SB 297: California Finance Lenders Law: regulation of lead generators.
- Session Year: 2017-2018
- House: Senate
- Latest Version Date: 2017-04-17
(1)The California Finance Lenders Law 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. Existing law regulates the charges a licensee may impose or receive on loans it makes.
This bill would expand the application of that law to include finders. lead generators. The bill would prohibit a person from engaging in business as a finder, lead generator, defined to include any person who, for compensation or in expectation of compensation, helps connect facilitate a loan by introducing a prospective borrower and finance prospective lender regarding in connection with certain loan activities, without first registering with the commissioner. The bill would require the commissioner to establish timelines and fees for finder lead generator registration and renewals, and would mandate that specified minimum information be required for applicants seeking registration, including the name, business address, and licensing details of the finder lead generator and his or her employees who are responsible for that finders lead generators activities, and a list of activities the finder lead generator would perform. The bill would authorize the commissioner, upon providing reasonable notice and an opportunity to be heard, to deny an application for registration as a finder lead generator for specified reasons, including if a false statement has been made by the applicant. The bill would permit the commissioner to order the suspension or revocation of a finders lead generators registration upon failure to pay a required fee or assessment by the specified due date and would prohibit a finder from engaging in specific activities, including counseling or providing advice to a borrower. date. The bill also would prohibit a finder, lead generator, during any period when its registration is revoked or suspended, from conducting any business unless permitted by the commissioner.
The bill would authorize a licensee to compensate a registered finder lead generator for that finders lead generators activities, subject to various requirements, including entering into a written agreement clearly describing the services to be performed, and complying with the applicable statutory provisions governing those transactions. The bill also would require each licensee that uses the services of a lead generator to develop and implement policies and procedures to, among other things, exercise oversight over the business practices of the lead generator. The bill would make a licensee that pays a lead generator for services in connection with a loan offered subject to discipline by the commissioner in connection with any misrepresentation made or deceptive act or practice engaged in by that lead generator. The bill would further require finders lead generators to develop and implement policies and procedures to respond to questions raised by borrowers and prospective borrowers and to provide specified disclosure information to consumers about the nature of the finders business as a loan matching/referral/comparison service registered lead generators business as a registrant with the Department of Business Oversight.
(2)Existing law prohibits a person from making a materially false or misleading statement or representation about the terms or conditions of a borrowers loan, when making or brokering that loan.
This bill additionally would prohibit a person from making a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding lead generation activities subject to that division. the act. The bill also would make related and conforming changes, including authorizing the commissioner to take various enforcement actions upon finding that a finder lead generator has violated the act. By expanding the definition of a crime, the bill would impose a state-mandated local program.
Existing law requires finance lenders, brokers, and mortgage loan originator licensees to preserve their books, accounts, and records for at least 3 years after making the final entry on any loan recorded in those documents.
This bill also would require finance lenders that utilize the services of a finder lead generator to maintain their records of dealings with that finder lead generation for at least 3 years and would require finders lead generators to maintain records related to finding lead generation activities on behalf of lenders for at least 3 years following the creation of those documents. The bill would specify that these records requirements do not require the maintenance or storage of personal identification for any borrower, except that each finder lead generator that does not maintain or store personal information must have a method by which the identity of individual consumers borrowers can be reconstructed, if requested by the commissioner. The bill also would make it a violation of the act to compensate a lead generator in connection with any service provided by that lead generator, where the lead generator has made a materially false or misleading statement or engaged in other unlawful, deceptive, misleading, or unfair acts or practices, as specified.
The bill would include related findings of the Legislature regarding its intent regarding the regulation of lead generators.
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.
(1)The California Finance Lenders Law 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. Existing law regulates the charges a licensee may impose or receive on loans it makes.
This bill would expand the application of that law to include finders, and finders. The bill would prohibit a person from engaging in business as a finder, defined to include any person who who, for compensation or in expectation of compensation, helps bring connect a prospective borrower and finance lender together regarding certain loan activities, without first registering with the commissioner. The bill would require the commissioner to establish timelines and fees for finder registration and renewals, and would mandate that specified minimum information be required for applicants seeking registration, including the name, business address, and licensing details of the finder and his or her employees who are responsible for that finders activities, and a list of activities the finder would perform on behalf of lenders. perform. The bill would authorize the commissioner commissioner, upon providing reasonable notice and an opportunity to be heard, to deny an application for registration as a finder for specified reasons, including if a false statement has been made by the applicant. The bill would permit the commissioner to order the suspension or revocation of a finders registration upon failure to pay a required fee or assessment by the specified due date and would prohibit a finder from engaging in specific activities, including counseling or providing advice to a borrower, and would also borrower. The bill also would prohibit a finder, during any period when its registration is revoked or suspended, from conducting any business unless permitted by the commissioner.
The bill would authorize a licensee to compensate a registered finder for that finders activities, subject to various requirements, including entering into a written agreement clearly describing the services to be performed, and complying with the applicable statutory provisions governing those transactions. The bill would further require finders to provide specified disclosure information to consumers about the nature of the finders business as an independent a loan matching/referral/comparison service registered with the Department of Business Oversight.
(2)Existing law prohibits a person from making a materially false or misleading statement or representation about the terms or conditions of a borrowers loan, when making or brokering that loan.
This bill additionally would prohibit a person from making a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to that division. The bill also would make related and conforming changes, including authorizing the commissioner to take various enforcement actions upon finding that a finder has violated the act. By expanding the definition of a crime, the bill would impose a state-mandated local program.
Existing law requires finance lenders, brokers, and mortgage loan originator licensees to preserve their books, accounts, and records for at least 3 years after making the final entry on any loan recorded in those documents.
This bill also would require finance lenders that utilize the services of a finder to maintain their records of dealings with that finder for at least 3 years and would require finders to maintain records related to finding activities on behalf of lenders for at least 3 years following the creation of those documents. The bill would specify that these records requirements do not require the maintenance or storage of personal identification for any borrower, except that each finder that does not maintain or store personal information must have a method by which the identity of individual consumers can be reconstructed, if requested by the commissioner.
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.
(1)The California Finance Lenders Law 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. Existing law regulates the charges a licensee may impose or receive on loans it makes.
This bill would expand the application of that law to include finders, and would prohibit a person from engaging in business as a finder, defined to include any person who helps bring a prospective borrower and finance lender together regarding certain loan activities, without first registering with the commissioner. The bill would require the commissioner to establish timelines and fees for finder registration and renewals, and would mandate that specified minimum information be required for applicants seeking registration, including the name, business address, and licensing details of the finder and his or her employees who are responsible for that finders activities, and a list of activities the finder would perform on behalf of lenders. The bill would authorize the commissioner to order the suspension or revocation of a finders registration upon failure to pay a required fee or assessment by the specified due date and would prohibit a finder from engaging in specific activities, including counseling or providing advice to a borrower, and would also prohibit a finder, during any period when its registration is revoked or suspended, from conducting any business unless permitted by the commissioner.
The bill would authorize a licensee to compensate a registered finder for that finders activities, subject to various requirements, including entering into a written agreement clearly describing the services to be performed, and complying with the applicable statutory provisions governing those transactions. The bill would further require finders to provide specified disclosure information to consumers about the nature of the finders business as an independent loan matching/referral/comparison service registered with the Department of Business Oversight.
(2)Existing law prohibits a person from making a materially false or misleading statement or representation about the terms or conditions of a borrowers loan, when making or brokering that loan.
This bill additionally would prohibit a person from making a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to that division. The bill also would make related and conforming changes, including authorizing the commissioner to take various enforcement actions upon finding that a finder has violated the act. By expanding the definition of a crime, the bill would impose a state-mandated local program.
Existing law requires finance lenders, brokers, and mortgage loan originator licensees to preserve their books, accounts, and records for at least 3 years after making the final entry on any loan recorded in those documents.
This bill also would require finance lenders that utilize the services of a finder to maintain their records of dealings with that finder for at least 3 years and would require finders to maintain records related to finding activities on behalf of lenders for at least 3 years following the creation of those documents.
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.
(a)It is the intent of the Legislature to amend the California Finance Lenders Law to recognize the existence of, and to regulate, persons whose function is limited to bringing parties to a loan transaction together so that those parties may negotiate their own loan contract, and to distinguish the acts of these persons from the acts of loan brokers. The term lead generator, as used in this act, is intended to carry the same meaning as the term finder, as used in Tyrone v. Kelley (1973) 9 Cal.3d 1, and other related court opinions.
(b)It is the intent of the Legislature that the definitions in this act be liberally construed to further the purposes of the act.
(c)Nothing in this act is intended to extend the scope or coverage of the California Finance Lenders Law to any entity currently exempt under California or federal law from licensing under the California Finance Lenders Law, nor to extend the scope of the Finance Lenders Law to any transaction not currently subject to that law.
SECTION 1.SEC. 2.Section 22009.5 is added to the Financial Code, to read:22009.5.Finance broker means any person who brings a prospective borrower and a finance lender together, and who is engaged in the business of performing one or both of the following activities: activities for compensation, or in expectation of compensation, from a finance lender or borrower:
(a)Matching a prospective borrower with a finance lender, using information provided by both parties.
(1)(b)Negotiating the price, length, or any other loan term between a licensee finance lender and a prospective borrower that may be applicable to the borrower.
(2)Advising a prospective borrower as to any loan term. Providing financial education or information of a general nature to a prospective borrower shall not be considered advising.SEC. 2.SEC. 3.Section 22010.5 is added to the Financial Code, to read:22010.5.Finder Lead generator means any person who, for compensation or in expectation of compensation, helps facilitate a loan subject to this division by performing one or more of the following activities for another or others:
(a)Collecting Soliciting or collecting nonpublic personal identification information, such as social security number, tax identification number, bank account number, bank routing number, or other nonpublic personal identification information, from prospective borrowers in anticipation of selling or submitting the information to one or more finance lenders.
(b)Introducing or connecting prospective borrowers and prospective lenders after comparing prospective borrowers attributes with prospective lenders preferences. preferences, in anticipation of compensation by prospective lenders.
(c)Offering to the public a means through which the finder lead generator compiles and publishes comparison information on various loans made pursuant to this division, including services that allow consumers borrowers to contact finance lenders through links on the finders lead generators Internet Web site or comparable technological means.
(d)Delivering disclosures to borrowers or prospective borrowers that are required pursuant to this division. (e)Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower that has been either prepared by a finance lender or reviewed and approved in writing by that lender. A finder may discuss that information with a prospective borrower in general terms, but may not engage in brokerage activity without being licensed as a finance broker, as defined in Section 22009.5.(f)Notifying a prospective borrower of the information needed to complete an application for a loan subject to this division, without providing counseling or advice to a prospective borrower.(g)Contacting a finance lender on behalf of a prospective borrower to determine the status of a prospective borrowers loan application.(h)Communicating a response that is returned by a finance lenders automated underwriting system to a borrower or a prospective borrower.(i)Obtaining a borrowers signature on documents prepared by a finance lender and delivering final copies of the documents to the borrower.(d)Soliciting or collecting nonpublic personal information from prospective borrowers in anticipation of selling or submitting that information to one or more lead generators.
(e)Purchasing, soliciting, or otherwise acquiring nonpublic personal information from a lead generator in anticipation of selling or submitting that information to one or more finance lenders.
SEC. 3.SEC. 4.Section 22010.6 is added to the Financial Code, to read:22010.6.The following shall not be deemed to be finance brokers or finders lead generators and may engage in the activities specified below in connection with loans subject to this division, without the requirement for licensure or regulation pursuant to this division:
(a)A person who is not engaged in the business of a broker or a finder, lead generator, and whose activities in connection with the referral of introduction of prospective borrowers and prospective lenders regarding loans subject to this division are performed on no more than an occasional basis.
(b)A person who disseminates, places, posts, or distributes advertising or promotional information or materials pertaining to loans on behalf of licensees and does not otherwise engage in the activities of a broker or a finder. lead generator.
(c)A person providing financial education or information of a general nature to a prospective borrower.
(d)A credit reporting agency that furnishes a consumer credit report to a finance lender.
SEC. 5.Section 22107 of the Financial Code is amended to read:22107.(a)Each finance lender and broker 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 licensees 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). (d).
(b)Each registered lead generator shall pay to the commissioner its pro rata share of all costs and expenses 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 division in the year in which the assessment is made.
(b)(c)On or before the 30th day of September in each year, the commissioner shall notify each licensee and each registrant 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)(d)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)(e)If a licensee fails to pay the assessment on or before the 31st day of October, the commissioner may by order summarily suspend or revoke the certificate issued to the licensee. If, after an order is made, a request for 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 or broker 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)(f)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 and for lead generator registrations and registration renewals under this division.
(f)(g)Notwithstanding subdivisions (a) to (e), (f), inclusive, the commissioner may by rule require licensees to pay assessments through the Nationwide Mortgage Licensing System and Registry.
SEC. 6.Section 22112 of the Financial Code is amended to read:22112.(a)A Each licensee and registrant 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, locations or registrants with multiple locations of business, 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 or consumers as the result of a licensees noncompliance with the requirements of this division.
(b)When an action is commenced on a licensees or registrants bond, the commissioner may require the filing of a new bond. Immediately upon recovery of any action on the bond, the licensee or registrant 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.
SEC. 4.SEC. 7.Section 22113 is added to the Financial Code, to read:22113.(a)No person may engage in the business of a finder lead generator without first registering as a finder lead generator with the commissioner.
(b)An application for registration as a finder lead generator under this division shall be in the form and contain the information the commissioner may by rule or order require. The following information shall be required of applicants for registration, at a minimum:
(1)The name, business address, and licensing details, if applicable, of the finder lead generator and all physical locations and Internet Web site addresses from which the finder lead generator will engage in activities subject to this division.
(2)The name and contact information for an employee of the finder lead generator who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the finder lead generator and lenders subject to this division.
(3)The name and contact information for one or more employees of the finder lead generator who are responsible for that finders finding lead generators activities subject to this division.
(4)A list of the activities the finder lead generator will perform subject to this division.
(c)The commissioner shall, by rule, establish the timelines and fees applicable to applicants for original finder lead generator registrations and annual renewals.
(d)If a registered finder lead generator fails to pay a required fee or assessment by the due date specified by the commissioner, the commissioner may by order summarily suspend or revoke the finders lead generators registration. If, after an order is made, a request for 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 registration is revoked or suspended, a finder lead generator 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 registration shall not affect the powers of the commissioner as provided in this division.
SEC. 5.SEC. 8.Section 22114 is added to the Financial Code, to read:22114.(a)Upon reasonable notice and opportunity to be heard, the commissioner may deny an application for a registration as a finder lead generator for either of the following reasons:
(1)A false statement of a material fact has been made in the application.
(2)The commissioner has grounds to believe that approval is likely to result in harm to the public.
(b)An application for registration as a finder lead generator shall be considered withdrawn 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 registration with the required fees, either issue a registration 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. If the commissioner fails to issue a registration or file a statement of issues within 60 days from the filing of a full and complete application for a registration with the required fees, an applicant for registration may operate provisionally, until the time the commissioner issues a registration or files a statement of issues.
SEC. 6.SEC. 9.Section 22152 of the Financial Code is amended to read:22152.(a)A finance lender or broker 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 location at which a registered finder lead generator engages in finding activities subject to the provisions of this division shall not be considered a place of business of the licensee. a licensee that consummates a loan with a borrower using the services of that lead generator, unless that licensee otherwise engages in business at that location.
SEC. 7.SEC. 10.Section 22157 of the Financial Code is amended to read:22157.(a)Finance lender, broker, and mortgage loan originator licensees shall preserve their books, accounts, and records, including cards used in the card system, if any, for at least three years after making the final entry on any loan recorded therein.
(b)Each finance lender that utilizes the services of a finder lead generator shall maintain records of its dealings with that finder, lead generator, including agreements, contracts, books, accounts, and records, for at least three years following the creation of those documents.
(c)Each finder lead generator that is compensated by a lender licensed under this division shall maintain records related to its finding lead generation activities for at least three years following the creation of those documents.
(d)Subdivisions (b) and (c) shall not be deemed to require the maintenance or storage of personal identification information for any borrower; however, each finder lead generator that does not maintain or store personal identification information shall have a method by which the identity of individual consumers borrowers can be reconstructed, if requested by the commissioner.
(e)It shall be a violation of this division to compensate a lead generator in connection with any services provided by that lead generator, or in connection with the referral of any borrower or prospective borrower by that lead generator, where the lead generator has made any materially false or misleading statement to a borrower or prospective borrower or has engaged in any unlawful, deceptive, misleading, or unfair act or practice in connection with that service or loan.
SEC. 11.Section 22159 of the Financial Code is amended to read:22159.(a)Each finance lender and broker licensee and each lead generator registrant shall file an annual report with the commissioner, on or before the 15th day of March, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee or registrant 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 persons. Nonpublicly traded person for purposes of this section means persons with securities owned by 35 or fewer individuals. The report shall be made under oath and in the form prescribed by the commissioner.
(b)A licensee or registrant shall make other special reports that may be 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 his or her employer pursuant to subdivision (c).
SEC. 8.SEC. 12.Section 22161 of the Financial Code is amended to read:22161.No person subject to this division shall do any of the following:
(a)Make a materially false or misleading statement or representation to a borrower about the terms or conditions of that borrowers loan, when making or brokering the loan.
(b)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the a prospective borrower may qualify, when engaging in finding lead generation activities.
(c)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, 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.
(d)Commit an act in violation of Section 1695.13 of the Civil Code.
(e)Engage in any act in violation of Section 17200 of the Business and Professions Code.
(f)Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party.
(g)Commit an act that constitutes fraud or dishonest dealings.
SEC. 9.SEC. 13.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 or a registered finder lead generator 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 his or her 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, mortgage loan originator, or a registered finder, lead generator, and from engaging in any business activity on the premises where a licensed finance lender, broker, mortgage loan originator, or a registered finder lead generator is conducting its business. This subdivision shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a licensed finance lender, broker, or mortgage loan originator.
SEC. 10.SEC. 14.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 from any position of employment, management, or control any finance lender, broker, mortgage loan originator, finder, lead generator, 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, mortgage loan originator, or finder, lead generator, 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 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, mortgage loan originator, or finder, lead generator, and from engaging in any business activity on the premises where a finance lender, broker, mortgage loan originator, or finder lead generator is conducting business.
SEC. 11.SEC. 15.Section 22173 is added to the Financial Code, to read:22173.A licensee may compensate a registered finder lead generator for engaging in finding lead generation activities, subject to all of the following requirements:
(a)Each licensee wishing to engage the services of a finder lead generator shall enter into a written agreement with that finder lead generator clearly describing the services to be performed.
(b)Each agreement between a licensee and a finder lead generator shall include provisions requiring the finder lead generator to do all of the following:
(1)Register with the commissioner in accordance with this division.
(2)Comply with applicable provisions of this division and with rules promulgated and orders issued by the commissioner to implement those provisions.
(3)Retain and produce records of all transactions conducted with California residents as required by Section 22157.
(c)Each licensee shall exercise oversight over each of its finders compliance with the provisions of this division and shall maintain the records documenting its oversight efforts. A(c)A licensee that compensates lead generators shall not charge any of its borrowers a fee attributable to the licensees costs of lead generation.
(d)A licensee shall not compensate a finder lead generator that is not registered pursuant to this division in connection with a loan made pursuant to this division.
SEC. 16.Section 22173.5 is added to the Financial Code, to read:22173.5.(a)Each licensee that uses the services of a lead generator shall develop and implement policies and procedures reasonably intended to do all of the following:
(1)Exercise oversight over the business practices and advertising and marketing claims of the lead generator.
(2)Monitor borrower complaints about the lead generator.
(3)Ensure the lead generators compliance with the provisions of this division.
(4)Refrain from using leads generated through false, misleading or deceptive business or advertising practices.
(b)A licensee that pays compensation to a lead generator in connection with a loan offered pursuant to this division shall be subject to discipline by the commissioner in connection with any misrepresentation made or deceptive act or practice engaged in by that lead generator in connection with that loan.
(c)Nothing in this division is intended to authorize any conduct that is subject to subdivision (a) of Section 23005, or that is otherwise prohibited by any provision of this division or other law of this state or the federal government.
SEC. 12.SEC. 17.Section 22174 is added to the Financial Code, to read:22174.(a)At Each lead generator shall develop and implement policies and procedures to respond to questions raised by borrowers and prospective borrowers and to address complaints from borrowers and prospective borrowers as soon as reasonably practicable.
(b)At the time a finder lead generator receives an inquiry or application from a consumer borrower for a loan subject to this division, the finder lead generator shall provide the following statement to the consumer borrower in no smaller than 10-point type, or electronically in a similarly clear and conspicuous manner, a form that allows the statement to be printed: printed and shall ask the borrower to acknowledge receipt of the statement:
[Name of finder] is a loan matching/referral/comparison service You are not submitting your information directly to a lender. [Name of lead generator] is a lead generator registered with the California Department of Business Oversight. [Name of finder] We may disclose or sell your information to one or more lenders or other lead generators, at no direct cost to you, with the goal of helping you obtain the financing you are seeking. We also may be compensated by lenders in exchange for loan referrals, for featured placement of certain sponsored products and services, or for your clicking on certain links posted on an Internet Web site. You may receive separate communications from one or more lenders based on the information we have collected from you. The financing you are offered may not be the best fit for you or provide you with the most favorable loan terms for your circumstances. It is your responsibility to evaluate any loan you may be offered and determine if it is right for you. If you have questions about the services we perform, you may contact us at [telephone number or email address at which finder lead generator may be reached] or [email address at which finder may be reached]. If you wish to report a complaint about [Name of finder], lead generator], you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(b)
(c)At the time a lender licensed under this division approves an application for a loan subject to this division from a borrower who has been referred to it directly by a finder, lead generator, the lender shall provide the following statement to the borrower in no smaller than 10-point type, or electronically in a similarly clear and conspicuous manner in a form that allows that statement to be printed: printed, and shall ask the borrower to acknowledge receipt of the statement:
[Name of licensed lender], a lender licensed under the California Finance Lenders Law, has approved you for a loan based on information you provided to a third party working on our behalf. The details of the loan we are prepared to extend to you are described in accompanying documents. IF YOU ACCEPT THE LOAN, [NAME OF LICENSED LENDER] WILL BECOME YOUR LENDER. We may compensate the third party from which we obtained your information for their services in referring you to us. If you have any questions about your loan, now or in the future, you should direct those questions to us by [insert at least two different ways in which a borrower may contact the lender]. If you wish to report a complaint regarding this loan transaction, you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(c)
(d)If a loan applicant directs questions about a loan to a finder, lead generator, which the loan the finder lead generator is not permitted to answer, the finder lead generator shall make a good faith effort to assist the applicant in making direct contact with the lender before the loan is consummated. This good faith effort shall, at a minimum, consist of assisting the applicant in communicating with the licensee as soon as reasonably practicable, which shall at a minimum include a two-way communication. For purposes of this section, two-way communication means telephone, electronic mail, or another form of communication that allows the applicant to communicate with the licensee. lender.
(e)A licensee that uses the services of one or more lead generators shall develop and implement policies and procedures to respond to questions raised by prospective borrowers and borrowers about loans made using lead generators and to address customer complaints as soon as reasonably practicable.
(f)A licensee that uses the services of one or more lead generators shall not treat a loan as consummated or fund a loan until the licensee has completed a two-way communication with the prospective borrower. Sending a voicemail or electronic message to the applicant, without a prior or subsequent response from the prospective borrower, shall not constitute a two-way communication.
SEC. 13.SEC. 18.Section 22175 is added to the Financial Code, to read:22175.(a)A finder lead generator shall comply with all laws, rules, and orders applicable to licensees under this division, which impose requirements regarding the duty to safeguard nonpublic personal financial information. information, including, but not limited to, the California Financial Information Privacy Act (Division 1.4 (commencing with Section 4050)).
(b)A lead generator shall not solicit or collect nonpublic personal information from or about a consumer unless that nonpublic personal information is reasonably necessary to perform the activities set forth in Section 22010.5.
(b)Nonpublic personal financial information collected from a borrower by a finder in connection with a loan request or application may not be disclosed to or used by any third party, unless authorized by the borrower electronically or in writing, or unless required or permitted by applicable law.SEC. 14.SEC. 19.Section 22176 is added to the Financial Code, to read:22176.A finder may lead generator shall not do any of the following:
(a)Engage in the business of a finder lead generator without first registering as a finder lead generator in accordance with Section 22113.
(b)Enter into a written agreement with a licensee that is not in good standing with the commissioner at the time that agreement is signed or with an unlicensed person that is subject to a final desist and refrain order for engaging in unlicensed activities at the time that agreement is signed.
(c)Provide marketing materials that are specific to a lender or a lenders specific loan offerings without prior approval of the material substance of those materials by that lender.
(d)Engage in unsolicited door-to-door or telephonic contact with prospective borrowers.
(d)(e)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding lead generation activities.
(e)(f)Use or disclose to any third party a prospective borrowers nonpublic personal identification information without first obtaining the borrowers consent. consent, except as provided in the California Financial Information Privacy Act.
SEC. 15.SEC. 20.Section 22700 of the Financial Code is amended to read:22700.(a)Finance lender and broker licenses and finder lead generator registrations 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 or registration becomes effective 30 days after receipt of an application to surrender the license or registration 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 or registration becomes effective at the time and upon the conditions that the commissioner determines.
SEC. 16.SEC. 21.Section 22701 of the Financial Code is amended to read:22701.For the purpose of discovering violations of this division or securing information required by him or her in the administration and enforcement of this division, the commissioner may at any time investigate the loans 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, or finder lead generator 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 representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of all these persons.
SEC. 17.SEC. 22.Section 22704 of the Financial Code is amended to read:22704.The power of investigation and examination by the commissioner is not terminated by the surrender, suspension, or revocation of any license or registration issued by him or her.
SEC. 18.SEC. 23.Section 22705 of the Financial Code is amended to read:22705.Whenever the commissioner deems it necessary for the general welfare of the public, he or she has continuous authority to exercise the powers set forth in this division whether or not an application for a license or registration has been filed with the commissioner, any license or registration has been issued, or if issued, has been surrendered, suspended, or revoked.
SEC. 19.SEC. 24.Section 22707 of the Financial Code is amended to read:22707.(a)The cost of each examination of a licensee, finder, lead generator, or other person subject to this division shall be paid to the commissioner by the licensee, finder, lead generator, or person examined, and the commissioner may maintain an action for the recovery of the cost in any court of competent jurisdiction. In determining the cost of an examination, the commissioner may use the estimated average hourly cost for all persons performing examinations of licensees, finders, lead generators, or other persons subject to this division for the fiscal year.
(b)For the purpose of this section only, no person other than a licensee or a finder lead generator shall be deemed to be a person subject to this division until the person is determined to be a person subject to this division by an administrative hearing in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code or by a judicial hearing in any court of competent jurisdiction.
SEC. 20.SEC. 25.Section 22707.5 of the Financial Code is amended to read:22707.5.(a)If, upon inspection, examination, or investigation, the commissioner has cause to believe that a licensee, finder, lead generator, or other person is violating any provision of this division or any rule or order thereunder, the commissioner or his or her designee, may issue a citation to the licensee or person in writing, describing with particularity the basis of the citation. Each citation may contain an order to correct the violation or violations identified and provide a reasonable time period or periods by which the violation or violations must be corrected. In addition, each citation may assess an administrative fine not to exceed two thousand five hundred dollars ($2,500) that shall be deposited in the State Corporations Fund. In assessing a fine, the commissioner shall 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, finder, lead generator, or licensee cited, and the history of previous violations. A citation issued or a fine assessed pursuant to this section, while constituting punishment for a violation of law, shall be in lieu of other administrative discipline by the commissioner for the offense or offenses cited, and the citation and fine payment thereof by a licensee or finder lead generator shall not be reported as disciplinary action taken by the commissioner.
(b)Notwithstanding subdivision (a), nothing in this section shall prevent the commissioner from issuing an order to desist and refrain from engaging in a specific business or activity or activities, or an order to suspend all business operations to a person, finder, lead generator, or licensee who is engaged in or who has engaged in continued or repeated violations of this division. In any of these circumstances, the sanctions authorized under this section shall be separate from, and in addition to, all other administrative, civil, or criminal remedies.
(c)If, within 30 days from the receipt of the citation, the licensee, finder, lead generator, or person cited fails to notify the department that he or she intends to request a hearing as described in subdivision (d), the citation shall be deemed final.
(d)Any hearing under this section shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(e)After the exhaustion of the review procedures provided for in this section, the commissioner may apply to the appropriate superior court for a judgment in the amount of the administrative fine and an order compelling the cited licensee, finder, lead generator, or person to comply with the order of the commissioner. The application, which shall include a certified copy of the final order of the commissioner, shall constitute a sufficient showing to warrant the issuance of the judgment and order.
SEC. 21.SEC. 26.Section 22710 of the Financial Code is amended to read:22710.The commissioner may upon three days notice and a hearing, suspend any license or registration for a period not exceeding 30 days, pending investigation.
SEC. 22.SEC. 27.Section 22711 of the Financial Code is amended to read:22711.Any licensee may surrender any license, and any finder lead generator may surrender a registration, by delivering to the commissioner written notice that the licensee or finder lead generator surrenders that license or registration. Surrender of the license or registration does not affect the licensees or finders lead generators civil or criminal liability for acts committed prior to surrender of the license or registration.
SEC. 23.SEC. 28.Section 22712 of the Financial Code is amended to read:22712.(a)Whenever, in the opinion of the commissioner, any person is engaged in the business as a broker or finance lender, or a mortgage loan originator, as defined in this division, without a license from the commissioner, or as a finder, lead generator, as defined in this division, without a registration from the commissioner, or any licensee or finder lead generator violates any provision of this division, any provision of an order, or any regulation adopted pursuant to this division, the commissioner may order that person, licensee, or finder lead generator to desist and to refrain from engaging in the business or further continuing that violation. 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.
(b)Notwithstanding subdivision (a), if, after an investigation, the commissioner has reasonable grounds to believe that a person is conducting 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.
SEC. 24.SEC. 29.Section 22714 of the Financial Code is amended to read:22714.(a)The commissioner shall suspend or revoke any license or registration upon notice and reasonable opportunity to be heard, if the commissioner finds any of the following:
(1)The licensee or registrant 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 or registrant 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 or registration reasonably would have warranted the commissioner in refusing to issue the license or registration 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.
(b)A master license may 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 registration or imposing sanctions against a licensee or registrant shall not affect other licensed or registered locations unless expressly stated in the order.
SEC. 25.SEC. 30.Section 22757 of the Financial Code is amended to read:22757.A finance lender, broker, or mortgage loan originator licensed under this division shall not pay any commission, fee, or other compensation to an unlicensed individual for conducting activities that require a license, unless that unlicensed individual is exempt from licensure or is a registered finder lead generator pursuant to this division.
SEC. 26.SEC. 31.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
Finance broker means any person who brings a prospective borrower and a finance lender together, and who is engaged in the business of performing one or both of the following activities:
(1)Negotiating the price, length, or any other loan term between a licensee and a prospective borrower that may be applicable to the borrower.
(2)Advising a prospective borrower as to any loan term. Providing financial education or information of a general nature to a prospective borrower shall not be considered advising.
SEC. 2.Section 22010.5 is added to the Financial Code, to read:22010.5.Finder means any person who who, for compensation or in expectation of compensation, helps facilitate a loan subject to this division by performing one or more of the following activities: activities for another or others:
(a)Collecting nonpublic personal identification information, such as social security number, tax identification number, bank account number, bank routing number, or other nonpublic personal identification information, from prospective borrowers in anticipation of selling or submitting the information to one or more finance lenders.
(b)Introducing or matching connecting prospective borrowers and prospective lenders after comparing prospective borrowers attributes with prospective lenders underwriting requirements. preferences.
(c)Offering to the public a means through which the finder compiles and publishes comparison information on various loans offered by finance lenders, made pursuant to this division, including services that allow consumers to contact finance lenders through links on the finders Internet Web site or comparable technological means.
(d)Delivering disclosures to borrowers or prospective borrowers that are required pursuant to this division.
(e)Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower that has been either prepared by a finance lender or reviewed and approved in writing by that lender. A finder may discuss that information with a prospective borrower in general terms, but may not provide counseling or advice to a prospective borrower. engage in brokerage activity without being licensed as a finance broker, as defined in Section 22009.5.
(f)Notifying a prospective borrower of the information needed to complete an application for a loan subject to this division, without providing counseling or advice to a prospective borrower.
(g)Contacting a finance lender on behalf of a prospective borrower to determine the status of a prospective borrowers loan application.
(h)Communicating a response that is returned by a finance lenders automated underwriting system to a borrower or a prospective borrower.
(i)Obtaining a borrowers signature on documents prepared by a finance lender and delivering final copies of the documents to the borrower.
SEC. 3.Section 22010.6 is added to the Financial Code, to read:22010.6.The following shall not be deemed to be finance brokers or finders and may engage in the activities specified below in connection with loans subject to this division, without the requirement for licensure or regulation: regulation pursuant to this division:
(a)A person who is not engaged in the business of a broker or a finder, and whose activities in connection with the referral of loans subject to this division are performed on no more than an occasional basis, not to exceed five times in any calendar year. basis.
(b)A person who disseminates, places, posts, or distributes advertising or promotional information or materials pertaining to loans on behalf of licensees and does not engage in the activities of a broker or a finder.
(c)A person providing financial education or information of a general nature to a prospective borrower.
(d)A credit reporting agency that furnishes a consumer credit report to a finance lender.
SEC. 4.Section 22113 is added to the Financial Code, to read:22113.(a)No person may engage in the business of a finder without first registering as a finder with the commissioner.
(b)An application for registration as a finder under this division shall be in the form and contain the information the commissioner may by rule or order require. The following information shall be required of applicants for registration, at a minimum:
(1)The name, business address, and licensing details, if applicable, of the finder and all physical locations and Internet Web site addresses from which the finder will engage in activities subject to this division.
(2)The name and contact information for an employee of the finder who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the finder and lenders subject to this division.
(3)The name and contact information for one or more employees of the finder who are responsible for that finders finding activities on behalf of lenders subject to this division.
(4)A list of the activities the finder will perform on behalf of lenders subject to this division.
(c)The commissioner shall, by rule, establish the timelines and fees applicable to applicants for original finder registrations and annual renewals.
(d)If a registered finder fails to pay a required fee or assessment by the due date specified by the commissioner, the commissioner may by order summarily suspend or revoke the finders registration. If, after an order is made, a request for 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 registration is revoked or suspended, a finder 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 registration shall not affect the powers of the commissioner as provided in this division.
SEC. 5.Section 22114 is added to the Financial Code, to read:22114.(a)Upon reasonable notice and opportunity to be heard, the commissioner may deny an application for a registration as a finder for either of the following reasons:
(1)A false statement of a material fact has been made in the application.
(2)The commissioner has grounds to believe that approval is likely to result in harm to the public.
(b)An application for registration as a finder shall be considered withdrawn 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 registration with the required fees, either issue a registration 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. If the commissioner fails to issue a registration or file a statement of issues within 60 days from the filing of a full and complete application for a registration with the required fees, an applicant for registration may operate provisionally, until the time the commissioner issues a registration or files a statement of issues.
SEC. 6.Section 22152 of the Financial Code is amended to read:22152.(a)A finance lender or broker 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 location at which a registered finder engages in finding activities on behalf of a finance lender or broker licensee shall not be considered a place of business of the licensee.
SEC. 7.Section 22157 of the Financial Code is amended to read:22157.(a)Finance lender, broker, and mortgage loan originator licensees shall preserve their books, accounts, and records, including cards used in the card system, if any, for at least three years after making the final entry on any loan recorded therein.
(b)Each finance lender that utilizes the services of a finder shall maintain records of its dealings with that finder, including agreements, contracts, books, accounts, and records, for at least three years following the creation of those documents.
(c)Each finder that is compensated by a lender licensed under this division shall maintain records related to its finding activities on behalf of lenders for at least three years following the creation of those documents.
(d)Subdivisions (b) and (c) shall not be deemed to require the maintenance or storage of personal identification information for any borrower; however, each finder that does not maintain or store personal identification information shall have a method by which the identity of individual consumers can be reconstructed, if requested by the commissioner.
SEC. 8.Section 22161 of the Financial Code is amended to read:22161.No person subject to this division shall do any of the following:
(a)Make a materially false or misleading statement or representation to a borrower about the terms or conditions of that borrowers loan, when making or brokering the loan.
(b)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to this division. activities.
(c)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, 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.
(d)Commit an act in violation of Section 1695.13 of the Civil Code.
(e)Engage in any act in violation of Section 17200 of the Business and Professions Code.
(f)Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party.
(g)Commit an act that constitutes fraud or dishonest dealings.
SEC. 9.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 or a registered finder 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 his or her 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, or mortgage loan originator originator, or a registered finder, and from engaging in any business activity on the premises where a licensed finance lender, broker, mortgage loan originator, or a registered finder is conducting its business. This subdivision shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a licensed finance lender, broker, or mortgage loan originator.
SEC. 10.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 from any position of employment, management, or control any finance lender, broker, mortgage loan originator, finder, 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, mortgage loan originator, or finder, 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 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, mortgage loan originator, or finder, and from engaging in any business activity on the premises where a finance lender, broker, mortgage loan originator, or finder is conducting business.
SEC. 11.Section 22173 is added to the Financial Code, to read:22173.A licensee may compensate a registered finder for engaging in finding activities, subject to all of the following requirements:
(a)Each licensee wishing to engage the services of a finder shall enter into a written agreement with that finder clearly describing the services to be performed.
(b)Each agreement between a licensee and a finder shall include provisions requiring the finder to do all of the following:
(1)Register with the commissioner in accordance with this division.
(2)Comply with applicable provisions of this division and with rules promulgated and orders issued by the commissioner to implement those provisions.
(3)Retain and produce records of all transactions conducted with California residents on behalf of the licensee, as required by Section 22157.
(c)Each licensee shall exercise oversight over each of its finders compliance with the provisions of this division. division and shall maintain the records documenting its oversight efforts. A licensee shall not compensate a finder that is not registered pursuant to this division in connection with a loan made pursuant to this division.
SEC. 12.Section 22174 is added to the Financial Code, to read:22174.(a)At the time a finder receives an inquiry or application from a consumer for a loan subject to this division, the finder shall provide the following statement to the consumer in no smaller than 10-point type, or electronically in a form that allows the statement to be printed:
[Name of finder] is an independent a loan matching/referral/comparison service registered with the California Department of Business Oversight. [Name of finder] may be compensated by lenders in exchange for loan referrals, for featured placement of certain sponsored products and services, or for your clicking on certain links posted on an Internet Web site. You may receive separate communications from one or more lenders based on the information we have collected from you. If you have questions about the services we perform, you may contact us at [phone [telephone number at which finder may be reached] or [email address at which finder may be reached]. If you wish to report a complaint about [Name of finder], you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(b)At the time a lender licensed under this division approves an application for a loan subject to this division from a borrower who has been referred to it directly by one or more finders, a finder, the lender shall provide the following statement to the borrower in no smaller than 10-point type, or electronically in a form that allows that statement to be printed:
[Name of licensed lender] lender], a lender licensed under the California Finance Lenders Law, has approved you for a loan based on information you provided to a third party working on our behalf. The details of the loan we are prepared to extend to you are described in accompanying documents. We may compensate the third party from which we obtained your information for their services in referring you to us. If you have any questions about your loan, now or in the future, you should direct those questions to us by [insert at least two different ways in which a borrower may contact the lender]. If you wish to report a complaint regarding this loan transaction, you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(c)If a loan applicant directs questions about a loan to a finder, which the loan the finder is not permitted to answer, the finder shall make a good faith effort to assist the applicant in making direct contact with the lender before the loan is consummated. This good faith effort shall, at a minimum, consist of assisting the applicant in communicating with the licensee as soon as reasonably practicable, which shall at a minimum include a two-way communication. For purposes of this section, two-way communication means telephone, electronic mail, or another form of communication that allows the applicant to communicate with the licensee.
SEC. 13.Section 22175 is added to the Financial Code, to read:22175.(a)A finder shall comply with all laws, rules, and orders applicable to licensees under this division, which impose requirements regarding the duty to safeguard nonpublic personal financial information.
(b)Nonpublic personal financial information collected from a consumer borrower by a finder in connection with a loan request or application may not be disclosed to or used by any third party, except where the finder provides that information to a lender licensed under this division pursuant to the express written or electronic consent from the consumer. unless authorized by the borrower electronically or in writing, or unless required or permitted by applicable law.
SEC. 14.Section 22176 is added to the Financial Code, to read:22176.A finder may not engage in any of the following activities: do any of the following:
(a)Provide counseling or advice to a borrower or prospective borrower.(a)Engage in the business of a finder without first registering as a finder in accordance with Section 22113.
(b)Enter into a written agreement with a licensee that is not in good standing with the commissioner at the time that agreement is signed or with an unlicensed person that is subject to a final desist and refrain order for engaging in unlicensed activities at the time that agreement is signed.
(b)(c)Provide loan-related marketing materials that have not previously been approved by a lender licensed under this division to a borrower or a prospective borrower. are specific to a lender or a lenders specific loan offerings without prior approval of the material substance of those materials by that lender.
(c)(d)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to this division. activities.
(d)(e)Use or disclose to any third party a prospective borrowers nonpublic personal identification information without first obtaining the borrowers consent.
SEC. 15.Section 22700 of the Financial Code is amended to read:22700.(a)Finance lender and broker licenses and finder registrations 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 or registration becomes effective 30 days after receipt of an application to surrender the license or registration 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 or registration becomes effective at the time and upon the conditions that the commissioner determines.
SEC. 16.Section 22701 of the Financial Code is amended to read:22701.For the purpose of discovering violations of this division or securing information required by him or her in the administration and enforcement of this division, the commissioner may at any time investigate the loans 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, or finder 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 representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of all these persons.
SEC. 17.Section 22704 of the Financial Code is amended to read:22704.The power of investigation and examination by the commissioner is not terminated by the surrender, suspension, or revocation of any license or registration issued by him or her.
SEC. 18.Section 22705 of the Financial Code is amended to read:22705.Whenever the commissioner deems it necessary for the general welfare of the public, he or she has continuous authority to exercise the powers set forth in this division whether or not an application for a license or registration has been filed with the commissioner, any license or registration has been issued, or if issued, has been surrendered, suspended, or revoked.
SEC. 19.Section 22707 of the Financial Code is amended to read:22707.(a)The cost of each examination of a licensee, finder, or other person subject to this division shall be paid to the commissioner by the licensee, finder, or person examined, and the commissioner may maintain an action for the recovery of the cost in any court of competent jurisdiction. In determining the cost of an examination, the commissioner may use the estimated average hourly cost for all persons performing examinations of licensees, finders, or other persons subject to this division for the fiscal year.
(b)For the purpose of this section only, no person other than a licensee or a finder shall be deemed to be a person subject to this division until the person is determined to be a person subject to this division by an administrative hearing in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code or by a judicial hearing in any court of competent jurisdiction.
SEC. 20.Section 22707.5 of the Financial Code is amended to read:22707.5.(a)If, upon inspection, examination, or investigation, the commissioner has cause to believe that a licensee, finder, or other person is violating any provision of this division or any rule or order thereunder, the commissioner or his or her designee, may issue a citation to the licensee or person in writing, describing with particularity the basis of the citation. Each citation may contain an order to correct the violation or violations identified and provide a reasonable time period or periods by which the violation or violations must be corrected. In addition, each citation may assess an administrative fine not to exceed two thousand five hundred dollars ($2,500) that shall be deposited in the State Corporations Fund. In assessing a fine, the commissioner shall 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, finder, or licensee cited, and the history of previous violations. A citation issued or a fine assessed pursuant to this section, while constituting punishment for a violation of law, shall be in lieu of other administrative discipline by the commissioner for the offense or offenses cited, and the citation and fine payment thereof by a licensee or finder shall not be reported as disciplinary action taken by the commissioner.
(b)Notwithstanding subdivision (a), nothing in this section shall prevent the commissioner from issuing an order to desist and refrain from engaging in a specific business or activity or activities, or an order to suspend all business operations to a person, finder, or licensee who is engaged in or who has engaged in continued or repeated violations of this division. In any of these circumstances, the sanctions authorized under this section shall be separate from, and in addition to, all other administrative, civil, or criminal remedies.
(c)If, within 30 days from the receipt of the citation, the licensee, finder, or person cited fails to notify the department that he or she intends to request a hearing as described in subdivision (d), the citation shall be deemed final.
(d)Any hearing under this section shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(e)After the exhaustion of the review procedures provided for in this section, the commissioner may apply to the appropriate superior court for a judgment in the amount of the administrative fine and an order compelling the cited licensee, finder, or person to comply with the order of the commissioner. The application, which shall include a certified copy of the final order of the commissioner, shall constitute a sufficient showing to warrant the issuance of the judgment and order.
SEC. 21.Section 22710 of the Financial Code is amended to read:22710.The commissioner may upon three days notice and a hearing, suspend any license or registration for a period not exceeding 30 days, pending investigation.
SEC. 22.Section 22711 of the Financial Code is amended to read:22711.Any licensee may surrender any license, and any finder may surrender a registration, by delivering to the commissioner written notice that the licensee or finder surrenders that license or registration. Surrender of the license or registration does not affect the licensees or finders civil or criminal liability for acts committed prior to surrender of the license or registration.
SEC. 23.Section 22712 of the Financial Code is amended to read:22712.(a)Whenever, in the opinion of the commissioner, any person is engaged in the business as a broker or finance lender, or a mortgage loan originator, as defined in this division, without a license from the commissioner, or as a finder, as defined in this division, without a registration from the commissioner, or any licensee or finder violates any provision of this division, any provision of an order, or any regulation adopted pursuant to this division, the commissioner may order that person, licensee, or finder to desist and to refrain from engaging in the business or further continuing that violation. 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.
(b)Notwithstanding subdivision (a), if, after an investigation, the commissioner has reasonable grounds to believe that a person is conducting 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.
SEC. 24.Section 22714 of the Financial Code is amended to read:22714.(a)The commissioner shall suspend or revoke any license or registration upon notice and reasonable opportunity to be heard, if the commissioner finds any of the following:
(1)The licensee or registrant 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 or registrant 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 or registration reasonably would have warranted the commissioner in refusing to issue the license or registration 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.
(b)A master license may 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 registration or imposing sanctions against a licensee or registrant shall not affect other licensed or registered locations unless expressly stated in the order.
SEC. 25.Section 22757 of the Financial Code is amended to read:22757.A finance lender, broker, or mortgage loan originator licensed under this division shall not pay any commission, fee, or other compensation to an unlicensed individual for conducting activities that require a license, unless that unlicensed individual is exempt from licensure or is a registered finder pursuant to this division.
SEC. 26.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
Finance broker means any person who brings a prospective borrower and a finance lender together, and who is engaged in the business of performing one or both of the following activities:
(1)Negotiating the price, length, or any other loan term between a licensee and a prospective borrower that may be applicable to the borrower.
(2)Advising a prospective borrower as to any loan term. Providing financial education or information of a general nature to a prospective borrower shall not be considered advising.
SEC. 2.Section 22010.5 is added to the Financial Code, to read:22010.5.Finder means any person who helps facilitate a loan subject to this division by performing one or more of the following activities:
(a)Collecting nonpublic personal identification information, such as social security number, tax identification number, bank account number, bank routing number, or other nonpublic personal identification information, from prospective borrowers in anticipation of selling or submitting the information to one or more finance lenders.
(b)Introducing or matching prospective borrowers and prospective lenders after comparing prospective borrowers attributes with prospective lenders underwriting requirements.
(c)Offering to the public a means through which the finder compiles and publishes comparison information on various loans offered by finance lenders, including services that allow consumers to contact finance lenders through links on the finders Internet Web site or comparable technological means.
(d)Delivering disclosures to borrowers or prospective borrowers that are required pursuant to this division.
(e)Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower that has been either prepared by a finance lender or reviewed and approved in writing by that lender. A finder may discuss that information with a prospective borrower in general terms, but may not provide counseling or advice to a prospective borrower.
(f)Notifying a prospective borrower of the information needed to complete an application for a loan subject to this division, without providing counseling or advice to a prospective borrower.
(g)Contacting a finance lender on behalf of a prospective borrower to determine the status of a prospective borrowers loan application.
(h)Communicating a response that is returned by a finance lenders automated underwriting system to a borrower or a prospective borrower.
(i)Obtaining a borrowers signature on documents prepared by a finance lender and delivering final copies of the documents to the borrower.
SEC. 3.Section 22010.6 is added to the Financial Code, to read:22010.6.The following shall not be deemed to be finance brokers or finders and may engage in the activities specified below in connection with loans subject to this division, without the requirement for licensure or regulation:
(a)A person who is not engaged in the business of a broker or a finder, and whose activities in connection with the referral of loans subject to this division are performed on no more than an occasional basis, not to exceed five times in any calendar year.
(b)A person who disseminates, places, posts, or distributes advertising or promotional information or materials pertaining to loans on behalf of licensees and does not engage in the activities of a broker or a finder.
(c)A person providing financial education or information of a general nature to a prospective borrower.
SEC. 4.Section 22113 is added to the Financial Code, to read:22113.(a)No person may engage in the business of a finder without first registering as a finder with the commissioner.
(b)An application for registration as a finder under this division shall be in the form and contain the information the commissioner may by rule or order require. The following information shall be required of applicants for registration, at a minimum:
(1)The name, business address, and licensing details, if applicable, of the finder and all physical locations and Internet Web site addresses from which the finder will engage in activities subject to this division.
(2)The name and contact information for an employee of the finder who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the finder and lenders subject to this division.
(3)The name and contact information for one or more employees of the finder who are responsible for that finders finding activities on behalf of lenders subject to this division.
(4)A list of the activities the finder will perform on behalf of lenders subject to this division.
(c)The commissioner shall, by rule, establish the timelines and fees applicable to applicants for original finder registrations and annual renewals.
(d)If a registered finder fails to pay a required fee or assessment by the due date specified by the commissioner, the commissioner may by order summarily suspend or revoke the finders registration. If, after an order is made, a request for 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 registration is revoked or suspended, a finder 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 registration shall not affect the powers of the commissioner as provided in this division.
SEC. 5.Section 22114 is added to the Financial Code, to read:22114.(a)Upon reasonable notice and opportunity to be heard, the commissioner may deny an application for a registration as a finder for either of the following reasons:
(1)A false statement of a material fact has been made in the application.
(2)The commissioner has grounds to believe that approval is likely to result in harm to the public.
(b)An application for registration as a finder shall be considered withdrawn 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 registration with the required fees, either issue a registration 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.
SEC. 6.Section 22152 of the Financial Code is amended to read:22152.(a)A finance lender or broker 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 location at which a registered finder engages in finding activities on behalf of a finance lender or broker licensee shall not be considered a place of business of the licensee.
SEC. 7.Section 22157 of the Financial Code is amended to read:22157.(a)Finance lender, broker, and mortgage loan originator licensees shall preserve their books, accounts, and records, including cards used in the card system, if any, for at least three years after making the final entry on any loan recorded therein.
(b)Each finance lender that utilizes the services of a finder shall maintain records of its dealings with that finder, including agreements, contracts, books, accounts, and records, for at least three years following the creation of those documents.
(c)Each finder that is compensated by a lender licensed under this division shall maintain records related to its finding activities on behalf of lenders for at least three years following the creation of those documents.
SEC. 8.Section 22161 of the Financial Code is amended to read:22161.No person subject to this division shall do any of the following:
(a)Make a materially false or misleading statement or representation to a borrower about the terms or conditions of that borrowers loan, when making or brokering the loan.
(b)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to this division.
(b)(c)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, 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.
(c)(d)Commit an act in violation of Section 1695.13 of the Civil Code.
(d)(e)Engage in any act in violation of Section 17200 of the Business and Professions Code.
(e)(f)Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party.
(f)(g)Commit an act that constitutes fraud or dishonest dealings.
SEC. 9.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 or a registered finder 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 his or her 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, or mortgage loan originator or a registered finder, and from engaging in any business activity on the premises where a licensed finance lender, broker, or mortgage loan originator originator, or a registered finder is conducting its business. This subdivision shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a licensed finance lender, broker, or mortgage loan originator.
SEC. 10.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 from any position of employment, management, or control any finance lender, broker, mortgage loan originator, finder, 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, or mortgage loan originator, or finder, 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 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, or mortgage loan originator, or finder, and from engaging in any business activity on the premises where a finance lender, broker, or mortgage loan originator originator, or finder is conducting business.
SEC. 11.Section 22173 is added to the Financial Code, to read:22173.A licensee may compensate a registered finder for engaging in finding activities, subject to all of the following requirements:
(a)Each licensee wishing to engage the services of a finder shall enter into a written agreement with that finder clearly describing the services to be performed.
(b)Each agreement between a licensee and a finder shall include provisions requiring the finder to do all of the following:
(1)Register with the commissioner in accordance with this division.
(2)Comply with applicable provisions of this division and with rules promulgated and orders issued by the commissioner to implement those provisions.
(3)Retain and produce records of all transactions conducted with California residents on behalf of the licensee, as required by Section 22157.
(c)Each licensee shall exercise oversight over each of its finders compliance with the provisions of this division.
SEC. 12.Section 22174 is added to the Financial Code, to read:22174.(a)At the time a finder receives an inquiry or application from a consumer for a loan subject to this division, the finder shall provide the following statement to the consumer in no smaller than 10-point type, or electronically in a form that allows the statement to be printed:
[Name of finder] is an independent loan matching/referral/comparison service registered with the California Department of Business Oversight. [Name of finder] may be compensated by lenders in exchange for loan referrals, for featured placement of certain sponsored products and services, or for your clicking on certain links posted on an Internet Web site. You may receive separate communications from one or more lenders based on the information we have collected from you. If you have questions about the services we perform, you may contact us at [phone at which finder may be reached] or [email address at which finder may be reached]. If you wish to report a complaint about [Name of finder], you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(b)At the time a lender licensed under this division approves an application for a loan subject to this division from a borrower who has been referred to it by one or more finders, the lender shall provide the following statement to the borrower in no smaller than 10-point type, or electronically in a form that allows that statement to be printed:
[Name of licensed lender] has approved you for a loan based on information you provided to a third party working on our behalf. The details of the loan we are prepared to extend to you are described in accompanying documents. We may compensate the third party from which we obtained your information for their services in referring you to us. If you have any questions about your loan, now or in the future, you should direct those questions to us by [insert at least two different ways in which a borrower may contact the lender]. If you wish to report a complaint regarding this loan transaction, you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.
(c)If a loan applicant directs questions about a loan to a finder, which the loan the finder is not permitted to answer, the finder shall make a good faith effort to assist the applicant in making direct contact with the lender before the loan is consummated. This good faith effort shall, at a minimum, consist of assisting the applicant in communicating with the licensee as soon as reasonably practicable, which shall at a minimum include a two-way communication. For purposes of this section, two-way communication means telephone, electronic mail, or another form of communication that allows the applicant to communicate with the licensee.
SEC. 13.Section 22175 is added to the Financial Code, to read:22175.(a)A finder shall comply with all laws, rules, and orders applicable to licensees under this division, which impose requirements regarding the duty to safeguard nonpublic personal financial information.
(b)Nonpublic personal financial information collected from a consumer by a finder in connection with a loan request or application may not be disclosed to or used by any third party, except where the finder provides that information to a lender licensed under this division pursuant to the express written or electronic consent from the consumer.
SEC. 14.Section 22176 is added to the Financial Code, to read:22176.A finder may not engage in any of the following activities:
(a)Provide counseling or advice to a borrower or prospective borrower.
(b)Provide loan-related marketing materials that have not previously been approved by a lender licensed under this division to a borrower or a prospective borrower.
(c)Make a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in finding activities on behalf of a licensee subject to this division.
(d)Use or disclose to any third party a prospective borrowers nonpublic personal identification information without first obtaining the borrowers consent.
SEC. 15.Section 22700 of the Financial Code is amended to read:22700.(a)Finance lender and broker licenses and finder registrations 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 or registration becomes effective 30 days after receipt of an application to surrender the license or registration 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 or registration becomes effective at the time and upon the conditions that the commissioner determines.
SEC. 16.Section 22701 of the Financial Code is amended to read:22701.For the purpose of discovering violations of this division or securing information required by him or her in the administration and enforcement of this division, the commissioner may at any time investigate the loans 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 or lender, broker, or finder 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 representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of all these persons.
SEC. 17.Section 22704 of the Financial Code is amended to read:22704.The power of investigation and examination by the commissioner is not terminated by the surrender, suspension, or revocation of any license or registration issued by him or her.
SEC. 18.Section 22705 of the Financial Code is amended to read:22705.Whenever the commissioner deems it necessary for the general welfare of the public, he or she has continuous authority to exercise the powers set forth in this division whether or not an application for a license or registration has been filed with the commissioner, any license or registration has been issued, or if issued, has been surrendered, suspended, or revoked.
SEC. 19.Section 22707 of the Financial Code is amended to read:22707.(a)The cost of each examination of a licensee licensee, finder, or a other person subject to this division shall be paid to the commissioner by the licensee licensee, finder, or person examined, and the commissioner may maintain an action for the recovery of the cost in any court of competent jurisdiction. In determining the cost of an examination, the commissioner may use the estimated average hourly cost for all persons performing examinations of licensees licensees, finders, or other persons subject to this division for the fiscal year.
(b)For the purpose of this section only, no person other than a licensee or a finder shall be deemed to be a person subject to this division until the person is determined to be a person subject to this division by an administrative hearing in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code or by a judicial hearing in any court of competent jurisdiction.
SEC. 20.Section 22707.5 of the Financial Code is amended to read:22707.5.(a)If, upon inspection, examination, or investigation, the commissioner has cause to believe that a licensee licensee, finder, or other person is violating any provision of this division or any rule or order thereunder, the commissioner or his or her designee, may issue a citation to the licensee or person in writing, describing with particularity the basis of the citation. Each citation may contain an order to correct the violation or violations identified and provide a reasonable time period or periods by which the violation or violations must be corrected. In addition, each citation may assess an administrative fine not to exceed two thousand five hundred dollars ($2,500) that shall be deposited in the State Corporations Fund. In assessing a fine, the commissioner shall 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 person, finder, or licensee cited, and the history of previous violations. A citation issued or a fine assessed pursuant to this section, while constituting punishment for a violation of law, shall be in lieu of other administrative discipline by the commissioner for the offense or offenses cited, and the citation and fine payment thereof by a licensee or finder shall not be reported as disciplinary action taken by the commissioner.
(b)Notwithstanding subdivision (a), nothing in this section shall prevent the commissioner from issuing an order to desist and refrain from engaging in a specific business or activity or activities, or an order to suspend all business operations to a person person, finder, or licensee who is engaged in or who has engaged in continued or repeated violations of this division. In any of these circumstances, the sanctions authorized under this section shall be separate from, and in addition to, all other administrative, civil, or criminal remedies.
(c)If, within 30 days from the receipt of the citation, the licensee licensee, finder, or person cited fails to notify the department that he or she intends to request a hearing as described in subdivision (d), the citation shall be deemed final.
(d)Any hearing under this section shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(e)After the exhaustion of the review procedures provided for in this section, the commissioner may apply to the appropriate superior court for a judgment in the amount of the administrative fine and an order compelling the cited licensee licensee, finder, or person to comply with the order of the commissioner. The application, which shall include a certified copy of the final order of the commissioner, shall constitute a sufficient showing to warrant the issuance of the judgment and order.
SEC. 21.Section 22710 of the Financial Code is amended to read:22710.The commissioner may upon three days notice and a hearing, suspend any license or registration for a period not exceeding 30 days, pending investigation.
SEC. 22.Section 22711 of the Financial Code is amended to read:22711.Any licensee may surrender any license license, and any finder may surrender a registration, by delivering to the commissioner written notice that the licensee or finder surrenders that license or registration. Surrender of the license or registration does not affect the licensees or finders civil or criminal liability for acts committed prior to surrender of the license. license or registration.
SEC. 23.Section 22712 of the Financial Code is amended to read:22712.(a)Whenever, in the opinion of the commissioner, any person is engaged in the business as a broker or finance lender, or a mortgage loan originator, as defined in this division, without a license from the commissioner, or as a finder, as defined in this division, without a registration from the commissioner, or any licensee or finder violates 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 person, licensee, or finder to desist and to refrain from engaging in the business or further continuing that violation. 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.
(b)Notwithstanding subdivision (a), if, after an investigation, the commissioner has reasonable grounds to believe that a person is conducting 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.
SEC. 24.Section 22714 of the Financial Code is amended to read:22714.(a)The commissioner shall suspend or revoke any license, license or registration upon notice and reasonable opportunity to be heard, if the commissioner finds any of the following:
(1)The licensee or registrant 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 or registrant 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, license or registration reasonably would have warranted the commissioner in refusing to issue the license or registration 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.
(b)A master license may 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 registration or imposing sanctions against a licensee or registrant shall not affect other licensed or registered locations unless expressly stated in the order.
SEC. 25.Section 22757 of the Financial Code is amended to read:22757.A finance lender, broker, or mortgage loan originator licensed under this division shall not pay any commission, fee, or other compensation to an unlicensed individual for conducting activities that require a license, unless that unlicensed individual is exempt from licensure or is a registered finder pursuant to this division.
SEC. 26.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
|
Date
|
Status
|
|---|---|
| Feb 1, 2018 | Returned to Secretary of Senate pursuant to Joint Rule 56. |
| May 25, 2017 | May 25 hearing: Held in committee and under submission. |
| May 19, 2017 | Set for hearing May 25. |
| May 1, 2017 | May 1 hearing: Placed on APPR. suspense file. |
| Apr 21, 2017 | Set for hearing May 1. |
| Apr 17, 2017 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on APPR. |
| Apr 13, 2017 | April 17 set for first hearing canceled at the request of author. |
| Apr 7, 2017 | Set for hearing April 17. |
| Apr 5, 2017 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0. Page 619.) (April 5). Re-referred to Com. on APPR. |
| Mar 27, 2017 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on B. & F.I. |
| Feb 28, 2017 | Set for hearing April 5. |
| Feb 23, 2017 | Referred to Com. on B. & F.I. |
| Feb 14, 2017 | From printer. May be acted upon on or after March 16. |
| Feb 13, 2017 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| May 1, 2017 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Apr 5, 2017 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Banking and Financial Institutions |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Allied Cash Advance | ** Support | Apr 3, 2017 |
| Ascend Consumer Finance | ** Support | Apr 3, 2017 |
| Bay Area Title Loans | ** Support | Apr 3, 2017 |
| Brightline Defense Project | ** Against | Apr 3, 2017 |
| BSL Financial Services | ** Support | Apr 3, 2017 |
| California Capital Financial Development Corporation | ** Against | Apr 3, 2017 |
| California Financial Service Providers | * Support | May 1, 2017 |
| California Financial Services Association | * Support | May 1, 2017 |
| California Reinvestment Coalition | ** Against | Apr 3, 2017 |
| CEDC Small Business Finance | ** Against | Apr 3, 2017 |
| Center for Responsible Lending | ** Against | Apr 3, 2017 |
| Check Agencies of California | ** Support | Apr 3, 2017 |
| Clergy and Laity United for Economic Justice | ** Against | Apr 3, 2017 |
| Community Legal Services of East Palo Alto | ** Against | Apr 3, 2017 |
| Consumers For Auto Reliability And Safety | ** Against | Apr 3, 2017 |
| Consumers Union | ** Against | Apr 3, 2017 |
| Davis Commercial Finance | ** Support | Apr 3, 2017 |
| East LA Community Corporation | ** Against | Apr 3, 2017 |
| Elevate | * Support | May 1, 2017 |
| Expansion Capital Group | ** Support | Apr 3, 2017 |
| Galt Ventures | ** Support | Apr 3, 2017 |
| Greenlining Institute | ** Against | Apr 3, 2017 |
| Housing and Economic Rights Advocates | ** Against | Apr 3, 2017 |
| InstaLoan | ** Support | Apr 3, 2017 |
| Law Foundation of Silicon Valley | ** Against | Apr 3, 2017 |
| Law Offices of Paul Soter | * Support | Apr 5, 2017 |
| Leads Market.com LLC | * Support | Apr 5, 2017 |
| LeadsMarket.com | ** Support | Apr 3, 2017 |
| Lend Up | * Support | Apr 5, 2017 |
| Mission Economic Development Agency | ** Against | Apr 3, 2017 |
| Neighborhood Housing Services of the East Bay | ** Against | Apr 3, 2017 |
| New Credit America | ** Support | Apr 3, 2017 |
| Nuestra Casa | ** Against | Apr 3, 2017 |
| Online Lenders Alliance | * Support | Apr 5, 2017 |
| Oportun Inc. | * Against | Apr 5, 2017 |
| Opportunity Financial | ** Support | Apr 3, 2017 |
| Opportunity Fund | ** Support | Apr 3, 2017 |
| Presente | ** Against | Apr 3, 2017 |
| Public Counsel | ** Against | Apr 3, 2017 |
| Public Law Center | ** Against | Apr 3, 2017 |
| Rise Credit of California | * Support | May 1, 2017 |
| Salas and Company | ** Support | Apr 3, 2017 |
| Southwestern & Pacific Specialty Finance | ** Support | Apr 3, 2017 |
| Spectrum Franchise Group | ** Support | Apr 3, 2017 |
| Speedy Cash | ** Support | Apr 3, 2017 |
| Title Bucks | ** Support | Apr 3, 2017 |
| Title Max | ** Support | Apr 3, 2017 |
SENATE COMMITTEE ON
Senator Ricardo Lara, Chair
2017 - 2018 Regular Session
SB 297 (Dodd) - California Finance Lenders Law: regulation of lead generators
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: May 1, 2017 | Consultant: |
This bill meets the criteria for referral to the Suspense File.
Bill Summary:
SB 297 would define the term finance broker and leader generator and would provide for the licensure and regulation of lead generators by the Commissioner of Business Oversight.
Fiscal Impact:
- Ongoing costs of $1.1 million to The Department of Business Oversight (DBO) for workload, registering new lead generators, and for enforcement (State Corporations Fund)
- One-time costs of $700,000 to DBO to update the IT system to accommodate the new licenses (State Corporations Fund)
Background:
California Finance Lenders Law (CFLL) requires licensing and regulation of finance lenders and brokers making and brokering consumer and commercial loans. CFLL was created before the prevalence of the internet and activities that are common in today’s online consumer and business lending marketplaces. Introducing prospective borrowers to prospective lenders online without helping to negotiate the terms of the loan is colloquially known as lead generation, and online lead generation is becoming increasingly prevalent. While lead generation can be beneficial to borrowers and lenders, it can also be predatory and harm borrowers. This bill aims to provide a regulatory framework to protect those who use lead generators to obtain installment loans.
Proposed Law:
This bill would:
- Define a finance broker and a lead generator in CFLL and define what is not deemed a finance broker or lead generator;
- Require each lead generator to pay to the commissioner its pro rata share of all costs and expenses reasonably incurred, as estimated by the commissioner, for the ensuing year and any deficit actually incurred or anticipated in the year in which the assessment is made;
- Require each lead generator registrant to maintain a $25,000 surety bond;
- Prohibit a person from engaging the business of a lead generator without first registering with the commissioner, as defined;
- Provide that the commissioner may suspend or revoke the lead generator’s registration if a registered lead generator fails to pay a required fee or assessment by the established due date;
- Provide that the commissioner may deny an application for a registration as a lead generator if a false statement of a material fact has been made in the application or the commissioner has grounds to believe that approval is likely to result in harm to the public;
- Prohibit the location at which a registered lead generator engages in lead generation activities from being considered a place of business of the licensee;
- Specify how a finance lender and lead generator must maintain records;
- Require each lead generator registrant to file an annual report with the commissioner giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted within the state during the preceding calendar year;
- Specify that it is a violation to compensate a lead generator in connection with any services provided by that lead generator, or in connection with the referral of any borrower or prospective borrower by that lead generator, where the lead generator has made any materially false or misleading statement to a borrower or prospective borrower or has engaged in any unlawful, deceptive, misleading, or unfair act or practice in connection with that service or loan;
- Authorize a CFLL licensee to compensate a registered lead generator for engaging in finding activities, as specified;
- Prohibit a CFLL licensee that compensates lead generators from charging any of its borrowers a fee attributable to the licensee’s costs of lead generation;
- Prohibit a CFLL licensee from compensating a lead generator that is not registered pursuant to the CFLL in connection with a loan made pursuant to the CFLL;
- Prohibit a lead generator from:
- Entering into a written agreement with a CFLL licensee that is not in good standing with the commissioner or with an unlicensed person that is subject to a final desist and refrain order for engaging in unlicensed activities at the time that agreement is signed
- Providing marketing materials that are specific to a lender or a lender’s specific loan offerings without prior approval of the material substance of those materials by that lender
- Engaging in unsolicited door-to-door or telephonic contact with prospective borrowers
- Making a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in lead generation activities
- Require each licensee that uses the services of a lead generator to develop and implement policies and procedures reasonably intended to exercise oversight, monitor borrower complaints, ensure the lead generator’s compliance, and refrain from using leads generated through false, misleading or deceptive business or advertising practices;
- Require each lead generator to develop and implement policies and procedures to respond to questions raised by borrowers and prospective borrowers and to address complaints from borrowers and prospective borrowers as soon as reasonably practicable;
- Require the lead generator, at the time an inquiry or application from a borrower is received, to provide a statement to the borrower, as specified;
- Require a lead generator to comply with all laws, rules, and orders that are applicable to CFLL licensees and any other laws of the state of federal government;
- Provide the commissioner with the same type of investigation and enforcement authority over lead generators as over CFLL licensee (e.g., examinations, authority to suspend or bar an employee, citation and fine authority, desist and refrain authority, and suspension and revocation of registration).
Related Legislation:
AB 784 (Dababneh, 2017) would expand the Pilot Program for Increased Access to Responsible Small-Dollar Loans to include loans of up to $5,000, and rename finders as referral partners when used in connection with pilot program loans. This bill would also allow for the use of online referral partners and provide greater flexibility to pilot program lenders with respect to their compensation of finders. This bill is pending in the Assembly Banking and Finance Committee.
SB 235 (Block, Chapter 505, Statutes of 2015) increases the types of activities in which Pilot Program for Increased Access to Responsible Small-Dollar Loans finders may engage and provides greater flexibility to pilot program lenders with respect to their compensation of lead generators.
-- END --
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Bill Dodd, Chair
2017 - 2018 Regular
Bill No: Hearing Date: April 5, 2017
Author: | |||
Version: | Amended | ||
Urgency: | Fiscal: | ||
Consultant: | |||
Subject:
SUMMARY
Defines the terms finance broker and finder under the California Finance Lenders Law (CFLL); requires finders to register with the Department of Business Oversight (DBO), provide specified disclosures, adhere to specified rules, and refrain from engaging in prohibited activity; and gives the Commissioner of Business Oversight (commissioner) regulatory and enforcement authority over finders, as specified.
DESCRIPTION
- Defines a finance broker as any person who brings a prospective borrower and a finance lender together, and who is engaged in the business of performing one or both of the following activities:
- Negotiating the price, length, or any other loan term between a licensee and a prospective borrower that may be applicable to the borrower.
- Advising a prospective borrower as to any loan term.
- Negotiating the price, length, or any other loan term between a licensee and a prospective borrower that may be applicable to the borrower.
- Defines a finder as any person, who, for compensation or in expectation of compensation, helps facilitate a loan subject to the CFLL by performing one or more of the following activities for another or others:
- Collecting nonpublic personal identification information from prospective borrowers in anticipation of selling or submitting the information to one or more finance lenders.
- Introducing or connecting prospective borrowers and prospective lenders after comparing prospective borrowers’ attributes with prospective lenders’ preferences.
- Offering to the public a means through which the finder compiles and publishes comparison information on various loans made pursuant to the CFLL, including services that allow consumers to contact finance lenders through links on the finder’s Internet Web site or comparable technological means.
- Delivering disclosures to borrowers or prospective borrowers that are required pursuant to the CFLL.
- Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower, which has been either prepared by a finance lender or reviewed and approved in writing by that lender.
- Notifying a prospective borrower of the information needed to complete an application for a loan subject to the CFLL, without providing counseling or advice to that borrower.
- Contacting a finance lender on behalf of a prospective borrower to determine the status of a prospective borrower’s loan application.
- Communicating a response that is returned by a finance lender’s automated underwriting system to a borrower or a prospective borrower.
- Obtaining a borrower’s signature on documents prepared by a finance lender and delivering final copies of the documents to the borrower.
- Collecting nonpublic personal identification information from prospective borrowers in anticipation of selling or submitting the information to one or more finance lenders.
- Provides that the following are not deemed to be finance brokers or finders and may engage in the specified activities in connection with loans subject to the CFLL, without the requirement for licensure or regulation:
- A person whose activities in connection with loans subject to the CFLL are performed on no more than an occasional basis.
- A person who disseminates, places, posts, or distributes advertising or promotional information or materials pertaining to loans made under the CFLL.
- A person who provides financial education or information of a general nature to a prospective borrower.
- A credit reporting agency that furnishes a consumer credit report to a finance lender.
- A person whose activities in connection with loans subject to the CFLL are performed on no more than an occasional basis.
- Prohibits persons from engaging in the business of a finder without first registering as a finder with the commissioner, as specified. Contains requirements applicable to applications for registration, establishment of application fees by the commissioner; and review, approval, and denial of applications by the commissioner.
- Prohibits a CFLL licensee from compensating a finder that is not registered pursuant to the CFLL in connection with a loan made pursuant to the CFLL.
- Authorizes a CFLL licensee to compensate a registered finder for engaging in finding activities, subject to all of the following requirements:
- Each licensee wishing to engage the services of a finder must enter into a written agreement with that finder, clearly describing the services to be performed.
- Each agreement between a licensee and a finder must require the finder to register with the commissioner, comply with applicable provisions of the CFLL and with rules promulgated and orders issued by the commissioner to implement those provisions, and retain and produce records of all transactions conducted with California residents, upon request by the commissioner.
- Each licensee must exercise oversight over its finders’ compliance with the provisions of the CFLL and must retain records documenting its oversight efforts for at least three years.
- Each licensee wishing to engage the services of a finder must enter into a written agreement with that finder, clearly describing the services to be performed.
- Prohibits a finder from entering into a written agreement with a CFLL licensee that is not in good standing with the commissioner at the time that agreement is signed or with an unlicensed person that is subject to a final desist and refrain order for engaging in unlicensed activities at the time that agreement is signed.
- Requires each finder to comply with all laws, rules, and orders that are applicable to CFLL licensees, which impose requirements regarding the duty to safeguard nonpublic personal financial information. Prohibits a finder who collects nonpublic personal financial information from a borrower in connection with a loan request or application from disclosing that information to a third party, unless authorized by the borrower, or unless required or permitted by applicable law.
- Requires finders to provide a specified disclosure to a consumer each time that finder receives an inquiry or application from a consumer for a loan subject to the CFLL. Requires CFLL lenders who approve an application for a loan subject to the CFLL from a borrower referred to it by a finder to provide a specified disclosure to the borrower. Prescribes the language and type size of these disclosures
- Subjects registered finders to the provisions of the CFLL that prohibit making materially false or misleading statements or representations to borrowers about loans; engaging in misleading advertising; committing acts that constitute fraud or dishonest dealings; knowingly misrepresenting, circumventing, or concealing any material aspect or information regarding a transaction to which the person is a party; or engaging in an acts in violation of specified sections of the Civil Code or Business and Professions Code.
- Provides the commissioner with the same types of investigation and enforcement authority over finders that he or she has over CFLL licensees (e.g., examinations at any time, authority to suspend or bar an employee, citation and fine authority over both licensees and unlicensed persons that require a license, desist and refrain authority over both licensees and unlicensed persons that require a license, and suspension and revocation of registration). All enforcement authority is subject to the provisions of the Administrative Procedures Act.
EXISTING LAW
- Defines a broker, pursuant to the CFLL, as any person who is engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender (Financial Code Section 22004). Provides that no person shall engage in the business of a finance broker without obtaining a license from the commissioner (Financial Code Section 22100).
- Prohibits a finance lender from paying any compensation to an unlicensed person or company for soliciting or accepting applications for loans. This prohibition does not apply to the payment of compensation to an employee of the lender, a real estate broker, or to compensation paid for any brokerage service provided by a bank, savings and loan association, or other financial institution that exempted from the CFLL (10 California Code of Regulations, Title 10, Section 1451).
- Contains two limited exceptions to the prohibition against compensating unlicensed persons in connection with the solicitation or acceptance of applications for loans:
- Lenders accepted to participate in the Pilot Program for Increased Access to Responsible Small-Dollar Loans (pilot program) may use the services of one or more finders, as defined. Finders authorized under the pilot program need not be licensed, if they engage in one or more of eight activities that generally involve helping borrowers fill out loan applications and communicating with lenders about the status of and final decision on borrowers’ loan applications. Pilot program finders may also engage in one or more of three additional activities (disbursing loan proceeds, accepting loan payments, and providing borrower disclosures) if they hold specified licenses. The ability of pilot program lenders to compensate finders is subject to several limitations. The commissioner has examination and disciplinary authority over pilot program finders (Financial Code Sections 22371 through 22376).
- CFLL licensees that make commercial loans may compensate unlicensed persons in connection with the referral of one or more prospective borrowers, when all of the following occur: the referral leads to a consummated loan, the loan contract provides for an annual percentage rate that does not exceed 36%, the licensee follows specified requirements when underwriting the loan, the licensee maintains records of all compensation paid to unlicensed persons, and the licensee annually submits information to the commissioner. Unlicensed persons that receive compensation may not engage in one or more of eight specific activities involving loans, except as specified. Six of these eight activities are generally allowed to be performed by pilot program finders (Financial Code Section 22602; thus, while the two exceptions to the prohibition against compensating unlicensed persons in connection with loan applications are not in direct conflict with one another, they are inconsistent).
- Lenders accepted to participate in the Pilot Program for Increased Access to Responsible Small-Dollar Loans (pilot program) may use the services of one or more finders, as defined. Finders authorized under the pilot program need not be licensed, if they engage in one or more of eight activities that generally involve helping borrowers fill out loan applications and communicating with lenders about the status of and final decision on borrowers’ loan applications. Pilot program finders may also engage in one or more of three additional activities (disbursing loan proceeds, accepting loan payments, and providing borrower disclosures) if they hold specified licenses. The ability of pilot program lenders to compensate finders is subject to several limitations. The commissioner has examination and disciplinary authority over pilot program finders (Financial Code Sections 22371 through 22376).
COMMENTS
- Purpose: This bill is intended to provide regulatory certainty for lenders licensed under the CFLL that use lead generators and for lead generators operating in California.
- Background: The CFLL was written long before the Internet was developed. For that reason, the law is silent on several activities that are common in today’s consumer and business lending marketplaces, including the act of introducing prospective borrowers to prospective lenders online, without helping to negotiate the terms of the loan. The persons who perform these introductions are known as finders (a term used in case law) or, more colloquially, lead generators.
As is clear to anyone who searches for a loan on the Internet, online lead generation websites are extremely common. Lead generators collect information from consumers and small businesses seeking loans and sell that information to lenders seeking to extend credit to these groups. Lead generators can benefit both borrowers and lenders. Borrowers who use lead generators to help them obtain loans can often compare different lenders and loan terms, before selecting the combination in which they are most interested. Lenders can use lead generators to cost-effectively and efficiently identify prospective borrowers who are interested in and eligible for the loans they are offering.
However, as described in more detail below, lead generation can also be performed in ways that have the potential to harm borrowers and prospective borrowers. Yet, despite these potential harms, California currently lacks a regulatory framework designed to protect persons who use lead generators to obtain installment loans. This bill proposes such a regulatory framework and proposes to give California’s primary lending regulator, the Commissioner of Business Oversight, clear statutory authority to regulate the behavior of lead generators operating in California. - Discussion: As referenced above in the Existing Law section of this analysis, California’s CFLL is unclear and inconsistent in the way in which it covers the act of helping connect borrowers with lenders. This lack of consistency and regulatory clarity has led to several problems for lenders and lead generators. It also has significant potential to harm borrowers, because existing law fails to delineate what protections borrowers have when they use lead generators, nor to ensure that the lead generation process is transparent.
Some at DBO have suggested that lead generation activities constitute brokering, and that CFLL lenders may not compensate lead generators which lack those broker’s licenses. For that reason, California-licensed finance lenders that compensate unlicensed lead generators are subject to possible disciplinary action. However, because no other state law in the country requires lead generators to be licensed, most lead generation activities are performed by unlicensed entities. Although DBO has not yet brought enforcement actions against CFLL licensees in good standing, which have compensated unlicensed lead generators, the prospect of such discipline looms large over CFLL licensees seeking to remain in good standing with their regulator.
Because of DBO’s interpretation that lead generation activities may require licensure, several lenders that serve California borrowers are avoiding licensure in California. Many of these lenders have partnered with banks and are lending in California under the regulatory protection of their bank partnerships. Because they are not licensed under the CFLL, these lenders are not subject to the CFLL’s restrictions against compensating unlicensed lead generators; lenders lending under bank partnerships can and do freely use lead generators to help identify borrowers, which places them at a competitive advantage over their California-licensed finance lender counterparts.
Lenders are not the only entities that are avoiding licensure in California. Many lead generation companies are operating in California without finance broker licenses, which subjects them to the same legal and regulatory uncertainty faced by the licensed lenders that use their services. - Federal Trade Commission Workshop and White Paper: Calling lead generation “the most pervasive industry that nobody knows about,” the Federal Trade Commission (FTC) sponsored a workshop and published a white paper in 2016 to call attention to the consumer protection implications of lead generation (https://www.ftc.gov/news-events/blogs/business-blog/2016/09/ftc-staff-perspective-lead-generation).
Issued in September, 2016, that white paper stated, “Online lead generation is nearly ubiquitous in the modern marketplace, connecting consumers who are interested in goods or services with the merchants or providers who can offer them. But because lead generators often operate behind the scenes in complex ways, consumers and many businesses may know little about what they do and how to do it.” Potential benefits identified during the workshop: Lead generators may have special expertise that connects merchants and interested consumers quickly and cost-effectively. Lead generators may benefit consumers by connecting them quickly with multiple merchants and their associated offers – offers that consumers might not find as easily on their own.
On the flip side, the FTB identified several potential concerns for consumers, including complexity and lack of transparency, aggressive or potentially deceptive marketing, and potential misuse of sensitive consumer information. As described below, SB 297 contains provisions intended to address each of the consumer concerns raised by the FTC.
Complexity and Lack of Transparency: The FTC observed that “the pathway through which leads are collected, processed, and sold is often very complex and opaque....consumers who fill out web forms may not realize they are operated by lead generators and instead assume that they are submitting information directly to a merchant or other advertiser. Even if consumers understand that they are submitting their information to a lead generator, they may not know that this information can be sold and re-sold multiple times – and further that, as a result, they may be contacted by numerous marketers that are unfamiliar to them. Additionally, consumers may not be aware that lead generators sometimes sell their information to the companies willing to pay for it (or pay the most for it), as opposed to those best suited to offering them the products or services they seek.”
To address these concerns, the FTC report recommended that this information should be disclosed to consumers clearly and conspicuously to add transparency to the lead generation process and allow consumers to make informed choices about when and how to share their personal information. Toward that end, SB 297 requires finders to provide a specified disclosure to prospective borrowers that is intended to explain the lead generation process, provide borrowers with finders’ contact information if they have questions about that process, and provide information regarding how consumers may file complaints about finders with DBO. The bill also requires lenders that approve borrowers for loans after using finders to provide a disclosure to those borrowers informing them of the lead generation process, providing the borrowers with the lender’s contact information for questions about the loan, and providing information regarding how consumers may file complaints about their lender or their loan transaction to DBO.
Aggressive or Potentially Deceptive Marketing: According to the FTC, this issue appears best addressed through a combination of statutory prohibitions against deceptive marketing practices, enforcement actions by the appropriate regulator(s), and industry best practices. Consistent with these recommendations, SB 297 contains prohibitions against false and misleading statements and misrepresentations by finders, requirements that CFLL lenders exercise oversight over their finders’ compliance with these and other provisions of the CFLL, imposes records retention requirements on finders and licensees who use their services, and provides DBO with examination and enforcement authority.
Potential Misuse of Sensitive Consumer Information: Lead generation representatives that attended the FTC workshop “commented that the collection and use of [sensitive personal and financial information] is necessary for lenders to engage in quick, underwriting and approval – so that consumers shopping online for loans can secure them instantaneously. Other participants, however, expressed significant concern that lead generators’ collection and sharing of such sensitive information increases the risk of misuse and harm to consumers.”
SB 297 requires finders to comply with all of the laws, rules, and orders regarding the duty to safeguard nonpublic personal financial information that are applicable to CFLL licensees. The bill also prohibits finders from disclosing nonpublic personal financial information collected from a borrower in connection with a loan request or application with any third party, unless authorized by that borrower. - Summary of Arguments in Support:
- BSL Financial Services, Davis Commercial Finance, Opportunity Financial, Ascend Consumer Finance, and several other lenders are licensed under the CFLL and lend to California residents. “We have always wanted to expand the scope and quantity of the credit we are able to offer to our customers in California, and accordingly to increase both credit opportunities for our California customers and competition for their business among more lenders. However, the current rules of the CFLL as enforced by DBO pertaining to our ability to use loan finders is unclear and leads to uncertainty around how lead generation activities may lawfully be performed. Under the Department’s current interpretations, it is unclear whether we can fully use online loan leads. We are unable to conduct a refer-a-friend reward program, like any other business can do. We are limited in the joint advertising and marketing we can conduct with other businesses. We do not seek to mislead or deceive our customers; to the contrary, we seek to be able to reach out to them with accurate information to offer more credit opportunities to more of them.”
“SB 297 sets forth clear rules to inform borrowers of lenders’ relationships with loan finders, and to permit lenders and loan finders to offer a much wider range of credit opportunities to consumers and small businesses in California.” - Opportunity Fund is a not-for-profit financial institution that makes microloans to small businesses. “SB 297 provides needed oversight over finders to ensure all California consumers, including small business owners, are protected from dishonest or misleading statements in connection with their search for financing. Finders play an essential role in connecting small businesses with appropriate lenders across a range of industries and geographies. Current state law prohibits CA licensed lenders like Opportunity Fund from compensating most finders, which sets DBO licensees at a disadvantage compared to other financing companies that are not licensed within the state but who still do business here. By creating a simple finder registration process, SB 297 levels the playing field for DBO licensed lenders.”
- LeadsMarket.com provides an online platform where consumers searching for loans are connected to approved lenders. LeadsMarket.com supports SB 297, because the “bill provides effective consumer protection in the ‘lead generation’ process without creating an unnecessarily costly or complex regulatory burden. The registration requirement in SB 297 creates far more accountability than presently exists in California’s lead generation ecosystem. At the same time, the registration requirement is simple enough to encourage even small finders to comply. Finding a middle ground between burdensome regulations and robust consumer protection is important, and we believe SB 297 strikes that balance.”
- Speedy Cash and Galt Ventures are licensed to operate in 26 states, through 218 storefronts and online. “The definition of a broker and the act of brokering is traditionally defined as someone who arranges or negotiates the purchase or sale of goods or assets on behalf of another....A lead generator does not arrange or negotiate loans offered by CFLL licensees – a lead generator simply performs a ‘matchmaking’ service, i.e., offers to ‘introduce’ prospective borrowers with finance lenders who may be interested in purchasing leads/introductions to prospective borrowers. Unfortunately, however, the current definition of ‘broker’ in the CFLL (Financial Code Section 22004) is vague and antiquated in light of current business activities, and the modern realities of a diverse and mobile demographic. Accordingly, it is critically important that SB 297 becomes law so that CFLL licensees operate under clear ‘rules of the road’ and on a level playing field with other financial institutions, without the risk of unnecessary supervisory or enforcement actions.”
- BSL Financial Services, Davis Commercial Finance, Opportunity Financial, Ascend Consumer Finance, and several other lenders are licensed under the CFLL and lend to California residents. “We have always wanted to expand the scope and quantity of the credit we are able to offer to our customers in California, and accordingly to increase both credit opportunities for our California customers and competition for their business among more lenders. However, the current rules of the CFLL as enforced by DBO pertaining to our ability to use loan finders is unclear and leads to uncertainty around how lead generation activities may lawfully be performed. Under the Department’s current interpretations, it is unclear whether we can fully use online loan leads. We are unable to conduct a refer-a-friend reward program, like any other business can do. We are limited in the joint advertising and marketing we can conduct with other businesses. We do not seek to mislead or deceive our customers; to the contrary, we seek to be able to reach out to them with accurate information to offer more credit opportunities to more of them.”
- Summary of Arguments in Opposition:
- Consumers Union (CU) and a coalition of eighteen other consumer and legal advocacy groups oppose SB 297, because it “would authorize the use of unlicensed agents, acting as brokers in practice, to market loans with little oversight and potentially unlimited compensation that could incentivize predatory behavior.”
In its coalition letter, CU observes that finders were originally authorized under the pilot program as a way to connect consumers with safer, responsibly-underwritten loan options. SB 297 would authorize the use of finders in connection with loans made under the entire CFLL, including loans made in amounts of $2,500 and above, which have no rate caps. SB 297 would not require finders to be licensed, or limit the role to businesses with expertise in financial transactions. Any company would be able to register with DBO and commence finding activities. Permitting unlicensed companies to access and retain sensitive personal information raises financial privacy and data security concerns.
Finally, by authorizing finders to operate online, SB 297 would permit finders to market loans away from their places of business. It would eliminate per-loan compensation caps and would allow lenders to pass finder compensation costs onto consumers. CU and the other organizations that signed onto the coalition letter of opposition believe that these provisions create strong incentives for finders to aggressively market loans to borrowers. - Oportun, a pilot program lender that also lends in amounts above $2,500, believes that SB 297 “will dramatically increase the number of parties and entities of varying degrees of expertise, reliability and motivation who can and will originate, or at least significantly participate in, the origination of CFLL loans in California. We believe that there are likely to be significant negative effects of that increased participation.”
Oportun questions the need for the bill without extensive study and demonstration of compelling need. “Use of third parties to find borrowers and match them with lenders is not a unique, innovative, or new business practice. It is a well-known approach whose use waxes and wanes as abuses arise and market and regulatory adjustments are made. We are essentially talking about compensated steering. Any statutory regime that expands and legitimizes this must have some fairly compelling reasons to do so.
Other concerns: SB 297 reduces or omits many borrower protections that are embedded in transactions involving brokers. The bill lacks any requirements around a finder’s fitness for that role. Lenders may lack the ability to exercise effective oversight of finders. The duties of finders to borrowers with whom they interact are unclear. The bill does not limit finder compensation, nor does it require DBO to examine finders on a regular basis. The bill lacks transparency, accountability, or reporting by finders. There is no limitation on the size or interest rate of loans with which finders can be involved.
- Consumers Union (CU) and a coalition of eighteen other consumer and legal advocacy groups oppose SB 297, because it “would authorize the use of unlicensed agents, acting as brokers in practice, to market loans with little oversight and potentially unlimited compensation that could incentivize predatory behavior.”
- Amendments:
- Once the status of SB 297 and related legislation is more clearly known later in the year, SB 297 would benefit from amendments to ensure that its finder provisions do not conflict with those contained in the pilot program or those added to the CFLL by SB 197.
- Once the status of SB 297 and related legislation is more clearly known later in the year, SB 297 would benefit from amendments to ensure that its finder provisions do not conflict with those contained in the pilot program or those added to the CFLL by SB 197.
- Prior and Related Legislation:
- AB 784 (Dababneh), 2017: Would expand the pilot program to include loans of up to $5,000, rename finders as referral partners when used in connection with pilot program loans, allow for the use of online referral partners, and provide greater flexibility to pilot program lenders with respect to their compensation of finders. Pending in the Assembly Banking and Finance Committee.
- SB 235 (Block), Chapter 505, Statutes of 2015: Increase the types of activities in which pilot program finders may engage and provided greater flexibility to pilot program lenders with respect to their compensation of finders.
- SB 197 (Block), Chapter 761, Statutes of 2015: Authorized the payment of referral fees to unlicensed persons in connection with commercial loans made under the CFLL, subject to several limitations specified in the bill.
- AB 784 (Dababneh), 2017: Would expand the pilot program to include loans of up to $5,000, rename finders as referral partners when used in connection with pilot program loans, allow for the use of online referral partners, and provide greater flexibility to pilot program lenders with respect to their compensation of finders. Pending in the Assembly Banking and Finance Committee.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
Allied Cash Advance
Ascend Consumer Finance
Bay Area Title Loans
BSL Financial Services
California Financial Services Association
California Financial Service Providers
Check Agencies of California
Davis Commercial Finance
Elevate Credit
Expansion Capital Group
Galt Ventures
InstaLoan
LeadsMarket.com
LendUp
New Credit America
Opportunity Financial
Opportunity Fund
Salas and Company
Southwestern & Pacific Specialty Finance
Spectrum Franchise Group
Speedy Cash
Title Bucks
Title Max
Opposition
Brightline Defense Project
California Capital Financial Development Corporation
California Reinvestment Coalition
CEDC Small Business Finance
Center for Responsible Lending
Clergy and Laity United for Economic Justice
Community Legal Services of East Palo Alto
Consumers for Auto Reliability and Safety
Consumers Union
East LA Community Corporation
Greenlining Institute
Housing and Economic Rights Advocates
Law Foundation of Silicon Valley
Mission Economic Development Agency
Neighborhood Housing Services of the East Bay
Nuestra Casa
Oportun
Presente
Public Counsel
Public Law Center
-- END --
Discussed in Hearing
48MIN
Senate Standing Committee on Appropriations
3MIN
Senate Standing Committee on Appropriations
28MIN
Senate Standing Committee on Labor and Industrial Relations
Bill Author
Bill Co-Author(s):
