CALIFORNIA FINANCIAL CODE
DIVISION 9 – CALIFORNIA FINANCING LAW
CHAPTER 1 – General Provisions 22000-22172
ARTICLE 1 – Definitions 22000-22020
This division is known and may be cited as the “California Financing Law.”
(a) This division shall be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) To ensure an adequate supply of credit to borrowers in this state.
(2) To simplify, clarify, and modernize the law governing loans made by finance lenders.
(3) To foster competition among finance lenders.
(4) To protect borrowers against unfair practices by some lenders, having due regard for the interests of legitimate and scrupulous lenders.
(5) To permit and encourage the development of fair and economically sound lending practices.
(6) To encourage and foster a sound economic climate in this state.
(7) To protect property owners from deceptive and misleading practices that threaten the efficacy and viability of property assessed clean energy financing programs.
(b) Consumer loans, as defined in Sections 22203 and 22204, are subject to this chapter, Chapter 2 (commencing with Section 22200), Article 1 (commencing with Section 22700) of Chapter 4, and Article 2 (commencing with Section 22750) of Chapter 4.
(c) Commercial loans, as defined in Section 22502, are subject to this chapter, Chapter 3 (commencing with Section 22500), Article 1 (commencing with Section 22700) of Chapter 4, and Article 3 (commencing with Section 22780) of Chapter 4.
(d) A program administrator, as defined in Section 22018, is subject to this chapter, Chapter 3.5 (commencing with Section 22680), and Article 1 (commencing with Section 22700) of Chapter 4.
(e) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 5) and added by Stats. 2017, Ch. 475, Sec. 6. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
To accomplish its underlying purposes and policies, this division creates a class of exempt persons pursuant to Section 1 of Article XV of the California Constitution.
It is the intent of the Legislature to preserve existing exemptions under Section 1 of Article XV of the Constitution and statutory law for (a) personal property brokers formerly regulated by the Personal Property Brokers Law; (b) lenders formerly regulated by the Consumer Finance Lenders Law; and (c) lenders formerly regulated by the Commercial Finance Lenders Law; and no finding that any provision of this division is invalid with respect to a particular lender or class of lenders shall affect the enforceability of this division with respect to any of the foregoing classifications of lenders, which shall in all events continue to be exempted by this division.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
Unless the context otherwise requires, the definitions given in this article govern the construction of this division.
22003.5.
“Assessment contract” means an agreement entered into between all property owners of record on real property and a public agency in which, for voluntary contractual assessments imposed on the real property, the public agency provides a PACE assessment for the installation of one or more efficiency improvements on the real property in accordance with a PACE program, specified in paragraph (2) of subdivision (a) of Section 5898.20 of the Streets and Highways Code, or Section 5899, 5899.3, or 5899.4 of the Streets and Highways Code, or a special tax described in Section 53328.1 of the Government Code.
This section shall remain in effect only until January 1, 2029, and as of that date is repealed.
(Amended by Stats. 2018, Ch. 837, Sec. 2. (SB 465) Effective January 1, 2019. Repealed as of January 1, 2029, by its own provisions. See later operative version added by Stats. 2018, Ch. 837.)
“Broker” includes 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.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
“Commissioner” means the Commissioner of Business Oversight.
(Amended by Stats. 2013, Ch. 353, Sec. 65. (SB 820) Effective September 26, 2013. Operative July 1, 2013, by Sec. 129 of Ch. 353.)
As used in this division, the terms “security interest,” “accounts,” “chattel paper,” “documents,” “general intangibles,” “goods,” and “instruments” are as defined in the Uniform Commercial Code.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) “Licensee” means any finance lender, broker, or program administrator who receives a license in accordance with this division.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 8) and added by Stats. 2017, Ch. 475, Sec. 9. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
“Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization, a government, or a political subdivision of a government.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
“Finance lender” includes any person who is engaged in the business of making consumer loans or making commercial loans. The business of making consumer loans or commercial loans may include lending money and taking, in the name of the lender, or in any other name, in whole or in part, as security for a loan, any contract or obligation involving the forfeiture of rights in or to personal property, the use and possession of which property is retained by other than the mortgagee or lender, or any lien on, assignment of, or power of attorney relative to wages, salary, earnings, income, or commission.
It is the intent of the Legislature that the definition of finance lender shall be interpreted to include a personal property broker as referenced in Section 1 of Article XV of the California Constitution.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) “Finance lender,” “broker,” and “program administrator” do not include employees regularly employed at the location specified in the license of the finance lender, broker, or program administrator, except that an employee, when acting within the scope of his or her employment, shall be exempt from any other law from which his or her employer is exempt.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 10) and added by Stats. 2017, Ch. 475, Sec. 11. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
A “regulatory ceiling provision” is a statement in a section or subdivision that specifies an original bona fide principal loan amount at or above which that section or subdivision does not apply to a loan.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) “Branch office license” means a license to engage in business as a finance lender or broker at a location other than the location identified in a finance lender or broker license application or amended application.
(b) “Depository institution” has the same meaning as in Section 3 of the Federal Deposit Insurance Act, and includes any credit union.
(c) “Federal banking agencies” means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.
(d) “Nationwide Mortgage Licensing System and Registry” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators.
(e) “Residential mortgage loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling, as defined in Section 103(v) of the federal Truth in Lending Act, or residential real estate upon which is constructed or intended to be constructed a dwelling. “Dwelling” means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobilehome, or trailer, if it is used as a residence.
(f) “SAFE Act” means the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (Public Law 110-289).
(g) “Unique identifier” means a number or other identifier assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.
(h) For purposes of Sections 22109.2, 22109.3, and 22109.5, “nontraditional mortgage product” means any mortgage product other than a 30-year fixed rate mortgage.
(i) For purposes of Section 22109.1, “expungement” means the subsequent order under the provisions of Section 1203.4 of the Penal Code allowing such individual to withdraw his or her plea of guilty and to enter a plea of not guilty, or setting aside the verdict of guilty or dismissing the accusation, information, or indictment. With respect to criminal convictions in another state, that state’s definition of expungement will apply.
(Amended by Stats. 2012, Ch. 264, Sec. 1. (AB 2666) Effective January 1, 2013.)
(a) “Mortgage loan originator” means an individual who, for compensation or gain, or in the expectation of compensation or gain, takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.
(b) Mortgage loan originator does not include any of the following:
(1) An individual who performs purely administrative or clerical tasks on behalf of a person meeting the definition of a mortgage loan originator, except as provided in subdivision (c) of Section 22014. The term “administrative or clerical tasks” means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.
(2) An individual who solely renegotiates terms for existing mortgage loans held or serviced by his or her employer and who does not otherwise act as a mortgage loan originator, unless the United States Department of Housing and Urban Development or a court of competent jurisdiction determines that the SAFE Act requires such an employee to be licensed as a mortgage loan originator under state laws implementing the SAFE Act.
(3) An individual that is solely involved in extensions of credit relating to timeshare plans, as that term is defined in Section 101(53D) of Title 11 of the United States Code.
(4) An individual licensed as a mortgage loan originator pursuant to the provisions of Article 2.1 (commencing with Section 10166.01) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code and the SAFE Act.
(5) An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator only pursuant to his or her official duties as an employee of the federal, state, or local government agency or housing finance agency.
(A) For purposes of this paragraph, the term “employee” means an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.
(B) For purposes of this paragraph, the term “housing finance agency” means any authority:
(i) That is chartered by a state to help meet the affordable housing needs of the residents of the state.
(ii) That is supervised directly or indirectly by the state government.
(iii) That is subject to audit and review by the state in which it operates.
(6) (A) An employee of a bona fide nonprofit organization who exclusively originates residential mortgage loans for a bona fide nonprofit organization, and who acts as a mortgage loan originator only with respect to residential mortgage loans with terms that are favorable to the borrower.
(B) To qualify for the exemption under this paragraph, the bona fide nonprofit organization under this paragraph must register with the department on a form prescribed by the commissioner, along with documentation of all of the following by December 31 of each year:
(i) Status of a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986.
(ii) That the organization promotes affordable housing or provides home ownership education or similar services.
(iii) That the organization conducts its activities in a manner that serves public or charitable purposes, rather than commercial purposes.
(iv) That the organization receives funding and revenue, and charges fees in a manner that does not incentivize the organization or its employees to act other than in the best interests of its clients.
(v) That the organization compensates employees in a manner that does not incentivize employees to act other than in the best interests of its clients.
(vi) That the organization provides to, or identifies for, the borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs.
(vii) That the organization is certified by the United States Department of Housing and Urban Development as a housing counselor who engages solely in traditional housing counseling services, if applicable.
(C) The commissioner may periodically require reports regarding the activities of the bona fide nonprofit organization, and shall examine the nonprofit organization’s books and records in accordance with the regulations of the United States Department of Housing and Urban Development, or any successor guidance or requirement by the Consumer Financial Protection Bureau. If the nonprofit organization fails to provide documentation as required by subparagraph (B), or if it does not continue to meet the criteria under subparagraph (B), the commissioner may revoke the nonprofit organization’s status as a registered bona fide nonprofit organization.
(D) For residential mortgage loans to have terms that are favorable to the borrower, the terms shall be consistent with loan origination in a public or charitable context, rather than a commercial context.
(E) In making its determinations and examinations, the commissioner may rely on the receipt and review of:
(i) Reports filed with federal, state, or local housing agencies and authorities.
(ii) Reports and attestations prescribed by the commissioner by rule or order.
(c) “Registered mortgage loan originator” means any individual who is all of the following:
(1) Meets the definition of mortgage loan originator.
(2) Is an employee of a depository institution, a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration.
(3) Is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry.
(d) “Loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of, and subject to the supervision and instruction of, a mortgage loan originator licensed by the state or a registered mortgage loan originator.
(Amended by Stats. 2012, Ch. 264, Sec. 2. (AB 2666) Effective January 1, 2013.)
(a) A loan processor or underwriter who does not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator shall not be required to be licensed as a mortgage loan originator.
(b) An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator.
(c) An independent contractor may not engage in the activities of a loan processor or underwriter for a residential mortgage loan unless the independent contractor loan processor or underwriter obtains and maintains a mortgage loan originator license under this division. Each independent contractor loan processor or underwriter licensed as a mortgage loan originator shall have and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.
(Added by Stats. 2009, Ch. 160, Sec. 11. (SB 36) Effective October 11, 2009.)
“PACE assessment” means a voluntary contractual assessment, voluntary special tax, or special tax, as described in subdivisions (a), (b), and (c) of Section 26054 of the Public Resources Code.
(Added by Stats. 2017, Ch. 475, Sec. 12. (AB 1284) Effective October 4, 2017.)
“PACE program” means a program in which financing is provided for the installation of efficiency improvements on real property and funded through the use of property assessments, as well as other program components defined in this section, established pursuant to any of the following:
(a) Chapter 29 (commencing with Section 5898.10) of Part 3 of Division 7 of the Streets and Highways Code.
(b) The Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code).
(c) A charter city’s constitutional authority under Section 5 of Article XI of the California Constitution.
(Added by Stats. 2017, Ch. 475, Sec. 13. (AB 1284) Effective October 4, 2017.)
(a) “PACE solicitor” means a person authorized by a program administrator to solicit a property owner to enter into an assessment contract.
(b) “PACE solicitor agent” means an individual who is employed or retained by, and acts on behalf of, a PACE solicitor to solicit a property owner to enter into an assessment contract.
(c) “PACE solicitor” and “PACE solicitor agent” do not include any of the following:
(1) A person employed by a program administrator.
(2) A person, including a home improvement contractor or subcontractor, who does not solicit property owners to enter into assessment contracts.
(3) A person who performs purely administrative or clerical tasks.
(4) A person who advertises a PACE program, if the content of the advertising is created, prepared, or approved by a program administrator, and advertising is subject to, and in compliance with this division.
(5) A person who obtains information regarding prospective applicants for PACE financing, or who provides to a program administrator information regarding prospective applicants for PACE financing, if that information was not obtained in connection with advertising or soliciting a PACE program.
(6) A person who only solicits a property owner to enter into an assessment contract with a person who is not considered a program administrator within the meaning of subdivision (b) of Section 22018.
(Amended by Stats. 2018, Ch. 813, Sec. 1. (AB 2063) Effective January 1, 2019.)
(a) “Program administrator” means a person administering a PACE program on behalf of, and with the written consent of, a public agency. “Program administrator” does not include a public agency.
(b) For purposes of this division, “program administrator” does not include a person who meets both of the following conditions:
(1) The person does not administer a PACE program that provides financing for the installation of efficiency improvements on residential property with four or fewer units.
(2) The person does not administer a PACE program that provides financing for the installation of efficiency improvements on real property with a market value of less than one million dollars ($1,000,000).
(Amended by Stats. 2018, Ch. 813, Sec. 2. (AB 2063) Effective January 1, 2019.)
22018.5.
“Property owner” means all property owners of record on the property subject to the PACE assessment.
(Added by Stats. 2017, Ch. 475, Sec. 16. (AB 1284) Effective October 4, 2017.)
“Efficiency improvement” means one or more permanent improvements fixed to real property financed through a PACE assessment.
(Added by Stats. 2017, Ch. 475, Sec. 17. (AB 1284) Effective October 4, 2017.)
“Public agency” means a city, including a charter city, county, city and county, municipal utility district, community services district, community facilities district, joint powers authority, sanitary district, sanitation district, or water district, as defined in Section 20200 of the Water Code, that has established or participates in a PACE program, and utilizes a program administrator.
(Added by Stats. 2017, Ch. 475, Sec. 18. (AB 1284) Effective October 4, 2017.)
ARTICLE 2 – Exemptions 22050-22068
(a) This division does not apply to any person doing business under any law of any state or of the United States relating to banks, trust companies, savings and loan associations, insurance premium finance agencies, credit unions, small business investment companies, community advantage lenders, California business and industrial development corporations when acting under federal law or other state authority, or licensed pawnbrokers when acting under the authority of that license.
“Community advantage lender” means an entity authorized by the United States Small Business Administration to deliver community advantage loans.
(b) This division does not apply to a check casher who holds a valid permit issued pursuant to Section 1789.37 of the Civil Code when acting under the authority of that permit, and shall not apply to a person holding a valid license issued pursuant to Section 23005 of the Financial Code when acting under the authority of that license.
(c) This division does not apply to a college or university making a loan for the purpose of permitting a person to pursue a program or course of study leading to a degree or certificate.
(d) This division does not apply to a broker-dealer acting pursuant to a certificate then in effect and issued pursuant to Section 25211 of the Corporations Code.
(e) This division does not apply to any person who makes five or fewer loans in a 12-month period, these loans are commercial loans as defined in Section 22502, and the loans are incidental to the business of the person relying upon the exemption.
(f) This division does not apply to any public corporation as defined in Section 67510 of the Government Code, any public entity other than the state as defined in Section 811.2 of the Government Code, or any agency of any one or more of the foregoing, when making any loan so long as the public corporation, public entity, or agency of any one or more of the foregoing complies with all applicable federal and state laws and regulations.
(Amended by Stats. 2013, Ch. 243, Sec. 1. (AB 1091) Effective January 1, 2014.)
This division does not apply to the following:
(a) Any nonprofit cooperative association organized under Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code that loans or advances money in connection with any activity mentioned in that chapter.
(b) Any corporation, association, syndicate, joint stock company, or partnership engaged exclusively in the business of marketing agricultural, horticultural, viticultural, dairy, livestock, poultry, or bee products on a cooperative nonprofit basis that loans or advances money to its members or in connection with those businesses.
(c) Any corporation securing money or credit from any federal intermediate credit bank organized and existing pursuant to the provisions of an act of Congress entitled “Agricultural Credits Act of 1923” that loans or advances money or credit so secured.
(d) Any corporation created pursuant to the provisions of Part 5 (commencing with Section 14000) of Division 3 of Title 1 of the Corporations Code.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to any loan of credit made by a person not licensed under this division pursuant to a plan having all of the following characteristics:
(a) Credit cards issued pursuant to a written application and to the plan whereby the organization issuing the cards can acquire those obligations that its members in good standing incur with those persons with whom the organization has entered into written agreements setting forth the plan, and where the obligations are incurred pursuant to those agreements; or whereby the organization issuing the cards can extend credit to its members.
(b) The fee for the credit cards is designed to cover the administrative costs of the plan and is imposed upon the issuance of the card and on annual renewal dates thereafter.
(c) Any charges, discounts, or fees resulting from the acquisition of the charges is paid to the organization issuing the credit cards by the persons, corporations, or associations with whom the organization has entered into written agreements.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
In any proceeding under this law, the burden of proving an exemption is upon the person claiming it.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to bona fide conditional contracts of sale involving the disposition of personal property when these forms of sales agreements are not used for the purpose of evading this division.
(Repealed and added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to premium financing as defined in Section 18563.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to the California Infrastructure and Economic Development Bank, any program authorized pursuant to Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of Title 1 of the Corporations Code, or to the California Integrated Waste Management Board.
(Amended by Stats. 2004, Ch. 225, Sec. 10. Effective August 16, 2004.)
This division does not apply to any loan that is made or arranged by any person licensed as a real estate broker by the state and secured by a lien on real property, or to any licensed real estate broker when making such a loan. A licensed real estate broker may make a loan secured by a lien on real property for sale to a finance lender or arrange for a loan secured by a lien on real property to be made by a finance lender without obtaining a license under this division.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to any cemetery broker licensed under the Cemetery Act (Chapter 19 (commencing with Section 9600) of Division 3 of the Business and Professions Code).
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
A license to act as a broker under this division does not authorize the licensee to negotiate or perform any act as a broker in connection with loans made or to be made by a lender not licensed as a finance lender under this division.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
This division does not apply to a loan made or arranged by a licensed residential mortgage lender or servicer when acting under the authority of that license.
(Added by Stats. 1995, Ch. 564, Sec. 6.5. Effective January 1, 1996.)
(a) This division does not apply to any nonprofit church extension fund.
(b) For purposes of this section:
(1) “Nonprofit church extension fund” means a nonprofit organization affiliated with a church, that is formed for the purpose of making loans to that church’s congregational organization or organizations for site acquisitions, new facilities, or improvements to existing facilities, purchased for the benefit of the church congregational organization.
(2) What constitutes a “church” shall be determined from the following criteria, none of which has controlling weight: a distinct legal existence; a recognized creed and form of worship; a definite and distinct ecclesiastical government; a formal code of doctrine and discipline; a distinct religious history; a membership not associated with any other religion or denomination; a complete organization of ordained ministers ministering to their congregations; ordained ministers selected after completing prescribed courses of study; a literature of its own; established places of worship; regular congregations; regular religious services; schools for the religious instruction of youth; and schools for the preparation of its ministers.
(3) “Church congregational organization” means a group of individuals who gather for the purpose of practicing the religion or manner of worship promulgated by the church with which the organization is affiliated.
(4) “Site acquisitions” means purchases of land intended for use by a church congregational organization.
(5) “New facilities” means purchases of buildings or structures intended for use by a church congregational organization.
(6) “Improvements” means purchases of materials intended to increase the quality of existing religious sites or facilities.
(c) For purposes of this section, a nonprofit church extension fund shall establish that it is exempt from federal taxation pursuant to Section 501 of Title 26 of the United States Code.
(d) For purposes of this section, no individual may be held responsible for the repayment of any loan made by a nonprofit church extension fund.
(Added by Stats. 1998, Ch. 469, Sec. 1. Effective January 1, 1999.)
(a) This division does not apply to either of the following:
(1) A commercial bridge loan made by a venture capital company to an operating company.
(2) A venture capital investment made by a venture capital company in an equity security issued by an operating company.
(b) For purposes of this section:
(1) “Venture capital company” means a person other than an individual or sole proprietorship that meets all of the following:
(A) Engages primarily in the business of promoting economic, business, or industrial development through venture capital investments or the provision of financial or management assistance to operating companies.
(B) At all times maintains at least 50 percent of its assets in venture capital investments or commitments to make venture capital investments, and maintains or, assuming consummation of the equity investment to which the commercial bridge loan relates, will maintain a material equity interest in the operating company.
(C) Approves each loan made to an operating company through the venture capital company’s board of directors, executive committee, or similar policy body, based on a reasonable belief that the loan is appropriate for the operating company after reasonable inquiry concerning the operating company’s financing objectives and financial situation.
(D) Complies, when making the loan, with all applicable federal and state laws and rules or orders governing securities transactions including, but not limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Corporate Securities Law of 1968.
(2) “Operating company” means a person that meets all of the following:
(A) Primarily engages, wholly or substantially, directly or indirectly through a majority owned subsidiary or subsidiaries, in the production or sale, or the research or development, of a product or service other than the management or investment of capital. This shall not include any of the following:
(i) A person that is either an individual or a sole proprietorship.
(ii) A person that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies or other entity or person.
(B) Uses all of the proceeds of the commercial bridge loan for the operations of its business.
(C) Approves each commercial bridge loan through its board of directors, executive committee, or similar policy board, in the exercise of its fiduciary duty, based on a reasonable belief that the loan is appropriate for the operating company after reasonable inquiry concerning the operating company’s financing objectives and financial situation.
(3) “Commercial bridge loan” means a loan that meets all of the following criteria:
(A) A loan of a principal amount of five thousand dollars ($5,000) or more, or any loan under an open-end credit program, whether secured by personal property or unsecured, the proceeds of which are intended by the operating company for use primarily for other than personal, family, or household purposes.
(B) Is made with a maturity date not to exceed three years, and in connection with or in bona fide contemplation of, an equity investment in the operating company.
(C) Is secured, if at all, solely by the operating company’s business assets, exclusive of any real property.
(D) Is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(4) For purposes of paragraph (1), “venture capital investment” is an acquisition of securities in an operating company that a person, an investment adviser of the person, or an affiliated person of either, has or obtains management rights to.
(5) “Equity security” shall have the same meaning as in Section 3(a)(11) of the federal Securities Exchange Act of 1934.
(c) For purposes of paragraph (3) of subdivision (b), for the purposes of determining whether a loan is a commercial bridge loan, a venture capital company may rely on any written statement of intended purposes signed by the operating company. The statement may be a separate statement signed by the operating company or may be contained in another document signed by the operating company, but in each case it shall be approved by its board of directors, executive committee, or similar policy body. The venture capital company may not be required to ascertain that the proceeds of the loan are used in accordance with the statement of intended purposes.
(d) For purposes of subparagraph (A) of paragraph (3) of subdivision (b), the principles set forth in Section 22551 shall be used to determine whether the specified amount of a commercial bridge loan is a bona fide principal amount.
(e) Nothing in this section is intended to abrogate or diminish the application of any other laws that are designed to protect borrowers, including, but not limited to, laws pertaining to licensing, unfair competition, usury, and conflicts of interest.
(Amended by Stats. 2014, Ch. 68, Sec. 1. (SB 1181) Effective January 1, 2015.)
(a) This division does not apply to a franchise loan made by a franchisor to a franchisee or a subfranchisor or by a subfranchisor to a franchisee.
(b) For purposes of this section:
(1) “Franchise” means “franchise,” as defined in Section 31005 of the Corporations Code.
(2) “Franchisee” means “franchisee,” as defined in Section 31006 of the Corporations Code.
(3) “Franchisor” means “franchisor,” as defined in Section 31007 of the Corporations Code.
(4) “Area franchise” means “area franchise,” as defined in Section 31008 of the Corporations Code.
(5) “Subfranchise” means “subfranchise,” as defined in Section 31008.5 of the Corporations Code.
(6) “Subfranchisor” means “subfranchisor,” as defined in Section 31009 of the Corporations Code.
(7) “Franchised business” means a business operated pursuant to a franchise or area franchise by a franchisee or pursuant to a franchise, area franchise or subfranchise by a subfranchisor.
(8) “Franchise loan” means a commercial loan, as defined in Section 22502, made by a franchisor to a current or prospective franchisee or subfranchisor or a commercial loan by a subfranchisor to a current or prospective franchisee for the acquisition, construction, operation, development, equipping, expansion, contraction, consolidation, merger, recapitalization, reorganization, or termination of a franchised business provided that the following conditions are satisfied:
(A) The franchisor or subfranchisor making the franchise loan shall comply with all applicable federal and state franchise disclosure and registration laws, regulations, rules and orders, including, but not limited to, the California Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the Corporations Code) and the Federal Trade Commission Franchise Rule: Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures (Code of Federal Regulations, Title 16, Chapter 1, Subchapter D, Part 436 (16 CFR 436), as amended) in connection with the offer or sale of any franchise, area franchise, or subfranchise to which the franchise loan relates.
(B) The proceeds of the franchise loan are intended by the borrowing franchisee or subfranchisor for use primarily for other than personal, family, or household purposes.
(C) The loan, if secured, is secured solely by the assets of the franchised business to which the franchise loan relates. Property used by the borrower primarily for personal, family, or household purposes, including the borrower’s personal residence, shall not be taken as security for the loan.
(D) The loan is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(E) The lender shall fully and clearly disclose to the borrower, at or before the time the loan is made, the rates of interest, charges, and costs of the loan.
(c) For purposes of subparagraph (B) of paragraph (8) of subdivision (b), a lending franchisor or subfranchisor may rely on any written statement of intended purposes by the borrowing franchisee or subfranchisor. The statement may be a separate statement signed by the borrowing franchisee or subfranchisor or may be contained in another document signed by the borrowing franchisee or subfranchisor. The lending franchisor or subfranchisor may not be required to ascertain that the proceeds of a franchise loan are used in accordance with the statement of intended purposes.
(d) Nothing in this section is intended to abrogate or diminish the application of any other laws that are designed to protect borrowers, including, but not limited to, laws pertaining to licensing, unfair competition, usury and conflicts of interest.
(Added by Stats. 2004, Ch. 458, Sec. 16. Effective September 10, 2004.)
(a) This division does not apply to the following:
(1) A program-related investment defined in subsection (c) of Section 4944 of the Internal Revenue Code and United States Treasury Regulations Section 53.4944-3 that is made by a private foundation, tax-exempt organization within the meaning of Section 509(a) of the Internal Revenue Code.
(2) A loan, guaranty, or investment made by a public charity, tax-exempt organization within the meaning of paragraph (1), (2), or (3) of subsection (a) of Section 509 of the Internal Revenue Code that meets all of the following requirements:
(A) The primary purpose of the loan, guaranty, or investment is to accomplish one or more of the exempt purposes of the public charity making the loan, as described in Section 170(c)(2)(B) of the Internal Revenue Code.
(B) Neither the production of income nor the appreciation of property is a significant purpose of the loan, guaranty, or investment.
(C) No purpose of the loan, guaranty, or investment is to accomplish one or more of the purposes described in Section 170(c)(2)(D) of the Internal Revenue Code.
(b) Subdivision (a) shall not exempt from the provisions of this division a tax-exempt organization that is making consumer loans as defined in Sections 22203 and 22204.
(c) A loan that is secured by any assets owned by an individual shall be exempt under subdivision (a) only if the individual providing the security is an “accredited investor” as defined in paragraph (5) or (6) of subsection (a) of Section 230.501 of Title 17 of the Code of Federal Regulations. Property held by an individual for personal, family, or household purposes, including an individual’s personal residence, may not be taken as security for a loan.
(d) A program-related investment by a private foundation, and any loan, guaranty, or investment made by a public charity that is exempt under subdivision (a) is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(e) (1) Subdivision (a) shall exempt from the provisions of this division a program-related investment by a private foundation, or a loan, guaranty, or investment by a public charity, only if the following conditions are satisfied:
(A) The organization making the program-related investment, loan, guaranty, or investment is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and is organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(B) No part of the net earnings of the organization making the program-related investment, loan, guaranty or investment inures to the benefit of a private shareholder or individual.
(C) No broker’s fee will be paid in connection with the making of the program-related investment, loan, guaranty, or investment or placement of the program-related investment, loan, guaranty or investment.
(2) This subdivision does not prohibit the organization making the program-related investment, loan, guaranty, or investment from charging interest on the loan or investment or fees on the guaranty.
(f) Subdivision (a) shall only exempt from the provisions of this division a program-related investment by a private foundation or a loan, guaranty, or investment by a public charity that is made for the primary purpose of accomplishing one or more of the organization’s exempt purposes described in Section 501(c)(3) of the Internal Revenue Code, and no significant purpose of which is the production of income or the appreciation of property within the meaning of subsection (c) of Section 4944 of the Internal Revenue Code. A recipient shall be required to use all funds received from the private foundation or the public charity only for the charitable purposes for which the program-related investment, loan, guaranty, or investment was made.
(g) Subdivision (a) shall only exempt from the provisions of this division a program-related investment by a private foundation or a loan, guaranty, or investment by a public charity if the organization consummates not more than 35 loans in a calendar year. In the making and negotiating of these loans, the private foundation or public charity shall take into consideration the financial ability of the recipients to repay the loans in the time and manner provided.
(h) Nothing in this section is intended to abrogate or diminish the application of any other applicable laws that are designed to govern the tax-exempt organizations described in subdivision (a), including, but not limited to, laws pertaining to recordkeeping and reporting to the Attorney General and the Internal Revenue Service or to protect borrowers, including, but not limited to, laws pertaining to licenses, unfair competition, usury, and conflicts of interest.
(Amended by Stats. 2009, Ch. 103, Sec. 1. (AB 401) Effective January 1, 2010.)
(a) Persons not subject to this division may apply to the commissioner for an exempt company registration for the purpose of sponsoring one or more individuals required to be licensed as mortgage loan originators pursuant to the federal SAFE Act.
(b) An exempt person applying under the exempt company registration procedure shall comply with all rules and orders that the commissioner deems necessary to ensure compliance with the federal SAFE Act and shall pay an annual registration fee established by the commissioner.
(c) (1) A mortgage loan originator who is an insurance producer eligible for licensure pursuant to this section shall meet all of the following requirements:
(A) Be covered under an exclusive written contract with, and originate mortgage loans solely on behalf of, that exempt person.
(B) Hold a current insurance producer license under Article 3 (commencing with Section 1631) of Chapter 5 of Part 2 of Division 1 of the Insurance Code that is not suspended or revoked.
(C) Have a current notice of appointment under Article 9 (commencing with Section 1702) of Chapter 5 of Part 2 of Division 1 of the Insurance Code from an insurer that controls, is controlled by, or is under common control with that exempt person.
(2) A licensed mortgage loan originator who is an insurance producer for an insurer authorized to do business in this state may originate loans on behalf of a person registered pursuant to subdivision (a) or on behalf of a licensed finance lender that originates loans exclusively for a single person that is not subject to licensure pursuant to subdivision (a) of Section 22050.
(Amended by Stats. 2012, Ch. 264, Sec. 3. (AB 2666) Effective January 1, 2013.)
(a) The Legislature finds and declares that nonprofit organizations have an important role to play in helping individuals obtain access to affordable, credit-building small dollar loans. California law should refrain from creating statutory barriers that risk slowing the growth of these loans. This section shall be liberally construed to encourage nonprofit organizations to help facilitate the making of zero-interest, low-cost loans, through lending circles and other programs and services that allow individuals to establish and build credit histories or to improve their credit scores.
(b) For the purposes of this section, an organization described in subdivision (c) shall be known as an exempt organization, and an organization described in subdivision (d) shall be known as a partnering organization.
(c) There shall be exempted from this division a nonprofit organization that facilitates one or more zero-interest, low-cost loans, provided all of the following conditions are met:
(1) The organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and is organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(2) No part of the net earnings of the organization inures to the benefit of a private shareholder or individual.
(3) A broker’s fee is not paid in connection with the making of the loan that is facilitated by the organization.
(4) An organization wishing to operate pursuant to an exemption granted under this section shall file an application for exemption with the commissioner, in a manner prescribed by the commissioner, and shall pay a fee to the commissioner, in an amount calculated by the commissioner to cover his or her costs to administer this section and Section 22067. The commissioner may refuse to grant an exemption, or to suspend or revoke a previously issued exemption if he or she finds that one or more of the provisions of this section were not met or are not being met by the organization and that denial, suspension, or revocation of the exemption is in the best interests of the public.
(5) Every organization whose exemption is approved by the commissioner shall file an annual report with the commissioner on or before March 15 of each year, containing relevant information that the commissioner reasonably requires concerning lending facilitated by the organization within the state during the preceding calendar year at all locations at which the organization facilitates lending. The commissioner shall compile the information submitted pursuant to this paragraph for use in preparing the report required by Section 22067.
(6) Any loan made pursuant to this section shall comply with the following requirements:
(A) The loan shall be unsecured.
(B) Interest shall not be imposed.
(C) An administrative fee may be charged in an amount not to exceed the following:
(i) Seven percent of the principal amount, exclusive of the administrative fee, or ninety dollars ($90), whichever is less, on the first loan made to a borrower.
(ii) Six percent of the principal amount, exclusive of the administrative fee, or seventy-five dollars ($75), whichever is less, on the second and subsequent loans made to that borrower.
(D) An organization shall not charge the same borrower an administrative fee more than once in any four-month period. Each administrative fee shall be fully earned immediately upon consummation of a loan agreement.
(E) Notwithstanding subdivision (a) of Section 22320.5 and in lieu of any other type of delinquency fee or late fee, an organization may require reimbursement from a borrower of up to ten dollars ($10) to cover an insufficient funds fee incurred by that organization due to actions of the borrower. An organization shall not charge more than two insufficient funds fees to the same borrower in a single month.
(F) The following information shall be disclosed to the consumer in writing, in a typeface no smaller than 12-point type, at the time of the loan application:
(i) The amount to be borrowed, the total dollar cost of the loan to the consumer if the loan is paid back on time, including the sum of the administrative fee and principal amount borrowed, the corresponding annual percentage rate, calculated in accordance with Federal Reserve Board Regulation Z (12 C.F.R. 226.1), the periodic payment amount, the payment frequency, and the insufficient funds fee, if applicable.
(ii) An explanation of whether, and under what circumstances, a borrower may exit a loan agreement.
(G) The loan shall have a minimum principal amount upon origination of two hundred fifty dollars ($250) and a maximum principal amount upon origination of two thousand five hundred dollars ($2,500), and a term of not less than the following:
(i) Ninety days for loans whose principal balance upon origination is less than five hundred dollars ($500).
(ii) One hundred twenty days for loans whose principal balance upon origination is at least five hundred dollars ($500), but is less than one thousand five hundred dollars ($1,500).
(iii) One hundred eighty days for loans whose principal balance upon origination is at least one thousand five hundred dollars ($1,500).
(H) The loan shall not be refinanced.
(I) The organization or any of its wholly owned subsidiaries shall not sell or assign unpaid debt to an independent party for collection before at least 90 days have passed since the start of the delinquency.
(7) Prior to disbursement of loan proceeds, the organization shall either (A) offer a credit education program or seminar to the borrower that has been previously reviewed and approved by the commissioner for use in complying with this section, or (B) invite the borrower to a credit education program or seminar offered by an independent third party that has been previously reviewed and approved by the commissioner for use in complying with this section. A credit education program or seminar offered pursuant to this paragraph shall be provided at no cost to the borrower.
(8) The organization shall report each borrower’s payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, upon acceptance as a data furnisher by that consumer reporting agency. For purposes of this section, a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis is one that meets the definition in Section 603(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). An organization that is accepted as a data furnisher after being granted an exemption by the commissioner pursuant to this subdivision shall report all borrower payment performance since its inception of lending under the program, as soon as practicable after its acceptance into the program, but in no event more than six months after its acceptance into the program.
(9) The organization shall underwrite each loan and shall ensure that a loan is not made if, through its underwriting, the organization determines that the borrower’s total monthly debt service payments, at the time of loan origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit that can be independently verified by the organization, exceed 50 percent of the borrower’s gross monthly household income except as specified in clause (iii) of subparagraph (D).
(A) The organization shall seek information and documentation pertaining to all of a borrower’s outstanding debt obligations during the loan application and underwriting process, including loans that are self-reported by the borrower but not available through independent verification. The organization shall verify that information using a credit report from at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis or through other available electronic debt verification services that provide reliable evidence of a borrower’s outstanding debt obligations.
(B) The organization shall also request from the borrower and include all information obtained from the borrower regarding outstanding deferred deposit transactions in the calculation of the borrower’s outstanding debt obligations.
(C) The organization shall not be required to consider, for purposes of debt-to-income ratio evaluation, loans from friends or family.
(D) The organization shall also verify the borrower’s household income that the organization relies on to determine the borrower’s debt-to-income ratio using information from any of the following:
(i) Electronic means or services that provide reliable evidence of the borrower’s actual income.
(ii) Internal Revenue Service Form W-2, tax returns, payroll receipts, bank statements, or other third-party documents that provide reasonably reliable evidence of the borrower’s actual income.
(iii) A signed statement from the borrower stating sources and amounts of income, if the borrower’s actual income cannot be independently verified using electronic means or services, Internal Revenue Service forms, tax returns, payroll receipts, bank statements, or other third-party documents. If income is verified using a signed statement from a borrower, a loan shall not be made if the borrower’s total monthly debt service payments, at the time of loan origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit, exceed 25 percent of the borrower’s gross monthly household income.
(10) The organization shall notify each borrower, at least two days prior to each payment due date, informing the borrower of the amount due and the payment due date. Notification may be provided by any means mutually acceptable to the borrower and the organization. A borrower shall have the right to opt out of this notification at any time, upon electronic or written request to the organization. The organization shall notify each borrower of this right prior to disbursing loan proceeds.
(11) Notwithstanding Sections 22311 to 22315, inclusive, no organization, in connection with, or incidental to, the facilitating of any loan made pursuant to this section, may offer, sell, or require a borrower to contract for “credit insurance” as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(12) An organization shall not require, as a condition of making a loan, that a borrower waive any right, penalty, remedy, forum, or procedure provided for in any law applicable to the loan, including the right to file and pursue a civil action or file a complaint with or otherwise communicate with the commissioner or any court or other public entity, or that the borrower agree to resolve disputes in a jurisdiction outside of California or to the application of laws other than those of California, as provided by law. Any waiver by a borrower must be knowing, voluntary, and in writing, and expressly not made a condition of doing business with the organization. Any waiver that is required as a condition of doing business with the organization shall be presumed involuntary, unconscionable, against public policy, and unenforceable. The organization has the burden of proving that a waiver of any rights, penalties, forums, or procedures was knowing, voluntary, and not made a condition of the contract with the borrower.
(13) An organization shall not refuse to do business with or discriminate against a borrower or applicant on the basis that the borrower or applicant refuses to waive any right, penalty, remedy, forum, or procedure, including the right to file and pursue a civil action or complaint with, or otherwise notify, the commissioner or any court or other public entity. The exercise of a person’s right to refuse to waive any right, penalty, remedy, forum, or procedure, including a rejection of a contract requiring a waiver, shall not affect any otherwise legal terms of a contract or an agreement.
(14) This section does not apply to any agreement to waive any right, penalty, remedy, forum, or procedure, including any agreement to arbitrate a claim or dispute, after a claim or dispute has arisen. This section does not affect the enforceability or validity of any other provision of the contract.
(d) This division does not apply to a nonprofit organization that partners with an organization granted an exemption pursuant to subdivision (c) for the purpose of facilitating zero-interest, low-cost loans, provided that the requirements of paragraphs (6) to (14), inclusive, of subdivision (c), and the following additional conditions are met:
(1) The partnership of each exempt organization and each partnering organization shall be formalized through a written agreement that specifies the obligations of each party. Each written agreement shall contain a provision establishing that the partnering organization agrees to comply with the provisions of this section and any regulations that may be adopted by the commissioner pursuant to this section. Each written agreement shall be provided to the commissioner upon request.
(2) Each partnering organization shall meet the requirements for federal income tax exemption under Section 501(c)(3) of the Internal Revenue Code and shall be organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(3) No part of the net earnings of the partnering organization shall inure to the benefit of a private shareholder or individual.
(4) Each exempt organization shall notify the commissioner within 30 days of entering into a written agreement with a partnering organization, on such form and in such manner as the commissioner may prescribe. At a minimum, this notification shall include the name of the partnering organization, the contact information for a person responsible for the lending activities facilitated by that partnering organization, and the address or addresses at which the organization facilitates lending activities.
(5) Upon a determination that a partnering organization has acted in violation of this section or any regulation adopted thereunder, the commissioner may disqualify that partnering organization from performing services under this section, bar that organization from performing services at one or more specific locations of that organization, terminate a written agreement between a partnering organization and an exempt organization, and, if the commissioner deems such action to be in the public interest, prohibit the use of that partnering organization by all organizations granted exemptions by the commissioner pursuant to subdivision (c).
(6) The exempt organization shall include information regarding the loans facilitated by the partnering organization in the annual report required pursuant to paragraph (5) of subdivision (c).
(e) The commissioner may examine each exempt organization and each partnering organization for compliance with the provisions of this section, upon reasonable notice to the party responsible for the lending activities facilitated by that organization. An organization so examined shall make available to the commissioner or his or her representative all books and records requested by the commissioner related to the lending activities facilitated by that organization. The cost of the examination shall be paid by the exempt organization.
(f) This section does not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,500) or more as determined in accordance with Section 22251. For purposes of this subdivision, “bona fide principal amount” shall be determined in accordance with Section 22251.
(Amended by Stats. 2015, Ch. 303, Sec. 156. (AB 731) Effective January 1, 2016.)
(a) On or before July 1 of each year, the commissioner shall post a report on the department’s Internet Web site summarizing the information described in subdivision (b). The information disclosed to the commissioner for the commissioner’s use in preparing the report described in this section is exempted from any requirement of public disclosure by paragraph (2) of subdivision (d) of Section 6254 of the Government Code.
(b) The report required by this section shall specify the time period to which the report corresponds, and shall include, but not be limited to, the following for that time period:
(1) The number of organizations that applied for exemptions pursuant to subdivision (c) of Section 22066, and the number of organizations that entered into partnerships with exempt organizations in accordance with subdivision (d) of Section 22066.
(2) The number of organizations granted exemptions and the types of exemptions granted.
(3) The reason or reasons for denying applications for exemptions, if applicable. This information shall be provided in a manner that does not identify the entity or entities denied.
(4) The number of borrowers who applied for loans through exempt or partnering organizations, the number of borrowers granted loans facilitated by exempt or partnering organizations, the total amount loaned, and the distribution of loan lengths upon origination.
(5) The number of borrowers who obtained more than one loan through an exempt or partnering organization and the distribution of the number of loans per borrower.
(6) Of the number of borrowers who obtained more than one loan facilitated by an exempt or a partnering organization, the percentage of those borrowers whose credit scores increased between successive loans, based on information from at least one major credit bureau, and the average size of the increase.
(7) The income distribution of borrowers upon loan origination, including the number of borrowers who obtained at least one loan and who resided in a low-to-moderate-income census tract at the time of their loan application.
(8) The number of borrowers who obtained loans facilitated by an exempt or a partnering organization for the following purposes, based on borrower responses at the time of their loan applications indicating the primary purpose for which the loan was obtained:
(A) Medical.
(B) Other emergency.
(C) Vehicle repair.
(D) Vehicle purchase.
(E) To pay bills.
(F) To consolidate debt.
(G) To build or repair credit history.
(H) To finance a purchase of goods or services other than a vehicle.
(I) For other than personal, family, or household purposes.
(J) Other.
(9) The number of borrowers who self-report that they had a bank account at the time of their loan application, the number of borrowers who self-report that they had a bank account and used check-cashing services, and the number of borrowers who self-report that they did not have a bank account at the time of their loan application.
(10) The performance of loans under Section 22066, as reflected by all of the following:
(A) The number and percentage of borrowers who experienced at least one late payment lasting between 7 and 29 days and who subsequently brought his or her loan current, and the distribution of principal loan amounts corresponding to those late payments.
(B) The number and percentage of borrowers who experienced at least one late payment lasting between 30 and 59 days and who subsequently brought his or her loan current, and the distribution of principal loan amounts corresponding to those late payments.
(C) The number and percentage of borrowers who experienced at least one late payment lasting 60 days or more and who subsequently brought his or her loan current, and the distribution of principal loan amounts corresponding to those late payments.
(D) The number and percentage of borrowers who experienced at least one late payment of greater than seven days and who did not subsequently bring his or her loan current.
(E) Among loans that were ever late for seven days or more, the average number of times borrowers experienced a late payment of seven days or more.
(11) The number and types of violations of Section 22066 by exempt organizations, which were documented by the commissioner.
(12) The number and types of violations of Section 22066 by partnering organizations, which were documented by the commissioner.
(13) The number of times the commissioner suspended or revoked an exemption granted to an exempt organization pursuant to paragraph (4) of subdivision (c) of Section 22066 and the number of times a partnering organization was sanctioned by the commissioner pursuant to paragraph (5) of subdivision (d) of Section 22066.
(14) The number of complaints received by the commissioner about an exempt organization or a partnering organization, and the nature of those complaints.
(15) Recommendations, if any, for improving the program.
(Added by Stats. 2014, Ch. 190, Sec. 2. (SB 896) Effective January 1, 2015. Superseded on January 1, 2023; see amendment by Stats. 2021, Ch. 615.)
(a) The exemptions and exclusions in this article are not applicable to a person engaged in business as a program administrator or a PACE solicitor.
(b) This section shall become operative on January 1, 2019.
(Added by Stats. 2017, Ch. 475, Sec. 19. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
ARTICLE 3 – Licensing 22100-22112
(a) No person shall engage in the business of a finance lender or broker without obtaining a license from the commissioner.
(b) Every licensee engaging in the business of making or brokering residential mortgage loans shall require that every mortgage loan originator employed or compensated by that licensee obtains and maintains a mortgage loan originator license from the commissioner under this division or Division 20 (commencing with Section 50000), or has first obtained a license endorsement from the Commissioner of Real Estate pursuant to Article 2.1 (commencing with Section 10166.01) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code.
(c) A finance lender or broker shall not employ a mortgage loan originator whose license or license endorsement has lapsed.
(d) A finance lender or broker may not make or broker a residential mortgage loan unless that loan is offered by, negotiated by, or applied for through a licensed mortgage loan originator.
(e) Every licensee engaged in the business of making or brokering residential mortgage loans and every mortgage loan originator licensed under this division shall register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry.
(f) An individual shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this state without first obtaining and maintaining annually a license in accordance with the requirements of this division and any rules promulgated by the commissioner under this chapter.
(g) A registered mortgage loan originator, as defined in subdivision (c) of Section 22013, is exempt from licensure under this section when he or she is employed by:
(1) A depository institution.
(2) A subsidiary of a depository institution that is owned and controlled by a depository institution and regulated by a federal banking agency.
(3) An institution regulated by the Farm Credit Administration.
(Amended by Stats. 2012, Ch. 264, Sec. 4. (AB 2666) Effective January 1, 2013.)
22100.5.
(a) A person shall not engage in the business of a program administrator without obtaining a license from the commissioner.
(b) This section shall become operative on January 1, 2019.
(Added by Stats. 2017, Ch. 475, Sec. 20. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) An application for a license as a finance lender, broker, or program administrator under this division shall be in the form and contain the information that the commissioner may by rule or order require and shall be filed upon payment of the fee specified in Section 22103.
(b) Notwithstanding any other law, an applicant who does not currently hold a license as a finance lender, broker, or program administrator under this division shall furnish, with his or her application, a full set of fingerprints and related information for purposes of the commissioner conducting a criminal history record check. The commissioner shall obtain and receive criminal history information from the Department of Justice and the Federal Bureau of Investigation pursuant to Section 22101.5.
(c) This section does not prevent a licensee from engaging in the business of a finance lender or program administrator through a subsidiary corporation if the subsidiary corporation is licensed pursuant to this division.
(d) For purposes of this section, “subsidiary corporation” means a corporation that is wholly owned by a licensee.
(e) A new application shall not be required for a change in the address of an existing location previously licensed under this division. However, the licensee shall comply with the requirements of Section 22153.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require an application to be made through the Nationwide Mortgage Licensing System and Registry, and may require fees, fingerprints, financial statements, supporting documents, changes of address, and any other information, and amendments or modifications thereto, to be submitted in the same manner.
(g) Notwithstanding any other law, the commissioner may by rule or order prescribe circumstances under which to accept electronic records or electronic signatures. This section does not require the commissioner to accept electronic records or electronic signatures.
(h) For purposes of this section, the following terms have the following meanings:
(1) “Electronic record” means an initial license application, or material modification of that license application, and any other record created, generated, sent, communicated, received, or stored by electronic means. “Electronic records” also includes, but is not limited to, all of the following:
(A) An application, amendment, supplement, and exhibit, filed for any license, consent, or other authority.
(B) A financial statement, a report, or advertising.
(C) An order, license, consent, or other authority.
(D) A notice of public hearing, accusation, and statement of issues in connection with any application, license, consent, or other authority.
(E) A proposed decision of a hearing officer and a decision of the commissioner.
(F) The transcripts of a hearing and correspondence between a party and the commissioner directly relating to the record.
(G) A release, newsletter, interpretive opinion, determination, or specific ruling.
(H) Correspondence between a party and the commissioner directly relating to any document listed in subparagraphs (A) to (G), inclusive.
(2) “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.
(i) The Legislature finds and declares that the Department of Business Oversight has continuously implemented methods to accept records filed electronically, and is encouraged to continue to expand its use of electronic filings to the extent feasible, as budget, resources, and equipment are made available to accomplish that goal.
(j) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 21) and added by Stats. 2017, Ch. 475, Sec. 22. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
22101.5.
(a) The commissioner shall submit to the Department of Justice fingerprint images and related information required by the Department of Justice of all finance lender, broker, or program administrator license candidates, as defined by subdivision (a) of Section 22101, for purposes of obtaining information as to the existence and content of a record of state or federal convictions, state or federal arrests, and information as to the existence and content of a record of state or federal arrests for which the Department of Justice establishes that the person is free on bail or on his or her own recognizance pending trial or appeal.
(b) When received, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received pursuant to this section. The Department of Justice shall review the information returned from the Federal Bureau of Investigation and compile and disseminate a response to the commissioner.
(c) The Department of Justice shall provide a response to the commissioner pursuant to paragraph (1) of subdivision (p) of Section 11105 of the Penal Code.
(d) The commissioner shall request from the Department of Justice subsequent arrest notification service, as provided pursuant to Section 11105.2 of the Penal Code, for license candidates described in subdivision (a).
(e) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this section.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require fingerprints submitted by an applicant to be submitted to the Nationwide Mortgage Licensing System and Registry in addition to the Department of Justice.
(g) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 23) and added by Stats. 2017, Ch. 475, Sec. 24. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) A finance lender, broker, or program administrator licensee seeking to engage in business at a new location shall submit an application for a branch office license to the commissioner at least 10 days before engaging in business at a new location and pay the fee required by Section 22103. The commissioner may require an applicant seeking to engage in business at a new location to submit its application, or parts thereof, through the Nationwide Mortgage Licensing System and Registry.
(b) The licensee may engage in business at the new location 10 days after the date of submission of a branch office application.
(c) (1) The commissioner shall approve or deny the person responsible for the lending activity at the new location in accordance with Section 22109, and shall notify the licensee of this decision within 90 days of the date of receipt of the application.
(2) If the commissioner denies the application, the licensee shall, within 10 days of the date of receipt of notification of the commissioner’s denial, submit a new application to the commissioner designating a different person responsible for the lending activity at the new location. The commissioner shall approve or deny the different person as provided in paragraph (1).
(d) A licensee shall not engage in business at a new location in a name other than a name approved by the commissioner.
(e) The commissioner may adopt regulations to implement the requirements of this section.
(f) A branch office license to engage in business at a new location shall be issued in accordance with this section. A change of street address of a place of business designated in a license shall be made in accordance with Section 22153 and shall not constitute a new location subject to the requirements of this section.
(g) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 25) and added by Stats. 2017, Ch. 475, Sec. 26. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) At the time of filing the application for a finance lender, broker, program administrator, or branch office license, the applicant shall pay to the commissioner the sum of one hundred dollars ($100) as a fee for investigating the application, plus the cost of fingerprint processing and the criminal history record check under Section 22101.5, and two hundred dollars ($200) as an application fee. The investigation fee, including the amount for the criminal history record check, and the application fee are not refundable if an application is denied or withdrawn.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 27) and added by Stats. 2017, Ch. 475, Sec. 28. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) The applicant shall file with the application for a finance lender, broker, or program administrator license financial statements prepared in accordance with generally accepted accounting principles and acceptable to the commissioner that indicate a net worth of at least twenty-five thousand dollars ($25,000). Except as provided in subdivisions (b) and (c), a licensee shall maintain a net worth of at least twenty-five thousand dollars ($25,000) at all times.
(b) A licensed finance lender or broker, that employs one or more mortgage loan originators and that makes residential mortgage loans, shall continuously maintain a minimum net worth of at least two hundred fifty thousand dollars ($250,000).
(c) A licensed finance broker, that employs one or more mortgage loan originators and that arranges, but does not make, residential mortgage loans, shall continuously maintain a minimum net worth of at least fifty thousand dollars ($50,000).
(d) The commissioner may promulgate rules or regulations with respect to the requirements for minimum net worth, as are necessary to accomplish the purposes of this division and comply with the SAFE Act.
(e) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 29) and added by Stats. 2017, Ch. 475, Sec. 30. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) Upon the filing of an application pursuant to Section 22101 and the payment of the fees, the commissioner shall investigate the applicant and its general partners and persons owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or any person responsible for the conduct of the applicant’s lending or program administration activities in this state, if the applicant is a partnership. If the applicant is a corporation, trust, limited liability company, or association, including an unincorporated organization, the commissioner shall investigate the applicant, its principal officers, directors, managing members, and persons owning or controlling, directly or indirectly, 10 percent or more of the outstanding equity securities or any person responsible for the conduct of the applicant’s lending activities or for administering PACE programs for the applicant in this state. Upon the filing of an application pursuant to Section 22102 and the payment of the fees, the commissioner shall investigate the person responsible for the lending activity of the licensee, or for administering one or more PACE programs for the licensee, at the new location described in the application. The investigation may be limited to information that was not included in prior applications filed pursuant to this division. If the commissioner determines that the applicant has satisfied this division and does not find facts constituting reasons for denial under Section 22109, the commissioner shall issue and deliver a license to the applicant.
(b) For the purposes of this section, “principal officers” shall mean president, chief executive officer, treasurer, and chief financial officer, as may be applicable, and any other officer with direct responsibility for the conduct of the applicant’s lending activities or for PACE program administration for the applicant within the state.
(c) This section shall become operative on January 1, 2019.
(Amended (as added by Stats. 2017, Ch. 475, Sec. 32) by Stats. 2018, Ch. 813, Sec. 3. (AB 2063) Effective January 1, 2019.)
22105.1.
(a) An applicant for a mortgage loan originator license shall apply by submitting the uniform form prescribed for such purpose by the Nationwide Mortgage Licensing System and Registry. The commissioner may require the submission of additional information or supporting documentation to the department.
(b) Section 461 of the Business and Professions Code shall not be applicable to the Department of Business Oversight when using a national uniform application adopted or approved for use by the Nationwide Mortgage Licensing System and Registry in connection with the SAFE Act.
(c) In connection with an application for a license as a mortgage loan originator, the applicant shall, at a minimum, furnish to the Nationwide Mortgage Licensing System and Registry information concerning the applicant’s identity, including the following:
(1) Fingerprint images and related information, for purposes of performing a federal, or both a state and federal, criminal history background check.
(2) Personal history and experience in a form prescribed by the Nationwide Mortgage Licensing System and Registry, including the submission of authorization for the Nationwide Mortgage Licensing System and Registry and the commissioner to obtain both of the following:
(A) An independent credit report obtained from a consumer reporting agency.
(B) Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.
(d) The commissioner may ask the Nationwide Mortgage Licensing System and Registry to obtain state criminal history background check information on applicants described in subdivision (a) using the procedures set forth in subdivisions (e) and (f).
(e) If the Nationwide Mortgage Licensing System and Registry electronically submits fingerprint images and related information, as required by the Department of Justice, for an applicant for a mortgage loan originator license, for the purposes of obtaining information as to the existence and content of a record of state convictions and state arrests and to the existence and content of a record of state arrests for which the Department of Justice establishes that the person is free on bail or on his or her recognizance pending trial or appeal, the Department of Justice shall provide an electronic response to the Nationwide Mortgage Licensing System and Registry pursuant to paragraph (1) of subdivision (p) of Section 11105 of the Penal Code, and shall provide the same electronic response to the commissioner.
(f) The Nationwide Mortgage Licensing System and Registry may request from the Department of Justice subsequent arrest notification service, as provided pursuant to Section 11105.2 of the Penal Code, for persons described in subdivision (a). The Department of Justice shall provide the same electronic response to the commissioner.
(g) The Department of Justice shall charge a fee sufficient to cover the cost of processing the requests described in this section.
(Amended by Stats. 2015, Ch. 190, Sec. 43. (AB 1517) Effective January 1, 2016.)
22105.2.
(a) The commissioner is authorized to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry or other entities designated by the Nationwide Mortgage Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this division.
(b) For the purpose of participating in the Nationwide Mortgage Licensing System and Registry, the commissioner is authorized to waive or modify, in whole or in part, by rule, regulation, or order, any or all of the requirements of this division and to establish new requirements as reasonably necessary to participate in the Nationwide Mortgage Licensing System and Registry.
(c) The commissioner may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting information from, and distributing information to, the Department of Justice or any governmental agency.
(d) The commissioner may use the Nationwide Mortgage Licensing System and Registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.
(e) The commissioner shall establish a process where applicants and licensees may challenge information entered into the Nationwide Mortgage Licensing System and Registry by the commissioner.
(Added by Stats. 2009, Ch. 160, Sec. 19. (SB 36) Effective October 11, 2009.)
22105.3.
(a) Except as otherwise provided in Section 1512 of the SAFE Act, the requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to the Nationwide Mortgage Licensing System and Registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to that information or material, shall continue to apply to the information or material after the information or material has been disclosed to the Nationwide Mortgage Licensing System and Registry. The information and material may be shared with all state and federal regulatory officials with applicable oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law.
(b) For these purposes, the commissioner is authorized to enter agreements or share arrangements with other governmental agencies, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, or other associations representing governmental agencies as established by rule, regulation, or order of the commissioner.
(c) Information or material that is subject to a privilege or confidentiality under subdivision (a) shall not be subject to the following:
(1) Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the state.
(2) Subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the Nationwide Mortgage Licensing System and Registry with respect to the information or material, the person to whom the information or material pertains waives, in whole or in part, in the discretion of the person, that privilege.
(3) This section shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the Nationwide Mortgage Licensing System and Registry for access by the public.
(d) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 33) and added by Stats. 2017, Ch. 475, Sec. 34. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
22105.4.
The commissioner shall regularly report violations of this division, as well as enforcement actions and other relevant information, to the Nationwide Mortgage Licensing System and Registry, to the extent that information is public record.
(Added by Stats. 2009, Ch. 160, Sec. 21. (SB 36) Effective October 11, 2009.)
(a) The finance lender, broker, or program administrator license shall state the name of the licensee, and if the licensee is a partnership, the names of its general partners, and if a corporation or an association, the date and place of its incorporation or organization, and the address of the licensee’s principal business location. On the approval and licensing of a location pursuant to Section 22101 or 22102, the commissioner shall issue an original license endorsed to show the address of the authorized location and, if applicable, the name of the subsidiary corporation licensed to operate the location. The license shall state whether the licensee is licensed as a finance lender, broker, or program administrator.
(b) (1) An application for a license for a business location outside this state shall constitute an agreement by the applicant to do all of the following:
(A) Make the licensee’s books, accounts, papers, records, and files available to the commissioner or the commissioner’s representatives in this state.
(B) Pay the reasonable expenses for travel, meals, and lodging of the commissioner or the commissioner’s representatives incurred during any investigation or examination made at the licensee’s location outside this state.
(2) A licensee located outside this state is not required to maintain books and records regarding licensed loans separate from those for other loans if the licensed loans can be readily identified.
(c) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 35) and added by Stats. 2017, Ch. 475, Sec. 36. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) Each finance lender, broker, or program administrator licensee shall pay to the commissioner its pro rata share of all costs and expenses, including the costs and expenses associated with the licensing of mortgage loan originators it employs, reasonably incurred in the administration of this division, as estimated by the commissioner, for the ensuing year and any deficit actually incurred or anticipated in the administration of the program in the year in which the assessment is made. The pro rata share shall be the proportion that a licensee’s gross income bears to the aggregate gross income of all licensees as shown by the annual financial reports to the commissioner, for the costs and expenses remaining after the amount assessed pursuant to subdivision (c).
(b) On or before September 30th in each year, the commissioner shall notify each licensee of the amount assessed and levied against it and that amount shall be paid by October 31. If payment is not made by October 31, the commissioner shall assess and collect a penalty, in addition to the assessment, of 1 percent of the assessment for each month or part of a month that the payment is delayed or withheld.
(c) In the levying and collection of the assessment, a licensee shall neither be assessed for nor be permitted to pay less than two hundred fifty dollars ($250) per licensed location per year.
(d) If a licensee fails to pay the assessment on or before the October 31st, the commissioner may by order summarily suspend or revoke the certificate issued to the licensee. If, after an order is made, a request for a hearing is filed in writing within 30 days, and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a finance lender, broker, or program administrator licensee and any mortgage loan originator licensee employed by the finance lender or broker shall not conduct business pursuant to this division except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a certificate shall not affect the powers of the commissioner as provided in this division.
(e) The commissioner shall, by rule, establish the timelines, fees, and assessments applicable to applicants for original mortgage loan originator licenses, license renewals, and license changes under this division.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require licensees to pay assessments through the Nationwide Mortgage Licensing System and Registry.
(g) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 37) and added by Stats. 2017, Ch. 475, Sec. 38. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) The commissioner may by rule require licensees to file, at the times that he or she may specify, the information that he or she may reasonably require regarding any changes in the information provided in any application filed pursuant to this division.
(b) The commissioner may by rule require a licensee to file information through the Nationwide Mortgage Licensing System and Registry.
(Amended by Stats. 2009, Ch. 160, Sec. 23.5. (SB 36) Effective October 11, 2009.)
(a) Upon reasonable notice and opportunity to be heard, the commissioner may deny the application for a finance lender, broker, or program administrator license for any of the following reasons:
(1) A false statement of a material fact has been made in the application.
(2) The applicant or an officer, director, general partner, person responsible for the applicant’s lending activities or administering PACE programs for the applicant in this state, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant has, within the last 10 years, been convicted of or pleaded nolo contendere to a crime, or committed an act involving dishonesty, fraud, or deceit, if the crime or act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with this division.
(3) The applicant or an officer, director, general partner, person responsible for the applicant’s lending activities or administering PACE programs for the applicant in this state, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant has violated any provision of this division or the rules thereunder or any similar regulatory scheme of the State of California or a foreign jurisdiction.
(4) The applicant employs a mortgage loan originator who is not licensed, or has not initiated an application to become licensed, pursuant to this division.
(b) The application shall be considered withdrawn within the meaning of this section if the applicant fails to respond to a written notification of a deficiency in the application within 90 days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a full and complete application for a license with the fees, either issue a license or file a statement of issues prepared in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
(d) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 39) and added by Stats. 2017, Ch. 475, Sec. 40. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
22109.1.
(a) The commissioner shall deny an application for a mortgage loan originator license unless the commissioner makes, at a minimum, the following findings:
(1) The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of a revocation shall not be deemed a revocation.
(2) (A) The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court during the seven-year period preceding the date of the application for licensing and registration, or at any time preceding the date of application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering. Whether a particular crime is classified as a felony shall be determined by the law of the jurisdiction in which an individual is convicted.
(B) For purposes of this paragraph, an expunged or pardoned felony conviction shall not require denial of an application. However, the commissioner may consider the underlying crime, facts, or circumstances of an expunged or pardoned felony conviction when determining the eligibility of an applicant for licensure under this paragraph or paragraph (3).
(3) The applicant has demonstrated such financial responsibility, character, and general fitness as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this division.
(4) The applicant has completed the prelicensing education requirement described in Section 22109.2.
(5) The applicant has passed a written test that meets the test requirement described in Section 22109.3.
(6) The applicant is employed by, and subject to the supervision of, a finance lender or broker that has obtained a license from the commissioner pursuant to this division.
(b) Before denying a license under this section, the commissioner shall proceed as prescribed by Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code and shall have all the powers granted under that chapter.
(Amended by Stats. 2011, Ch. 444, Sec. 3. (SB 217) Effective January 1, 2012.)
22109.2.
(a) An applicant for a mortgage loan originator license shall complete at least 20 hours of education approved in accordance with subdivision (b). The education shall include at least the following:
(1) Three hours of instruction on federal law and regulations.
(2) Three hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the nontraditional mortgage product marketplace.
(4) Two hours of training related to relevant California law and regulations.
(b) For purposes of subdivision (a), prelicensing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry. Review and approval of a prelicensing education course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any prelicensing education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the applicant or an entity that is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of the employer or entity.
(d) Prelicensing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Mortgage Licensing System and Registry.
(e) The prelicensing education requirements approved by the Nationwide Mortgage Licensing System and Registry for any state other than California shall be accepted as credit toward completion of prelicensing education requirements in California.
(f) An individual previously licensed under this division as a mortgage loan originator, applying to be licensed again, shall prove that he or she has completed all of the continuing education requirements for the year in which the license was last held.
(Amended by Stats. 2014, Ch. 123, Sec. 1. (SB 1459) Effective January 1, 2015.)
22109.3.
(a) An applicant for a mortgage loan originator license shall pass a qualified written test developed or otherwise deemed acceptable by the Nationwide Mortgage Licensing System and Registry and administered by a test provider approved by the Nationwide Mortgage Licensing System and Registry.
(b) A written test shall not be treated as a qualified written test for purposes of subdivision (a) unless the test adequately measures the applicant’s knowledge and comprehension in appropriate subject areas, including all of the following:
(1) Ethics.
(2) Federal law and regulation relating to mortgage origination.
(3) State law and regulation relating to mortgage origination.
(4) Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.
(c) Nothing in this section shall prohibit a test provider approved by the Nationwide Mortgage Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant, or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.
(d) An individual shall not be considered to have passed a qualified written test administered pursuant to this section unless the individual achieves a test score of not less than 75 percent of correct answers to questions.
(e) An individual who fails the qualified written test may retake the test up to three consecutive times, although at least 30 days shall pass between each retesting.
(f) An applicant who fails three consecutive retests shall wait at least six months before retesting.
(g) A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer shall retake the test, not taking into account any time during which the individual is a registered mortgage loan originator.
(Amended by Stats. 2014, Ch. 123, Sec. 2. (SB 1459) Effective January 1, 2015.)
22109.4.
(a) A mortgage loan originator shall comply with the requirements of this section on or before December 31 of every year.
(b) The minimum standards for license renewal for a mortgage loan originator shall include the following:
(1) The mortgage loan originator continues to meet the minimum standards for license issuance under Section 22109.1.
(2) The mortgage loan originator has satisfied the annual continuing education requirements described in Section 22109.5.
(3) The mortgage loan originator, or the finance lender or broker employing the mortgage loan originator, has paid all required fees for renewal of the license as provided in Section 22107.
(c) The license of a mortgage loan originator failing to satisfy the minimum standards for license renewal shall expire at midnight on December 31, except as provided in subdivision (h) of Section 22109.5. The commissioner may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the Nationwide Mortgage Licensing System and Registry.
(Amended by Stats. 2010, Ch. 287, Sec. 9. (SB 1137) Effective January 1, 2011.)
22109.5.
(a) A licensed mortgage loan originator shall complete at least eight hours of continuing education approved in accordance with subdivision (b). The continuing education shall include at least the following:
(1) Three hours of instruction on federal law and regulations.
(2) Two hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the nontraditional mortgage product marketplace.
(4) One hour of training related to relevant California law and regulations.
(b) For purposes of this section, continuing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry. Review and approval of a continuing education course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the mortgage loan originator or an entity which is affiliated with the mortgage loan originator by an agency contract, or any subsidiary or affiliate of the employer or entity.
(d) Continuing education may be offered in a classroom, online, and by any other means approved by the Nationwide Mortgage Licensing System and Registry.
(e) Except as provided in subdivision (i), a licensed mortgage loan originator:
(1) May only receive credit for a continuing education course in the year in which the course is taken.
(2) May not take the same approved course in the same or successive years to meet the annual requirements for continuing education.
(f) A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator’s own annual continuing education requirement at the rate of two hours credit for every one hour taught.
(g) A person who has successfully completed continuing education requirements approved by the Nationwide Mortgage Licensing System and Registry for any state other than California shall be granted credit toward completion of continuing education requirements in California.
(h) A licensed mortgage loan originator who subsequently becomes unlicensed shall complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license.
(i) A person meeting the requirements of paragraphs (1) and (3) of subdivision (b) of Section 22109.4 may correct any deficiency in continuing education as established by rule or regulation of the commissioner.
(Amended by Stats. 2014, Ch. 123, Sec. 3. (SB 1459) Effective January 1, 2015.)
22109.6.
In addition to any other duties imposed upon the commissioner by law, the commissioner shall require mortgage loan originators to be licensed and registered through the Nationwide Mortgage Licensing System and Registry. In order to carry out this requirement, the commissioner is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the commissioner may establish by rule, regulation, or order, requirements as necessary, including, but not limited to, the following:
(a) Background information for the following:
(1) Criminal history through fingerprint or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting dates.
(d) Requirements for amending or surrendering a license or any other activities as the commissioner deems necessary for participation in the Nationwide Mortgage Licensing System and Registry.
(Added by Stats. 2009, Ch. 160, Sec. 30. (SB 36) Effective October 11, 2009.)
The proceedings for a denial of a license 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, and the commissioner has all the powers granted therein.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
All money paid or collected under this division shall be deposited in the State Treasury to the credit of the State Corporations Fund. The administration of this division shall be supported out of the State Corporations Fund.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) A licensee shall maintain a surety bond in accordance with this subdivision in a minimum amount of twenty-five thousand dollars ($25,000). The bond shall be payable to the commissioner and issued by an insurer authorized to do business in this state. An original surety bond, including any and all riders and endorsements executed subsequent to the effective date of the bond, shall be filed with the commissioner within 10 days of execution. For licensees with multiple licensed locations, only one surety bond is required. The bond shall be used for the recovery of expenses, fines, and fees levied by the commissioner in accordance with this division or for losses or damages incurred by borrowers or consumers as the result of a licensee’s noncompliance with the requirements of this division.
(b) When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond. Immediately upon recovery of any action on the bond, the licensee shall file a new bond. Failure to file a new bond within 10 days of the recovery on a bond, or within 10 days after notification by the commissioner that a new bond is required, constitutes sufficient grounds for the suspension or revocation of the license.
(c) The commissioner may by rule require a higher bond amount for a licensee who employs one or more mortgage loan originators and who makes or arranges residential mortgage loans, based on the dollar amount of residential mortgage loans originated by that licensee and any mortgage loan originators employed by that licensee. Every mortgage loan originator employed by the licensee shall be covered by the surety bond.
(Amended by Stats. 2010, Ch. 287, Sec. 10. (SB 1137) Effective January 1, 2011.)
ARTICLE 4 – Regulations 22150-22172
The commissioner may make general rules and regulations and specific rulings, demands, and findings for the enforcement of this division, in addition to, and within the general purposes of, this division.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) A finance lender license, broker license, program administrator license, and the license of every mortgage loan originator employed by a lender or finance broker, along with any currently effective order of the commissioner approving a different name pursuant to Section 22155, shall be conspicuously posted in the place of business authorized by the license.
(b) A license is not transferable or assignable. A license issued to a partnership or a limited partnership is not transferred or assigned within the meaning of this section by the death, withdrawal, or admission of a partner, general partner, or limited partner, unless the death, withdrawal, or admission dissolves the partnership to which the license was issued.
(c) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 41) and added by Stats. 2017, Ch. 475, Sec. 42. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) A finance lender, broker, or program administrator licensee shall maintain only one place of business under a duplicate or original license issued pursuant to Section 22101 or 22102. The commissioner may issue more than one license to the same licensee upon compliance with all the provisions of this division governing an original issuance of a license.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 43) and added by Stats. 2017, Ch. 475, Sec. 44. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) If a finance lender, broker, or program administrator licensee seeks to change its place of business to a street address other than that designated in its license, the licensee shall provide notice to the commissioner at least 10 days before the change. The commissioner shall notify the licensee within 10 days if the commissioner disapproves the change, and if the commissioner does not notify the licensee of disapproval within 10 days, the change in address shall be deemed approved. The commissioner may require an applicant to submit its application to change its place of business through the Nationwide Mortgage Licensing System and Registry.
(b) If notice is not given at least 10 days before the change of a street address of a place of business, as required by subdivision (a), or notice is not given at least 10 days before engaging in business at a new location, as required by Section 22102, the commissioner may assess a civil or administrative penalty on the licensee not to exceed five hundred dollars ($500).
(c) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 45) and added by Stats. 2017, Ch. 475, Sec. 46. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) A licensee shall not conduct the business of making loans or administering a PACE program under this division within any office, room, or place of business in which any other business is solicited or engaged in, or in association or conjunction therewith, except as is authorized in writing by the commissioner upon the commissioner’s finding that the character of the other business is such that the granting of the authority would not facilitate evasions of this division or of the rules and regulations made pursuant to this division. An authorization, once granted, remains in effect until revoked by the commissioner. The commissioner may authorize the other business through the Nationwide Mortgage Licensing System and Registry.
(b) The products or services of an affiliated corporation of the licensee that is a supervised financial institution, or a parent or subsidiary of a supervised financial institution that is an affiliate of the licensee, may be provided, offered, or sold at the licensed location of the licensee without authorization by the commissioner pursuant to subdivision (a) if both of the following are met:
(1) The activity is not prohibited by, or in violation of, the laws applicable to the affiliate or supervised financial institution.
(2) The products and services are not offered and sold in a manner that restricts the ability of the borrower or customer to individually select or reject a product or service that is offered.
(c) The following definitions govern the construction of this section:
(1) “Affiliated” or “affiliate” means the following: A corporation is an affiliate of, or a corporation is affiliated with, another specified corporation if it directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the other specified corporation.
(2) “Supervised financial institution” means any commercial bank, industrial bank, credit card bank, trust company, savings and loan association, savings bank, credit union, California finance lender, residential mortgage lender or servicer, or insurer, provided that the institution is subject to supervision by an official or agency of this state or of the United States.
(d) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 47) and added by Stats. 2017, Ch. 475, Sec. 48. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) A finance lender, broker, mortgage loan originator, or program administrator licensee shall not transact the business licensed or make any loan or administer any PACE program provided for by this division under any other name or at any other place of business than that named in the license except pursuant to a currently effective written order of the commissioner authorizing the other name or other place of business. The commissioner’s order, while effective, shall be deemed to amend the original license issued pursuant to Section 22105 or 22109.1. Notwithstanding any provision of this section, a finance lender, program administrator, broker, or mortgage loan originator licensee may make any loan and engage in any other business provided for by this division, other than the business described in subdivision (b) of Section 22154, at a place other than the licensed location under either of the following conditions:
(1) The borrower requests, either orally or in writing, that a loan be initiated or made at a location other than the licensee’s licensed location. The use by the licensee of a preprinted solicitation form returned to the licensee by the borrower shall not constitute a request by the borrower that a loan be initiated or made at a location other than the licensee’s licensed location.
(2) The licensee makes a solicitation or advertises for, or makes an offer of, a loan or assessment contract displayed on “home pages” or similar methods by the licensee on the Internet, the World Wide Web, or similar proprietary or common carrier electronic systems, and the prospective borrower or property owner may transmit information over these electronic systems to the licensee in connection with the licensee’s offer to make a loan or assessment contract.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 49) and added by Stats. 2017, Ch. 475, Sec. 50. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) Finance lender, broker, program administrator, and mortgage loan originator licensees shall keep and use in their business, books, accounts, and records which will enable the commissioner to determine if the licensee is complying with the provisions of this division and with the rules and regulations made by the commissioner. On any loan secured by real property in which loan proceeds were disbursed to an independent escrowholder, the licensee shall retain records and documents as set forth by rules of the commissioner adopted pursuant to Section 22150. Upon request of the commissioner, licensees shall file an authorization for disclosure to the commissioner of financial records of the licensed business pursuant to Section 7473 of the Government Code.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 51) and added by Stats. 2017, Ch. 475, Sec. 52. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) Finance lender, broker, and mortgage loan originator licensees shall preserve their books, accounts, and records, if any, for at least three years after making the final entry on any loan recorded therein.
(b) Except as otherwise specified by applicable law, including paragraph (3) of subdivision (b) of Section 5913 of the Streets and Highways Code, program administrator licensees shall preserve their books, accounts, and records for at least three years after the extinguishment of a PACE assessment is recorded therein.
(c) This section shall become operative on January 1, 2019.
(Amended (as added by Stats. 2017, Ch. 475, Sec. 54) by Stats. 2018, Ch. 813, Sec. 4. (AB 2063) Effective January 1, 2019.)
Nothing contained in Sections 22156 and 22157 shall require the maintenance or preservation of original records, provided that any information requested by the commissioner can be furnished within 48 hours, excluding Saturdays, Sundays, and holidays as defined in Sections 6700 and 6701 of the Government Code.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) Each finance lender, broker, and program administrator licensee shall file an annual report with the commissioner, on or before March 15th, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee or authorized by the program administrator licensee within the state during the preceding calendar year for each licensed place of business. The individual annual reports filed pursuant to this section shall be made available to the public for inspection except, upon request in the annual report to the commissioner, the balance sheet contained in the annual report of a sole proprietor or any other nonpublicly traded person. “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 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).
(e) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 55) and added by Stats. 2017, Ch. 475, Sec. 56. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
22159.5.
(a) The commissioner may, as he or she deems necessary, require licensees to provide reports concerning their residential mortgage loan servicing activities, including, but not limited to, information similar to that collected in connection with the Mortgage Servicers Survey, first published by the Department of Business Oversight in December 2007. The commissioner is additionally authorized to seek and accept information provided on a voluntary basis by residential mortgage loan servicers not subject to the commissioner’s jurisdiction. The commissioner shall post only aggregated survey results on the department’s Internet Web site, and shall note the number of loan servicers submitting data included in the aggregated totals and the estimated percentage of outstanding mortgage loans to Californians that are serviced by these loan servicers, to the extent information on the number of outstanding loans is available from a reliable source. Nothing in this section is intended to reduce or change the commissioner’s authority to request and demand reports under Sections 22150 and 22159.
(b) For purposes of this section, “mortgage loan servicing activity” means receiving more than three installment payments of principal, interest, or other amounts placed in escrow, pursuant to the terms of a mortgage loan, and performing services relating to that receipt or the enforcement of its receipt, on behalf of the holder of the note evidencing that loan.
(Amended by Stats. 2015, Ch. 190, Sec. 44. (AB 1517) Effective January 1, 2016.)
The commissioner shall make and file annually with the Department of Business Oversight as a public record a composite of the annual reports and any comments on the reports that he or she deems to be in the public interest.
(Amended by Stats. 2015, Ch. 190, Sec. 45. (AB 1517) Effective January 1, 2016.)
(a) A person subject to this division shall not do any of the following:
(1) Make a materially false or misleading statement or representation to a borrower about the terms or conditions of that borrower’s loan, when making or brokering the loan.
(2) Make a materially false or misleading statement or representation to a property owner about the terms or conditions of an assessment contract.
(3) Advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast in any manner, any statement or representation with regard to the business subject to the provisions of this division, including the rates, terms, or conditions for making or negotiating loans, or for making or negotiating assessment contracts, that is false, misleading, or deceptive, or that omits material information that is necessary to make the statements not false, misleading, or deceptive, or in the case of a licensee, that refers to the supervision of the business by the state or any department or official of the state.
(4) Commit an act in violation of Section 1695.13 of the Civil Code.
(5) Engage in any act in violation of Section 17200 of the Business and Professions Code.
(6) Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party.
(7) Commit an act that constitutes fraud or dishonest dealings.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 57) and added by Stats. 2017, Ch. 475, Sec. 58. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) A finance lender, broker, or mortgage loan originator licensee shall not place an advertisement disseminated primarily in this state for a loan unless the licensee discloses in the printed text of the advertisement, or in the oral text in the case of a radio or television advertisement, the license under which the loan would be made or arranged.
(b) A program administrator licensee shall not place an advertisement disseminated primarily in this state for an assessment contract unless the licensee discloses in the printed text of the advertisement, or in the oral text in the case of a radio or television advertisement, the license under which the assessment contract would be administered.
(c) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 59) and added by Stats. 2017, Ch. 475, Sec. 60. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) The commissioner may require that rates of charge, if stated by a licensee, be stated fully and clearly in the manner that the commissioner deems necessary to prevent misunderstanding by prospective borrowers or property owners.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 61) and added by Stats. 2017, Ch. 475, Sec. 62. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) If any person engaged in the business regulated by this division refers in any advertising to rates of interest, charges, or cost of loans or assessment contracts, the commissioner shall require that the rates, charges, or costs are stated fully and clearly in the manner that he or she deems necessary to give adequate information to prospective borrowers or property owners. If the rates or costs advertised do not apply to loans or assessment contracts of all classes made or negotiated by the person, this fact shall be clearly indicated in the advertisement.
(b) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 63) and added by Stats. 2017, Ch. 475, Sec. 64. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
No advertising copy shall be used after its use has been disapproved by the commissioner and the licensee is notified in writing of the disapproval. The commissioner may by order direct any licensee to submit advertising copy to the commissioner for review prior to use.
(Amended by Stats. 2010, Ch. 640, Sec. 1. (SB 1146) Effective January 1, 2011.)
The commissioner may require licensees to maintain a file of all advertising copy for a period of two years from the date of its use. The file shall be available to the commissioner upon request.
(Amended by Stats. 2010, Ch. 640, Sec. 2. (SB 1146) Effective January 1, 2011.)
A licensed finance lender may act as a broker as defined in Section 22004 at its licensed place of business without obtaining an additional license as a broker under this division provided the licensee has notified the commissioner of the action in writing.
(Added by Stats. 1994, Ch. 1115, Sec. 2. Effective January 1, 1995. Operative July 1, 1995, by Sec. 5 of Ch. 1115.)
(a) The commissioner may, after appropriate notice and opportunity for hearing, suspend for a period not to exceed 12 months or bar a person from any position of employment with a licensee if the commissioner finds that the person has willfully used or claimed without authority a designation or certification of special education, practice, or skill that the person has not attained, or willfully held out to the public a confusingly similar designation or certification for the purpose of misleading the public regarding 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, program administrator, or mortgage loan originator, and from engaging in any business activity on the premises where a licensed finance lender, broker, program administrator, or mortgage loan originator is conducting its business. This subdivision does not prohibit suspended or barred persons from having their personal transactions processed by a licensed finance lender, broker, mortgage loan originator, or program administrator.
(e) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 65) and added by Stats. 2017, Ch. 475, Sec. 66. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) The commissioner may, after appropriate notice and opportunity for hearing, by order, censure or suspend for a period not exceeding 12 months, or bar a person, including a mortgage loan originator, from any position of employment with, or management or control of, any finance lender, broker, program administrator, or any other person, if the commissioner finds either of the following:
(1) That the censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the finance lender, broker, program administrator, or mortgage loan originator, or to the public.
(2) That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense involving dishonesty, fraud, or deceit, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with the provisions of this division.
(b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a) or (b), the person may request a hearing under the Administrative Procedure Act (Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.
(c) Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any activities subject to licensure under the law.
(d) Persons suspended or barred under this section are prohibited from participating in any business activity of a finance lender, broker, program administrator, or mortgage loan originator, and from engaging in any business activity on the premises where a finance lender, broker, program administrator, or mortgage loan originator is conducting business.
(e) This section shall become operative on January 1, 2019.
(Repealed (in Sec. 67) and added by Stats. 2017, Ch. 475, Sec. 68. (AB 1284) Effective October 4, 2017. Section operative January 1, 2019, by its own provisions.)
(a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.
(b) It is unlawful for any person to knowingly make an untrue statement to the commissioner or the Nationwide Mortgage Licensing System and Registry during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.
(Amended by Stats. 2009, Ch. 160, Sec. 40.5. (SB 36) Effective October 11, 2009.)
(a) The commissioner shall apply the guidance on nontraditional mortgage product risks published on November 14, 2006, by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, and the Statement on Subprime Mortgage Lending published on July 17, 2007, by the aforementioned entities and the National Association of Consumer Credit Administrators, to licensees.
(b) The commissioner may adopt emergency and final regulations to clarify the application of this section as soon as possible.
(c) A finance lender or broker licensee shall adopt and adhere to policies and procedures that are reasonably intended to achieve the objectives set forth in the documents described in subdivision (a). A mortgage loan originator licensee shall adhere to policies and procedures developed by its employer in accordance with this division and applicable federal law and regulation.
(Amended by Stats. 2009, Ch. 160, Sec. 41. (SB 36) Effective October 11, 2009.)
(a) The commissioner may do one or more of the following:
(1) Deny, suspend, revoke, condition, or decline to renew a mortgage loan originator license for a violation of this division, or any rules or regulations adopted thereunder.
(2) Deny, suspend, revoke, condition, or decline to renew a mortgage loan originator license if an applicant or licensee fails at any time to meet the requirements of Section 22109.1 or 22109.4, or withholds information or makes a material misstatement in an application for a license or license renewal.
(3) Order restitution against a mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator for a violation of this division.
(4) Impose fines on a mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator pursuant to subdivisions (b), (c), and (d).
(5) Issue orders or directives to mortgage loan originators under this division as follows:
(A) Order or direct a mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator to desist and refrain from conducting business, including immediate temporary orders to desist and refrain.
(B) Order or direct a mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator to cease any harmful activities or violations of this division, including immediate temporary orders to desist and refrain.
(C) Enter immediate temporary orders to cease business under a license issued pursuant to the authority granted under Section 22100 if the commissioner determines that the license was erroneously granted or the mortgage loan originator is currently in violation of this division.
(D) Order or direct any other affirmative action as the commissioner deems necessary.
(b) The commissioner may impose a civil penalty on a mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator, if the commissioner finds, on the record after notice and opportunity for hearing, that the mortgage loan originator or any finance lender or broker licensee employing a mortgage loan originator has violated or failed to comply with any requirement of this division or any regulation prescribed by the commissioner under this division or order issued under authority of this division.
(c) The maximum amount of penalty for each act or omission described in subdivision (b) shall be twenty-five thousand dollars ($25,000).
(d) Each violation or failure to comply with any directive or order of the commissioner is a separate and distinct violation or failure.
(Added by Stats. 2009, Ch. 160, Sec. 41.5. (SB 36) Effective October 11, 2009.)