SB 325: Pilot Program for Increased Access to Responsible Small Dollar Loans.

Session Year: 2017-2018
House: Senate

Version:

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

This bill would permit a licensee that consummates electronically an unsecured loan under the Pilot Program for Increased Access to Responsible Small Dollar Loans to satisfy the requirements to provide a borrower with documents marked paid by providing the borrower or person making final payment with a receipt, as specified. The bill would eliminate the upper limit on the amount of a permissible loan under the pilot program and make corresponding changes. The bill would revise the statement of legislative findings for the program and specify the applicability of certain pilot program requirements on licensees and specified associates, when making loans above $2,500. The bill would revise the term finder to instead be referral partner and would make various conforming changes in this regard. The bill would revise the conditions under which a licensee may refinance a loan under the pilot program to apply to borrowers who have been current on their loans for a minimum of 8 consecutive months. The bill would permit a referral agents activities to be done through other means and not necessarily at his or her physical business location. The bill would delete other provisions connected to an entity who uses an electronic access point, as specified, or personally contacts a borrower at a physical business location, among other things. The bill would prohibit a referral partner from performing unsolicited door-to-door or telephonic solicitation. The bill would require licensees who that use referral agents to provide them training, as specified, and to implement procedures to ensure that referral partners act in compliance with the law. The bill would also eliminate the requirement that a licensee provide a borrower of a consummated loan a written copy of a specified disclosure notice within 2 weeks of consummation. The bill would revise requirements on compensating finders by eliminating a limit on total compensation paid over the life of a loan and would prescribe limits on compensation with reference to the contractual lengths of loans. The bill would revise the content of the report that the Commissioner of Business Oversight is required to provide to include certain information on loan applicants who were denied loans and for borrowers who did and did not have credit scores when they obtained loans, among other things. By expanding the definition of a crime, this bill would impose a state-mandated local program.

(2)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made in a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer. Existing law also provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. These provisions are repealed as of December 1, 2017.This bill would extend the repeal date of these provisions from December 1, 2017, to January 1, 2022.The bill would also make conforming changes and delete obsolete provisions.This bill would declare that it is to take effect immediately as an urgency statute.

Discussed in Hearing