(1)Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight.

Existing law requires each finance lender and broker licensee to file an annual report with the commissioner giving relevant information concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. Existing law authorizes the commissioner to, by order, summarily suspend or revoke the license of any licensee if that person fails to file that report within 10 days after notice by the commissioner that the report is due and not filed.

This bill would authorize the commissioner, except in certain circumstances, to impose, by order, a penalty on any licensee who fails to either provide the commissioner with any report required by law or any material information required by the commissioner to be included in a report. The bill would prohibit the penalty from exceeding $100 for each business day the report or information is overdue for the first 5 business days and thereafter from exceeding $500 for each day the report or information is overdue, not to exceed $25,000 in the aggregate. The bill would specify the due date for these penalties under specified circumstances. The bill would authorize a licensee ordered to pay the penalty to request in writing a hearing to challenge that order and would require that hearing to be held under specified administrative proceedings.

(2)Existing law, the California Deferred Deposit Transaction Law, requires each licensee to file a specified annual report with the Commissioner of Business Oversight and requires the report to be kept confidential. Existing law requires the annual consolidated report to be prepared by the commissioner and made available to the public.

This bill would instead require those annual reports to be made available to the public for inspection, except as specified, and would also require the reports to include any other information reasonably required by the commissioner.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(1)Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight.

Existing law requires each finance lender and broker licensee to file an annual report with the commissioner giving relevant information concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. Existing law authorizes the commissioner to, by order, summarily suspend or revoke the license of any licensee if that person fails to file that report within 10 days after notice by the commissioner that the report is due and not filed.

This bill would authorize the commissioner, except in certain circumstances, to impose, by order, a penalty on any licensee who fails to either provide the commissioner with any report required by law or any material information required by the commissioner to be included in a report. The bill would prohibit the penalty from exceeding $100 for each business day the report or information is overdue for the first 5 business days and thereafter from exceeding $500 for each day the report or information is overdue, not to exceed $25,000 in the aggregate. The bill would specify the due date for these penalties under specified circumstances. The bill would authorize a licensee ordered to pay the penalty to request in writing a hearing to challenge that order and would require that hearing to be held under specified administrative proceedings.

(2)Existing law, the California Deferred Deposit Transaction Law, requires each licensee to file a specified annual report with the Commissioner of Business Oversight and requires the report to be kept confidential. Existing law requires the annual consolidated report to be prepared by the commissioner and made available to the public.

This bill would instead require those annual reports to be made available to the public for inspection, except as specified, and would also require the reports to include any other information reasonably required by the commissioner.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(1)Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight.

Existing law requires each finance lender and broker licensee to file an annual report with the commissioner giving relevant information concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. Existing law authorizes the commissioner to, by order, summarily suspend or revoke the license of any licensee if that person fails to file that report within 10 days after notice by the commissioner that the report is due and not filed.

This bill would authorize the commissioner commissioner, except in certain circumstances, to impose, by order, a penalty on any licensee who fails to either provide the commissioner with any report required by law or requested by the commissioner or who fails to provide any material information required by the commissioner to be included in a report. The bill would prohibit the penalty from exceeding $100 for each business day the report or information is overdue for the first 5 business days and thereafter from exceeding $500 for each day the report or information is overdue. overdue, not to exceed $25,000 in the aggregate. The bill would specify the due date for these penalties under specified circumstances. The bill would authorize a licensee ordered to pay the penalty to request in writing a hearing to challenge that order and would require that hearing to be held under specified administrative proceedings.

(2)Existing law, the California Deferred Deposit Transaction Law, requires each licensee to file a specified annual report with the Commissioner of Business Oversight and requires the report to be kept confidential. Existing law requires the annual consolidated report to be prepared by the commissioner and made available to the public.

This bill would instead require those annual reports to be made available to the public for inspection inspection, except as specified, and would also require the reports to include any other information reasonably required by the commissioner.

(2)Existing law, the California Deferred Deposit Transaction Law, requires each licensee to file a specified annual report with the Commissioner of Business Oversight and requires the report to be kept confidential. Existing law requires the annual consolidated report to be prepared by the commissioner and made available to the public.

This bill would instead require those annual reports to be made available to the public for inspection and would also require the reports to include any other information reasonably required by the commissioner.

Existing law, the California Deferred Deposit Transaction Law, requires each licensee to file a specified annual report with the Commissioner of Business Oversight and requires the report to be kept confidential. Existing law requires the annual consolidated report to be prepared by the commissioner and made available to the public.

This bill would instead require those annual reports to be made available to the public for inspection and would also require the reports to include any other information reasonably required by the commissioner.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1636

Author:(Aguiar-Curry)

As Amended Ver:July 19, 2017

Majority vote

Original Committee Reference: B. & F.

SUMMARY: Makes changes to the California Deferred Deposit Transaction Law requiring the Department of Business Oversight (DBO) to make public licensee's annual reports for inspection, as specified.

The Senate amendments:

1. Allow an exception that the balance sheet of a sole proprietor, or any other nonpublicly traded persons, NOT be contained in the annual report available for public inspection.
2. Authorize the Commissioner of DBO (Commissioner) to impose, in certain circumstances, a penalty on any licensee who fails to provide material information or reports within the time specified.
3. Restrict the amount of the penalty imposed. The penalty shall not:
   1. Exceed $100 for each business day for the first five days.
   2. Exceed $500 for each business day after the first five days.
   3. Exceed $25,000 in the aggregate.
4. Allow the licensee to file a written request for a hearing within 30 days of the date of receiving the order imposing the penalty, as specified.

EXISTING LAW: Requires licensees under the California Deferred Deposit Transaction Law, on or before March 15 of each year, beginning March 2006, to file an annual report with the Commissioner pursuant to procedures that the Commissioner shall establish. The licensee's annual report shall be kept confidential pursuant to Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code and any regulations adopted thereunder. The annual consolidated report shall be prepared by the Commissioner and made available to the public.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: Under the California Deferred Deposit Transaction Law, loan originators, also known as payday lenders, are required to file an annual report with the Commissioner. According to the author's office:

AB 1636 does not seek to further regulate the payday lending industry, but it does increase transparency and the ability to monitor evolving practices and products by authorizing each licensee's submitted annual report to be made public. By allowing disaggregated information to be viewed by regulators and consumers, in addition to the consolidated summary report, AB 1636 will strengthen consumer protection by providing insight into the practices of individual payday lenders and their borrowers. This information will give the state a clearer picture about the payday loan industry and consumers' habits in practice.

Deferred Deposit Transaction Law: A payday loan, known more formally in California as a deferred deposit transaction, is a short-term loan in which a borrower writes a post-dated, personal check to a lender for a specified amount, which is capped by state law. The payday lender advances the borrower the amount on the check, less the fee, which is also capped by law. The payday lender does not cash the check at the time the loan is made. Both parties are aware that the borrower lacks sufficient funds to cover the check when the check is written. The assumption underlying the loan is that the borrower will repay the loan by the agreed-upon date, either by depositing sufficient funds in his or her checking account to cover the check, or by paying the payday lender in cash on the loan's due date, and having the lender return the original check to the borrower, without cashing it.

Under the California's payday loan law, any payday lender who makes a payday loan must be licensed. Each licensee may defer the deposit of a customer's personal check for up to 31 days. The face amount of the check presented by a borrower may not exceed $300, and the fee charged by the licensee may not exceed 15% of the face amount of the check ($45 on a $300 check). This statutorily capped fee must be expressed to borrowers in the form of an Annual Percentage Rate (APR). Given the short-term nature of payday loans (average is 17 days) the average APR is 411%. However, while the APR is high on a short-term product, the dollar costs of the fee cannot exceed 15% of the face amount of the check.

Licensees may charge one non-sufficient funds fee, capped at $15, for checks that are returned by a customer's financial institution. In addition, licensees may not directly or indirectly charge any additional fees in conjunction with a payday loan. Licensees may not enter into a payday loan with a customer who already has a payday loan outstanding and may not allow a customer to use one loan to pay off another. Licensees are also forbidden from accepting any collateral for a payday loan or making any payday loan contingent on the purchase of any goods or services. Each payday loan must be made pursuant to a written agreement. Licensees must clearly post their fees and charges at their business locations.

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0001377

 THIRD READING  

Bill No: AB 1636

Author:

:

Vote:

SENATE INS., BANK. & FIN. COMMITTEE: 8-1, 7/12/17

AYES: Mendoza, Galgiani, Glazer, Hernandez, Lara, Mitchell, Newman, Roth

NOES: Morrell

NO VOTE RECORDED: Berryhill, Gaines, Hueso, Portantino

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 73-0, 5/30/17 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill authorizes the Commissioner of the Department of Business Oversight (DBO; the commissioner) to impose specified penalties on California Finance Lenders Law (CFLL) licensees that fail to submit required information to DBO by the date it is due, as specified; makes public the annual reports that must be submitted to DBO by California Deferred Deposit Transaction Law (CDDTL) licensees, as specified; and authorizes the commissioner to require licensees to include any information he or she reasonably requires in those CDDTL annual reports.

ANALYSIS:

Existing law:

California Finance Lenders Law

1. Authorizes the commissioner to make general rules and regulations and specific rulings, demands, and findings for the enforcement of the CFLL in addition to and within the general purposes of the CFLL (Financial Code Section 22150).
2. Requires each finance lender and broker licensee to file an annual report with the commissioner, giving the relevant information the commissioner reasonably requires concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. Provides that the individual annual reports required to be filed with the commissioner 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 persons (Financial Code Section 22159).
3. Requires each finance lender and broker licensee to make other special reports that may be required by the commissioner (Financial Code Section 22159).
4. Authorizes the commissioner to suspend or revoke the license of any CFLL licensee if that person fails to file the annual report required by Financial Code Section 22159 within 10 days after notice by the commissioner that the report is due and not filed (Financial Code Section 22715).
5. Authorizes the commissioner to issue a citation to any licensee or other person that violates any provision of the CFLL or any rule or order issued pursuant to the CFLL, provides that each citation may contain an order to correct the violation or violations identified, and provides that each citation may assess an administrative fine not to exceed $2,500. In assessing the amount of the fine, the commissioner is required to give due consideration to the appropriateness of the amount of the fine with respect to factors including the gravity of the violation, the good faith of the person or licensees cited, and the history of previous violations (Financial Code Section 22707.5).

California Deferred Deposit Transaction Law

1. Authorizes the commissioner to make general rules and regulations and specific rulings, demands, and findings for the enforcement of the CDDTL, in addition to and within the general purposes of the CDDTL (Financial Code Section 23015).
2. Requires each CDDTL licensee to file an annual report with the commissioner, including eight specific categories of information, and requires each licensee’s annual report to be kept confidential pursuant to specified sections of the Government Code (Financial Code Section 23026).
3. Authorizes the commissioner to suspend or revoke the license of any licensee if that person fails to file the annual report required by Section 23026 within 10 days after notice by the commissioner that the report is due and not filed (Financial Code Section 23053).
4. Authorizes the commissioner to issue a citation to a licensee that is violating any provision of the CDDTL or any rule or order issued pursuant to the CDDTL, and authorizes the commissioner to accompany that citation with an order to desist and refrain and an assessment of an administrative penalty not to exceed $2,500 (Financial Code Section 23058).

This bill:

California Finance Lenders Law

1. Authorizes the commissioner to impose a penalty on any CFLL licensee that fails to do either of the following within the time period specified in any written demand of the commissioner:
   1. Make and file with the commissioner any report required by law.
   2. Furnish any material information required by the commissioner to be included in any report required by law.
2. Provides, however, that a penalty may not be imposed on a licensee pursuant to the authority described in (1), immediately above, if the commissioner requests new information from that licensee and fails to notify that licensee about the requirement to submit that new information within a specified time period.
3. Sets the amount of the penalty at a maximum of $100 per business day for each of the first five business days the report or information is overdue and a maximum of $500 per business day thereafter, not to exceed $25,000 in the aggregate.
4. Establishes procedures through which CFLL licensees on whom penalties are imposed may request hearings to challenge those penalties, as specified.

California Deferred Deposit Transaction Law

1. Authorizes the commissioner to require licensees to file annual reports with the commissioner, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business.
2. Provides that a licensee’s annual report shall be made available to the public for inspection, but further provides that nonpublicly traded persons, as defined, may request that their balance sheets be kept confidential.

Comments

This bill is sponsored by the author to increase compliance with the requirement that CFLL licensees submit annual reports and increase transparency about the payday lending industry.

CFLL provision. Under the existing CFLL, the commissioner has broad authority to request information from CFLL licensees in the form of both annual reports and special reports. If a licensee fails to submit a required report or fails to include required information in a report, the commissioner has clear authority to suspend or revoke that licensee’s license until the licensee submits the required information. The commissioner also has the authority to issue a citation and levy a fine on a licensee that fails to comply with any provision of the CFLL, including the requirement to submit a required report or include required information in a report. However, as the citation and fine authority provision is drafted, the commissioner appears to be required to set the amount of the fine at a single dollar amount up to $2,500; he or she does not appear to have the flexibility to set the amount of the fine at a single dollar amount per day for each day a violation occurs; furthermore, the maximum dollar amount of the fine is set at $2.500.

This bill authorizes the commissioner to impose a penalty of up to $100 per business day for the first five business days a required report or other required information is due and not submitted, and to increase that penalty to as much as $500 per business day thereafter, not to exceed $25,000 in the aggregate. Once a licensee incurs a penalty of at least $25,000, license suspension or revocation may be a more appropriate way in which to encourage the submission of required information than additional monetary penalties.

In order to ensure that no penalty is levied on a licensee that is given insufficient lead time in which to compile the information it is being asked to submit, this bill conditions the availability of penalty authority on a requirement that the commissioner provide licensees with at least 90 days’ notice before requiring any new types of information be submitted. Language requiring a minimum of 90 days’ notice before allowing the commissioner to levy a penalty in connection with failure to submit new types of information will not limit the ability of the commissioner to request information from his or her licensees on a very short time frame; it only protects licensees from monetary penalties if they are unable to comply with short timeframe requests by their due dates.

DDTL provision. Under the existing CDDTL, licensees’ annual reports are limited to eight, specific categories of information identified in statute, and must be kept confidential by the commissioner. This contrasts with the CFLL, under which the commissioner has broad authority to require licensees to submit whatever relevant information he or she reasonably requires regarding the businesses and operations of licensees during the prior calendar year, and must make licensees’ annual reports public, except under certain clearly specified circumstances. According to individuals who helped negotiate the bill which created the CDDTL during 2002, the less expansive authority granted to DBO under the CDDTL relative to the CFLL was a negotiated compromise.

This bill proposes to begin aligning the two laws. It does so by amending the CDDTL to give the commissioner the same authority to require licensees to include information in annual reports under that law that she has to require information under the CFLL, and by making CDDTL annual reports public, to the same extent that CFLL annual reports are made public.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/21/17)

Consumers Union

OPPOSITION: (Verified 8/21/17)

None received

ARGUMENTS IN SUPPORT: Consumers Union supports the provision of the bill that would make payday loan annual reports public. “Under current law, payday licensees’ annual reports are confidential and exempt from public inspection. Without access to this information, the public cannot know how lenders compare in terms of their business practices – average interest rates, charge-offs and other important data points. Furthermore, current law restricts the DBO from requesting additional information beyond what’s in statute. For example, the DBO can obtain information on total number of transactions and dollar volume a licensee has made, but cannot ask how many loans a licensee makes on average to the same borrower in a given year – a crucial indicator of whether and to what extent their customers are falling into debt traps. AB 1636 would increase transparency by authorizing the publication of licensees’ annual reports, and would give the DBO authority to request additional information for inclusion in the reports. This will provide the DBO appropriate flexibility to monitor market trends and better discharge its obligation to protect consumers.”

ASSEMBLY FLOOR: 73-0, 5/30/17

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Chau, Chen, Choi, Eggman, Medina, Melendez

Prepared by:

8/22/17 16:01:09

**** END ****

SENATE COMMITTEE ON

Senator Tony Mendoza, Chair

2017 - 2018 Regular

Bill No: Hearing Date: July 12, 2017

Subject:

SUMMARY

This bill authorizes the Commissioner of the Department of Business Oversight (DBO; the commissioner) to impose specified penalties on California Finance Lenders Law (CFLL) licensees that fail to submit required information to DBO by the date it is due, makes public the annual reports that must be submitted to DBO by California Deferred Deposit Transaction Law (CDDTL) licensees, and authorizes the commissioner to include any information he or she reasonably requires in those annual reports.

DIGEST

Existing law

California Finance Lenders Law:

1. Authorizes the commissioner to make general rules and regulations and specific rulings, demands, and findings for the enforcement of the CFLL in addition to and within the general purposes of the CFLL (Financial Code Section 22150).
   
2. Requires each finance lender and broker licensee to file an annual report with the commissioner, giving the relevant information the commissioner reasonably requires concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. Provides that the individual annual reports required to be filed with the commissioner 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 persons; Financial Code Section 22159).
   
3. Requires each finance lender and broker licensee to make other special reports that may be required by the commissioner (Financial Code Section 22159).
   
4. Authorizes the commissioner to suspend or revoke the license of any licensee if that person fails to file the annual report required by Financial Code Section 22159 within ten days after notice by the commissioner that the report is due and not filed (Financial Code Section 22715).
   
5. Authorizes the commissioner to issue a citation to any licensee or other person that violates any provision of the CFLL or any rule or order issued pursuant to the CFLL, provides that each citation may contain an order to correct the violation or violations identified, and provides that each citation may assess an administrative fine not to exceed $2,500. In assessing the amount of the fine, the commissioner is required to give due consideration to the appropriateness of the amount of the fine with respect to factors including the gravity of the violation, the good faith of the person or licensees cited, and the history of previous violations (Financial Code Section 22707.5)
   

California Deferred Deposit Transaction Law:

1. Authorizes the commissioner to make general rules and regulations and specific rulings, demands, and findings for the enforcement of the CDDTL, in addition to and within the general purposes of the CDDTL (Financial Code Section 23015).
   
2. Requires each CDDTL licensee to file an annual report with the commissioner pursuant to procedures the commissioner shall establish and requires each licensee’s annual report to be kept confidential pursuant to specified sections of the Government Code (Financial Code Section 23026).
   
3. Requires the commissioner to use the annual reports submitted by CDDTL licensees to compile an annual consolidated report, which must be made available to the public. Both the annual report described in Number 7, above, and the consolidated report are required to include eight specific data elements (Financial Code Section 23026).
   
4. Authorizes the commissioner to suspend or revoke the license of any licensee if that person fails to file the annual report required by Section 23026 within ten days after notice by the commissioner that the report is due and not filed (Financial Code Section 23053).
   
5. Authorizes the commissioner to issue a citation to a licensee that is violating any provision of the CDDTL or any rule or order issued pursuant to the CDDTL, and authorizes the commissioner to accompany that citation with an order to desist and refrain and an assessment of an administrative penalty not to exceed $2,500 (Financial Code Section 23058).
   

This bill:

Finance Lenders Law:

1. Authorizes the commissioner to impose a penalty on any CFLL licensee who fails to do either of the following within the time period specified in any written demand of the commissioner:
   
   1. Make and file with the commissioner any report required by law or requested by the commissioner.
      
   2. Furnish any material information required by the commissioner to be included in any report required by law or requested by the commissioner.
      
2. Provides that the amount of the penalty imposed pursuant to the authority described in Number 1, immediately above, shall not exceed $100 per day for each of the first five days the report or information is overdue and shall not exceed $500 per day thereafter.
   
3. Establishes procedures through which CFLL licensees on whom penalties are imposed may request hearings to challenge those penalties, as specified.
   

Deferred Deposit Transaction Law:

1. Requires the commissioner to make the annual report submitted by each CDDTL licensee public.
   
2. Authorizes the commissioner to include any information he or she reasonably requires in the annual consolidated report he or she is required to make available to the public under the CDDTL.

COMMENTS

1. Purpose of the bill This bill is sponsored by the author to increase transparency about the payday lending industry and increase compliance with the requirement that CFLL licensees submit annual reports.
   
2. Background and Stated Need for the Bill: According to this bill’s author, the payday lending provisions of this bill will strengthen consumer protection by providing insight into the practices of individual payday lenders and their borrowers and by holding licensees accountable. This information will give the state a clearer picture about the payday loan industry and consumers’ habits in practice. The author intends that provision of this bill which amends the CFLL will result in increased compliance by licensees with the requirement to submit annual reports.
   
3. Comments:
   
   Finance Lenders Law Provision. Under the existing CFLL, the commissioner has broad authority to request information from CFLL licensees in the form of both annual reports and special reports. The commissioner is required to make public the annual reports submitted by licensees, unless a licensee that is not publicly traded requests that its balance sheet be kept confidential when its annual report is released. Furthermore, under the CFLL, if a licensee fails to submit a required report or fails to include required information in a report, the commissioner has clear authority to suspend or revoke that licensee’s license until the licensee submits the required information. The commissioner also has the authority to issue a citation and levy a fine on a licensee that fails to comply with any provision of the CFLL, including the requirement to submit a required report or include required information in a report. However, as the citation and fine authority provision is drafted, the commissioner appears to be required to set the amount of the fine at a single dollar amount up to $2,500; he or she does not appear to have the flexibility to set the amount of the fine at a single dollar amount per day for each day a violation occurs; furthermore, the maximum dollar amount of the fine is set at $2.500.
   
   This bill proposes to authorize the commissioner to impose a penalty of up to $100 per day for the first five days a required or requested report or other required or requested information is due and not submitted, and to increase that penalty to as much as $500 per day thereafter that the report or information is due and not submitted. This bill does not impose any cap on the total size of the penalty that the commissioner may impose on a licensee in accordance with the authority granted by the bill, nor is the bill clear on whether the days to which it refers are calendar days or business days. Amendments are suggested to clarify that penalties may be imposed for every business day a required report is late and to cap the maximum penalty that may be imposed on a licensee pursuant to this provision at $25,000. Once a licensee incurs a penalty of at least $25,000, license suspension or revocation may be a more appropriate way in which to encourage the submission of required information than additional monetary penalties.
   
   Amendments are also suggested to strike references to reports or to information in reports that is requested by the commissioner. The sections of the CFLL that govern report submission grant the commissioner the ability to require the submission of reports and to require the submission of information in those reports; these sections do not use the word request. Amendments are suggested to strike references to requests from the penalty provision, to alleviate confusion.
   
   Finally, amendments to this provision are suggested to condition the availability of penalty authority on a requirement that the commissioner provide licensees with at least 90 days’ notice before requiring that any new types of information be submitted. Language requiring a minimum of 90 days’ notice before allowing the commissioner to levy a penalty in connection with failure to submit newly requested information will not limit the ability of the commissioner to request information from his or her licensees on a very short time frame; instead, it will ensure that no penalty may be levied on a licensee that is given insufficient lead time in which to compile the information it is being asked to submit.
   
   Deferred Deposit Transaction Law Provisions. Under the existing CDDTL, the commissioner lacks the express authority he or she has under the CFLL to require licensees to make special reports. Furthermore, information submitted by CDDTL licensees in their annual reports must be kept confidential, while information submitted by CFLL licensees in their annual reports is public, except under certain clearly specified circumstances. According to individuals who helped negotiate the bill which created the CDDTL during 2002, the less expansive authority granted to DBO under the CDDTL relative to the CFLL was a negotiated compromise.
   
   This bill proposes to begin aligning the two laws. It does so by authorizing the commissioner to request additional information from CDDTL licensees within their annual reports and making public the CDDTL annual reports that are currently required to be kept confidential. However, as drafted, this bill gives the DBO commissioner greater authority to request information in annual reports than she currently has under the CFLL and fails to include the same privacy safeguards for nonpublicly traded persons that exist in the CFLL. Amendments are suggested to ensure that the authority granted to the commissioner to request additional information from CDDTL licensees and to make public the CDDTL annual reports is consistent with the same authority the commissioner has under the CFLL.
   
4. Should the Reporting Requirements of the CFLL and CDDTL Be Further Aligned? As stated immediately above, the provision of this bill that proposes to amend the CDDTL begins to align the reporting provisions of the CFLL and CDDTL. However, if this bill is enacted, the commissioner will continue to have far broader authority under the CFLL than she does under the CDDTL. For example, the DBO commissioner will have the express authority to require her licensees to make special reports under the CFLL, but not under the CDDTL. Furthermore, the DBO commissioner will have the authority to fine her licensees for failing to submit required information under the CFLL, but not under the CDDTL. Absent a compelling reason for these requirements to differ, it would appear sensible to align them; doing so would reduce confusion about the commissioner’s authority under both laws and treat licensees engaging in similar sorts of lending activity similarly.
   
   However, when Committee staff inquired whether more extensive amendments to align the two laws would be favorably received by the regulated community, significant concerns were raised. Interestingly, the concerns did not stem from the idea that giving the commissioner additional authority to request information under the CDDTL was unreasonable. Instead, the concerns relate to DBO’s relatively recent practice of requesting information beyond that which is required to be included in the CDDTL annual report, without consulting with industry regarding the practicality of capturing that information, and without clarifying exactly what information is being sought. According to industry representatives, lack of sufficient advance notice regarding the types of information being sought has led some licensees to spend significant time and effort manually compiling information that could easily have been captured electronically, if only the requirement to collect the data had been known early enough in the year for systems to be programmed to collect it. In other cases, confusion over exactly what information was being sought has led different licensees to answer the same question on a DBO survey differently, generating data of suspect quality.
   
   Before agreeing to give the commissioner additional authority to request information and impose penalties under the CDDTL, the regulated community is seeking a chance to work with the commissioner on ways to ensure that the specific information which is requested of them through surveys and in their annual reports is clear and is made known to them early enough in the year for them to capture that information.
   
5. Support: Consumers Union (CU) supports the provision of the bill that would make payday loan annual reports public. “Under current law, payday licensees’ annual reports are confidential and exempt from public inspection. Without access to this information, the public cannot know how lenders compare in terms of their business practices – average interest rates, charge-offs and other important data points. Furthermore, current law restricts the DBO from requesting additional information beyond what’s in statute. For example, the DBO can obtain information on total number of transactions and dollar volume a licensee has made, but cannot ask how many loans a licensee makes on average to the same borrower in a given year – a crucial indicator of whether and to what extent their customers are falling into debt traps. AB 1636 would increase transparency by authorizing the publication of licensees’ annual reports, and would give the DBO authority to request additional information for inclusion in the reports. This will provide the DBO appropriate flexibility to monitor market trends and better discharge its obligation to protect consumers.”
   
6. Opposition: Check Into Cash and Check ‘n Go oppose the payday lending provision of AB 1636 based on concerns about the proprietary issues the bill has the potential to create. “Competitors will be able to use private information to their advantage. Expanding current law to this catch all method is too broad and overreaching.”
   
7. Suggested Amendments
   
   1. Page 3, amend lines 24 through 32, as follows:
      
      23026. On or before March 15 of each year, beginning March 2006, each licensee shall file an annual report with the commissioner pursuant to procedures that the commissioner shall establish, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee within the state during the preceding calendar year for each licensed place of business. The licensee’s 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 persons. “Nonpublicly traded person” for purposes of this section means persons with securities owned by 35 or fewer individuals. The annual consolidated report shall be prepared by the commissioner and made available to the public. For the previous calendar year, these reports shall include the following and any other information the commissioner reasonably requires:
      
   2. Page 2, amend lines 13 through 17, as follows:
      
      (A) Make and file with the commissioner any report required by law or requested by the commissioner.
      (B) Furnish any material information required by the commissioner to be included in any report required by law or requested by the commissioner.
      
   3. Page 2, line 10, add the words “Subject to paragraph (2),” at the start of the line.
      
      Page 2, after line 17, insert:
      
      (2) (a) No penalty may be imposed on a licensee pursuant to this subdivision in connection with a report or information required to be submitted by a licensee pursuant to subdivision (a) of Section 22159, if the commissioner is requesting information that was not requested the prior year, and if a licensee is notified about the requirement to submit such new information less than 90 days before that information is due to the commissioner.
      (b) No penalty may be imposed on a licensee pursuant to this subdivision in connection with a report or information required to be submitted by a licensee pursuant to subdivision (b) of Section 22159, if a licensee is notified about the requirement to submit such report or information less than 90 days before it is due to the commissioner.
      
      Page 3, amend lines 1 through 5, as follows:
      
      (2) (3) The amount of the penalty imposed pursuant to this subdivision shall not exceed one hundred dollars ($100) for each business day for the first five business days the report or information is overdue, and thereafter shall not exceed five hundred dollars ($500) for each business day the report or information is overdue, not to exceed twenty-five thousand dollars ($25,000) in the aggregate.
      

POSITIONS

Support

Consumers Union

Oppose

Check Into Cash

Check ‘n Go

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1636

Author:(Aguiar-Curry)

As Introduced Ver:February 17, 2017

Majority vote

SUMMARY: Makes changes to the California Deferred Deposit Transaction Law requiring the Department of Business Oversight (DBO) to make public licensee's annual reports for inspection. Specifically, this bill allows the Commissioner of DBO (Commissioner) to require licensee's to include any other information in licensee's reports that the Commissioner deems reasonable.

EXISTING LAW: Requires licensees under the California Deferred Deposit Transaction Law, on or before March 15 of each year, beginning March 2006, to file an annual report with the Commissioner pursuant to procedures that the Commissioner shall establish. The licensee's annual report shall be kept confidential pursuant to Government Code Chapter 3.5 Division 7 of Title 1 (commencing with Section 6250) and any regulations adopted thereunder. The annual consolidated report shall be prepared by the Commissioner and made available to the public.

FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to DBO.

COMMENTS: Under the California Deferred Deposit Transaction Law, loan originators, also known as payday lenders, are required to file an annual report with the Commissioner. According to the author's office:

Payday lenders provide Californians with an important service; offering short term loans when people don't have money to cover their expenses or an urgent need. However, when this type of loan is used by lower-income families it can quickly snowball into a financial crisis. For this reason, it is critical that members of the payday lending industry offer their services in the most responsible way.

[DBO] is responsible for providing oversight of the payday lending industry to protect consumers by ensuring that financial service providers and products operate ethically and legally. DBO is also the first line of defense against those few businesses that may not have sufficient consumer practices and safeguards.

Under existing law, individual annual reports submitted from payday lending operators are exempt from the Public Records Act. This means that no member of the public – whether a consumer, public agency, or researcher – can request or view the information submitted by any licensee. Additionally, the Commissioner of the DBO has no power to ask that additional data be included in the report, even though the payday lending industry is constantly changing and is increasingly operating online.

AB 1636 does not seek to further regulate the payday lending industry, but it does increase transparency and the ability to monitor evolving practices and products by authorizing each licensee's submitted annual report to be made public. By allowing disaggregated information to be viewed by regulators and consumers, in addition to the consolidated summary report, AB 1636 will strengthen consumer protection by providing insight into the practices of individual payday lenders and their borrowers. This information will give the state a clearer picture about the payday loan industry and consumers' habits in practice.

Deferred Deposit Transaction Law: A payday loan, known more formally in California as a deferred deposit transaction, is a short-term loan in which a borrower writes a post-dated, personal check to a lender for a specified amount, which is capped by state law. The payday lender advances the borrower the amount on the check, less the fee, which is also capped by law. The payday lender does not cash the check at the time the loan is made. Both parties are aware that the borrower lacks sufficient funds to cover the check when the check is written. The assumption underlying the loan is that the borrower will repay the loan by the agreed-upon date, either by depositing sufficient funds in his or her checking account to cover the check, or by paying the payday lender in cash on the loan's due date, and having the lender return the original check to the borrower, without cashing it.

Under the California's payday loan law, any payday lender who makes a payday loan must be licensed. Each licensee may defer the deposit of a customer's personal check for up to 31 days. The face amount of the check presented by a borrower may not exceed $300, and the fee charged by the licensee may not exceed 15% of the face amount of the check ($45 on a $300 check). This statutorily capped fee must be expressed to borrowers in the form of an Annual Percentage Rate (APR). Given the short-term nature of payday loans (average is 17 days) the average APR is 411%. However, while the APR is high on a short-term product, the dollar costs of the fee cannot exceed 15% of the face amount of the check.

Licensees may charge one non-sufficient funds fee, capped at $15, for checks that are returned by a customer's financial institution. In addition, licensees may not directly or indirectly charge any additional fees in conjunction with a payday loan. Licensees may not enter into a payday loan with a customer who already has a payday loan outstanding and may not allow a customer to use one loan to pay off another. Licensees are also forbidden from accepting any collateral for a payday loan or making any payday loan contingent on the purchase of any goods or services. Each payday loan must be made pursuant to a written agreement. Licensees must clearly post their fees and charges at their business locations.

Arguments in Support:

Making data public that contributes to the Commissioner's annual consolidated report allows for greater transparency and accountability in government. Also, allowing the Commissioner to require additional information deemed reasonable insures the public receives all appropriate information.

Arguments in Opposition:

Concerns have been raised that the information lenders provide to the Commissioner is proprietary in nature and should not be made accessible to the public.

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0000345

Date of Hearing: May 10, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 1636

Author:(Aguiar-Curry) – As Introduced Ver:February 17, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill makes changes to the California Deferred Deposit Transaction Law requiring the Department of Business Oversight (DBO) to make public licensee’s annual reports for inspection. This bill also allows the Commissioner of DBO Commissioner to require licensee’s to include any other information in licensee’s reports that the Commissioner deems reasonable.

FISCAL EFFECT:

Minor and absorbable costs to DBO.

COMMENTS:

Background and Purpose. Under the California Deferred Deposit Transaction Law, loan originators, also known as payday lenders, are required to file an annual report with the Commissioner. According to the author’s office, “AB 1636 does not seek to further regulate the payday lending industry, but it does increase transparency and the ability to monitor evolving practices and products by authorizing each licensee’s submitted annual report to be made public. By allowing disaggregated information to be viewed by regulators and consumers, in addition to the consolidated summary report, AB 1636 will strengthen consumer protection by providing insight into the practices of individual payday lenders and their borrowers. This information will give the state a clearer picture about the payday loan industry and consumers’ habits in practice.”

Analysis Prepared by: Jessica Peters / APPR. / (916) 319-2081

Date of Hearing: April 24, 2017

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Matthew Dababneh, Chair

ABPCA Bill Id:AB 1636 (

Author:Aguiar-Curry) – As Introduced Ver:February 17, 2017

SUBJECT: California Deferred Deposit Transaction Law: licensee annual reports

SUMMARY: Makes changes to the California Deferred Deposit Transaction Law requiring the Department of Business Oversight (DBO) to make public licensee’s annual reports for inspection. Specifically, this bill allows the Commissioner of DBO (Commissioner) to require licensee’s to include any other information in licensee’s reports that the Commissioner deems reasonable.

EXISTING LAW: Requires licensees under the California Deferred Deposit Transaction Law, on or before March 15 of each year, beginning March 2006, to file an annual report with the Commissioner pursuant to procedures that the Commissioner shall establish. The licensee’s annual report shall be kept confidential pursuant to Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code and any regulations adopted thereunder. The annual consolidated report shall be prepared by the Commissioner and made available to the public.

FISCAL EFFECT: Unknown

COMMENTS: Under the California Deferred Deposit Transaction Law, loan originators, also known as payday lenders, are required to file an annual report with the Commissioner. According to the author’s office:

Payday lenders provide Californians with an important service; offering short term loans when people don’t have money to cover their expenses or an urgent need. However, when this type of loan is used by lower-income families it can quickly snowball into a financial crisis. For this reason, it is critical that members of the payday lending industry offer their services in the most responsible way.

[DBO] is responsible for providing oversight of the payday lending industry to protect consumers by ensuring that financial service providers and products operate ethically and legally. DBO is also the first line of defense against those few businesses that may not have sufficient consumer practices and safeguards.

Under existing law, individual annual reports submitted from payday lending operators are exempt from the Public Records Act. This means that no member of the public – whether a consumer, public agency, or researcher – can request or view the information submitted by any licensee. Additionally, the Commissioner of the DBO has no power to ask that additional data be included in the report, even though the payday lending industry is constantly changing and is increasingly operating online.

AB 1636 does not seek to further regulate the payday lending industry, but it does increase transparency and the ability to monitor evolving practices and products by authorizing each licensee’s submitted annual report to be made public. By allowing disaggregated information to be viewed by regulators and consumers, in addition to the consolidated summary report, AB 1636 will strengthen consumer protection by providing insight into the practices of individual payday lenders and their borrowers. This information will give the state a clearer picture about the payday loan industry and consumers’ habits in practice.

Deferred Deposit Transaction Law: A payday loan, known more formally in California as a deferred deposit transaction, is a short-term loan in which a borrower writes a post-dated, personal check to a lender for a specified amount, that is capped by state law. The payday lender advances the borrower the amount on the check, less the fee, which is also capped by law. The payday lender does not cash the check at the time the loan is made. Both parties are aware that the borrower lacks sufficient funds to cover the check when the check is written. The assumption underlying the loan is that the borrower will repay the loan by the agreed-upon date, either by depositing sufficient funds in his or her checking account to cover the check, or by paying the payday lender in cash on the loan’s due date, and having the lender return the original check to the borrower, without cashing it.

Under the California's payday loan law, any payday lender who makes a payday loan must be licensed. Each licensee may defer the deposit of a customer’s personal check for up to 31 days. The face amount of the check presented by a borrower may not exceed $300, and the fee charged by the licensee may not exceed 15% of the face amount of the check ($45 on a $300 check). This statutorily capped fee must be expressed to borrowers in the form of an Annual Percentage Rate (APR). Given the short-term nature of payday loans (average is 17 days) the average APR is 411%. However, while the APR is high on a short-term product, the dollar costs of the fee cannot exceed 15% of the face amount of the check.

Licensees may charge one non-sufficient funds fee, capped at $15, for checks that are returned by a customer’s financial institution. In addition, licensees may not directly or indirectly charge any additional fees in conjunction with a payday loan. Licensees may not enter into a payday loan with a customer who already has a payday loan outstanding and may not allow a customer to use one loan to pay off another. Licensees are also forbidden from accepting any collateral for a payday loan or making any payday loan contingent on the purchase of any goods or services. Each payday loan must be made pursuant to a written agreement. Licensees must clearly post their fees and charges at their business locations.

Arguments in Support:

Making data public that contributes to the Commissioner’s annual consolidated report allows for greater transparency and accountability in government. Also, allowing the Commissioner to require additional information deemed reasonable insures the public receives all appropriate information.

Arguments in Opposition:

Concerns have been raised that the information lenders provide to the Commissioner is proprietary in nature and should not be made accessible to the public.

REGISTERED SUPPORT / OPPOSITION:

Support

Consumers Union of U.S., Inc.

Opposition

None on file

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081