AB 784: Pilot Program for Increased Access to Responsible Small Dollar Loans.

Session Year: 2017-2018
House: Assembly

Version:

Existing

(1)Existing law, the California Finance Lenders Law, generally provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight and makes a willful violation of its provisions a crime. That law, until Existing law prescribes limits on the maximum rate of charges and administrative fees that a licensee may contract for, and receive, on loans of up to $2,500.

The California Finance Lenders Law, until January 1, 2023, establishes the Pilot Program for Increased Access to Responsible Small Dollar Loans, which requires licensees and other entities that wish to participate in the program to file an application and pay a specified fee to the commissioner to participate in the program. The program authorizes a licensee approved by the commissioner to participate in the program to impose specified alternative interest rates and charges, including an administrative fee and delinquency fees, on unsecured loans of at least $300 and less than $2,500, subject to certain requirements. The program permits a licensee to use a finder, which is defined as an entity that, at its physical location for business, brings together a borrower and a licensee to negotiate a loan under the program. The program requires the commissioner, annually until July 1, 2021, as specified, to post a report on his or her Internet Web site summarizing utilization of the program. Existing law requires licensed finance lenders to perform specified actions when a loan is repaid, including providing a borrower with certain documents marked paid or an optical reproduction of them.

This bill would permit a licensee that consummates electronically an unsecured loan under the Pilot Program for Increased Access to Responsible Small Dollar Loans to satisfy the requirements to provide a borrower with documents marked-paid-by providing the borrower or person making final payment with a receipt, as specified. The bill would increase the amount of a permissible loan under the program from $2,500 to $5,000, and revise the statement of legislative findings for the program. The bill would revise the term finder to instead be referral partner, would make various conforming changes in this regard, and would permit a referral agents activities to be done through other means and not necessarily at his or her physical business location. The bill would delete other provisions connected to a finder who uses an electronic access point, as specified, or personally contacts a borrower at a physical business location, among other things.The bill would also eliminate the requirement that a licensee provide a borrower of a consummated loan a written copy of a specified disclosure notice within 2 weeks of consummation. The bill would revise requirements on compensating finders by eliminating a limit on total compensation paid over the life of a loan. The bill would prescribe a method of calculating the permitted compensation to be paid to a referral partner to base it on total compensation in a single calendar year, as specified. The bill would also permit referral partners that receive borrower loan payments to be paid a servicing fee of no more than $2 per payment for the duration of the loan. The bill would revise the content of the report that the Commissioner of Business Oversight is required to provide to include certain information on borrowers who had credit scores when they obtained loans.

This bill would apply the prescribed limits on charges and administrative fees that a licensee under the California Finance Lenders Law may contract for, and receive, described above, to loans of up to $5,000.

This bill would delete the repeal of the Pilot Program for Increased Access to Responsible Small Dollar Loans, thereby extending the program indefinitely. The bill would increase the amount of a permissible loan under the program from $2,500 to $5,000, make conforming changes, and revise the statement of legislative findings for the program.

By broadening the definition of a crime, this bill would impose a state-mandated local program.

(2)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.

Discussed in Hearing