the recipient an accurate statement of the total outstanding balance that would be required to pay the recipient’s obligation in full as of a certain date.
(2) The statement required by paragraph (1) shall be sent on or before the seventh third business day after receiving the written request from the recipient or any person acting on behalf of the recipient.
(3) The statement required by paragraph (1) shall include a time period, which shall not be less than seven three days after the recipient receives the statement, during which full payment by the recipient shall be deemed to fully satisfy the recipient’s obligations to the commercial financing provider.

22662.
 A licensed commercial financing broker shall do all of the following:
(a) (1) Deliver to the recipient 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 commercial financing broker and the commercial financing provider.
(2) The statement described in paragraph (1) shall show the date, amount, and terms of the agreement with the commercial financing broker and all amounts paid, or to be paid, to the commercial financing broker and to any person other than the commercial financing provider.
(b) Deliver to the commercial financing provider making the commercial financing transaction a copy of the statement described in subdivision (a).
(c) Deliver to the person making a payment to the commercial financing broker to be retained by the commercial financing 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 commercial financing transaction agreement or contract upon which the payment is applied. If the payment is made by a person other than the commercial financing provider, a copy of the receipt shall be delivered to the commercial financing provider.
(d) If the recipient pays the commercial financing transaction in full, ensure that the commercial financing provider fully complies with subdivision (e) of Section 22661.
(e) Deliver to any potential recipient, at the time the licensee first requires or accepts a signed instrument or the payment of a fee, a statement showing in clear and distinct terms the name, address, and license number of the commercial financing broker and commercial financing provider.

22663.
 (a) Before making a referral, a (1) (A) A commercial financing broker shall provide a disclosure disclose to a prospective recipient with the mean, median, average, minimum, and maximum annualized rates charged combined APRs and estimated APRs disclosed to recipients for consummated commercial financing transactions that were referred by the commercial financing broker to commercial financing providers in the past six months. previous calendar year on or after February 1.

(b)As used in this section, “annualized rate” means the annualized rate disclosed by a commercial financial provider pursuant to Division 9.5 (commencing with Section 22800).

(B) A commercial financing broker shall ensure that the information disclosed pursuant to this paragraph appears clearly and conspicuously on any internet website of the commercial financing broker.
(2) A commercial financing broker shall not engage in further brokering services with a potential recipient who has received the disclosure required by paragraph (1) before the potential recipient acknowledges that disclosure in writing.
(b) When presenting a specific offer to a potential recipient, a commercial financing broker shall clearly and conspicuously disclose to the potential recipient the lowest approximate annual percentage rate for any commercial financing that the commercial financing broker reasonably believes the potential recipient could qualify for based on the commercial financing broker’s industry knowledge and expertise.

22664.

(a)A commercial financing broker providing commercial financing brokerage services to a recipient is the fiduciary of the recipient, and a violation of the commercial financing broker's fiduciary duties shall be a violation of this division.

(b)The fiduciary duty required by this section includes a requirement that the commercial financing broker place the economic interest of the recipient ahead of the commercial financing broker’s own economic interest.

(c)A commercial financing broker who provides commercial financing brokerage services to the recipient owes the fiduciary duty required by this section to the recipient regardless of whether the commercial financing broker is acting as an agent for any other party in connection with the commercial financing transaction.

22664.
 A commercial financing broker owes a duty of care to, and has a duty to act in the highest good faith toward, a potential recipient, including the duty to exercise the utmost honesty and integrity toward the potential recipient.

22665.
 (a) A commercial financing provider shall not use the underwriting method described in Section 931 of Title 10 of the California Code of Regulations unless the commercial financing provider participates in a review process pursuant to subdivision (b).
(b) (1) A provider that uses the underwriting method described in Section 931 of Title 10 of the California Code of Regulations shall, on an annual basis, report data to the commissioner regarding estimated annual percentage rates disclosed to recipients and actual retrospective annual percentage rates of completed transactions.
(2) The report required by paragraph (1) shall contain information as the commissioner, by rule, prescribes as necessary or appropriate for the purpose of making a determination of whether the deviation between estimated annual percentage rates and actual retrospective annual percentage rates of completed transactions was reasonable.
(c) (1) The commissioner shall establish the method of reporting required by subdivision (b) and may, upon finding that the use of projected sales volume by the commercial financing provider has resulted in an unacceptable deviation between estimated and actual annual percentage rate, require the commercial financing provider to use the historical method pursuant to Section 930 of Title 10 of the California Code of Regulations.
(2) The commissioner may consider unusual and extraordinary circumstances impacting the commercial financing provider’s deviation between estimated and actual annual percentage rate in determining whether the use of projected sales volume by the commercial financing provider has resulted in an unacceptable deviation between estimated and actual annual percentage rate.

22666.
 (a) A commercial financing provider shall not use the term “interest” to describe a percentage rate unless that rate is an annual percentage rate calculated pursuant to Section 940 of Title 10 of the California Code of Regulations.
(b) A commercial financing provider shall not use the term “rate” to describe a metric of financing cost presented or disclosed during an application process for a commercial financing transaction unless that rate is an annual percentage rate calculated pursuant to Section 940 of Title 10 of the California Code of Regulations.
(c) After extending a specific offer to a potential recipient, whenever a commercial financing provider states a rate of finance charge or a financing amount to the potential recipient during an application process for commercial financing, the provider shall also state the rate as an “annual percentage rate” by using that term or the acronym “APR”. “APR.”

22667.
 If, as a condition of obtaining commercial financing, a commercial financing provider requires a recipient to pay off the balance of an existing commercial financing transaction from the same commercial financing provider, the commercial financing provider shall disclose the amount of the new commercial financing transaction that is used to pay off the portion of the existing commercial financing transaction that consists of prepayment charges required to be paid and any unpaid interest expense that was not forgiven at the time of renewal. For financing for which the total repayment amount is calculated as a fixed amount, the prepayment charge is equal to the original finance charge multiplied by the amount of the renewal used to pay off existing financing as a percentage of the total repayment amount, minus any portion of the total repayment amount forgiven by the provider at the time of prepayment.

22668.
 This chapter shall become operative on January 1, 2026.

SEC. 34.

 Section 22700 of the Financial Code is amended to read:

22700.
 (a) Finance lender, broker, commercial financing provider, commercial financing broker, and program administrator licenses issued under this division shall remain in effect until they are surrendered, revoked, or suspended.
(b) Mortgage loan originator licenses issued under this division shall be renewed annually upon the payment of an annual assessment, and, if renewed by the licensee, shall remain in effect until they are surrendered, revoked, or suspended.
(c) Surrender of a license becomes effective 30 days after receipt of an application to surrender the license or within a shorter period of time that the commissioner may determine, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the surrender is instituted within 30 days after the application is filed. If a proceeding is pending or instituted, surrender of a license becomes effective at the time and upon the conditions that the commissioner determines.

(d)This section shall become operative on January 1, 2019.

(d) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 35.

 Section 22701 of the Financial Code is amended to read:

22701.
 (a) For the purpose of discovering violations of this division or securing information required by him or her the commissioner in the administration and enforcement of this division, the commissioner may at any time investigate the loans, commercial financing transactions, assessment contracts, and business, and examine the books, accounts, records, and files used in the business, of every person engaged in the business of a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator, whether the person acts or claims to act as principal or agent, or under or without the authority of this division. For the purpose of examination, the commissioner and his or her the commissioner’s representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of all these persons.

(b)This section shall become operative on January 1, 2019.

(b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 36.

 Section 22712 of the Financial Code is amended to read:

22712.
 (a) (1) Whenever, in the opinion of the commissioner, any person is engaged or has engaged in business as a finance lender, broker, commercial financing provider, commercial financing broker, program administrator, or mortgage loan originator, as defined in this division, without a license from the commissioner, or any licensee is violating or has violated any provision of this division, any provision of an order, or any regulation adopted pursuant to this division, the commissioner may order that person or licensee to desist and to refrain from engaging in the business or further continuing that violation. In addition, the commissioner may include a claim for ancillary relief. The ancillary relief may include, but not be limited to, refunds, restitution or disgorgement, or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action. If, within 30 days after the order is served, a written request for a hearing is filed and no hearing is held within 30 days thereafter, the order is rescinded. For purposes of this section, “licensee” includes a mortgage loan originator.
(2) For purposes of this subdivision, “licensee” includes a mortgage loan originator.
(b) Notwithstanding subdivision (a), if, after an investigation, the commissioner has reasonable grounds to believe that a person is conducting or has conducted business in an unsafe or injurious manner, the commissioner shall, by written order addressed to that person, direct the discontinuance of the unsafe or injurious practices. The order shall be effective immediately, immediately but shall not become final except in accordance with the provisions of Section 22717.
(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 37.

 Section 22714 of the Financial Code is amended to read:

22714.
 (a) The commissioner shall suspend or revoke any license, upon notice and reasonable opportunity to be heard, if the commissioner finds any of the following:
(1) The licensee has failed to comply with any demand, ruling, or requirement of the commissioner made pursuant to and within the authority of this division.
(2) The licensee has violated any provision of this division or any rule or regulation made by the commissioner under and within the authority of this division.
(3) A fact or condition exists that, if it had existed at the time of the original application for the license, reasonably would have warranted the commissioner in refusing to issue the license originally.
(4) There has been repeated failure by the finance lender, when making or negotiating loans, to take into consideration in determining the size and duration of loans, the financial ability of the borrower to repay the loan in the time and manner provided in the loan contract, or to refinance the loan at maturity.
(5) There has been repeated failure by the program administrator, when administering assessment contracts, to take into consideration in determining the size and duration of the assessment contracts, the property owner’s ability to meet the annual PACE obligations in the time and manner provided in the contract.
(6) There has been repeated failure by the commercial financing provider, when making or negotiating commercial financing transactions, to take into consideration in determining the size, duration, and repayment features, the financial ability of the recipient to repay the commercial financing transaction in the time and manner provided in the commercial financing agreement or contract or to refinance the commercial financing transaction at maturity.
(b) A master license shall not be suspended or revoked pursuant to this section as a result of any action or failure to act by a subsidiary licensee unless grounds exist for the suspension or revocation of the master license pursuant to this section. An order suspending or revoking a license or imposing sanctions against a licensee shall not affect other licensed locations unless expressly stated in the order.

(c)This section shall become operative on January 1, 2019.

(c) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2026.

SEC. 38.

 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.