Bill Text: CA AB268 | 2015-2016 | Regular Session | Amended

California Assembly Bill 268 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: California Finance Lenders Law: unsecured consumer loans: terms and conditions: violations.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2016-11-30 - From Senate committee without further action. [AB268 Detail]

Download: California-2015-AB268-Amended.html

BILL NUMBER: AB 268	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 26, 2015

INTRODUCED BY   Assembly Member Dababneh

                        FEBRUARY 10, 2015

   An act to  amend   repeal Sections 22304 and
22305 of, and to repeal and add  Section 22303 of the Financial
Code, relating to consumer loans.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 268, as amended, Dababneh. Consumer  loans. 
 loans: charges: administrative fees. 
   Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders and brokers by the
Commissioner of Business Oversight    and makes a
willful violation of its provisions a crime  . Under existing
law, a finance lender includes any person who is engaged in the
business of making consumer loans. With respect to consumer loans
 of less than a bona fide principal amount of $2,500  ,
existing law authorizes every licensee under that law who lends money
to contract for and receive charges at a rate not exceeding the sum
of certain percentages on specified parts of the unpaid principal
balance,  except as specified.   or at a charge
determined by an alternative method.  
   This bill would repeal those consumer loan provisions and would
instead require the commissioner to establish an installment loan
rate review process for licensees that intend to offer unsecured full
amortizing installment loans of a minimum principal upon origination
of at least $300 and a maximum principal amount of $2,500. The bill
would require a licensee applying to make loans under this process to
provide to the commissioner specified information in order for its
loan product to be considered for approval, including information
about the proposed loan fees and other charges associated with the
loan and the length of the loan.  
   This bill would require the rate review applications submitted to
the commissioner to be in a manner prescribed by the commissioner,
and accompanied by a fee, in an amount calculated by the commissioner
to cover its administration costs. The bill would provide that an
installment loan product approved for a licensee under this process
is deemed approved for any licensee in good standing, and would
require the commissioner to maintain a list on its Internet Web site
of approved loan products.  
    Existing law, in addition to those charges on consumer loans,
authorizes a licensee to contract for and receive an administrative
fee with respect to a consumer loan of a bona fide principal amount
of not more than $2,500 at a rate not in excess of 5% of the
principal amount or $50, whichever is less, and with respect to a
consumer loan of a bona fide principal amount in excess of $2,500, at
an amount not to exceed $75.  
   This bill would repeal that authorization.  
   Because a willful violation of these provisions would be a crime,
this bill would impose a state-mandated local program.  
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.  
   This bill would provide that no reimbursement is required by this
act for a specified reason.  
   This bill would make a nonsubstantive change to that latter
provision. 
   Vote: majority. Appropriation: no. Fiscal committee:  no
  yes  . State-mandated local program: no
  yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 22303 of the  
Financial Code   is repealed.  
   22303.  Every licensee who lends any sum of money may contract for
and receive charges at a rate not exceeding the sum of the
following:
   (a) Two and one-half percent per month on that part of the unpaid
principal balance of any loan up to, including, but not in excess of
two hundred twenty-five dollars ($225).
   (b) Two percent per month on that portion of the unpaid principal
balance in excess of two hundred twenty-five dollars ($225) up to,
including, but not in excess of nine hundred dollars ($900).
   (c) One and one-half percent per month on that part of the unpaid
principal balance in excess of nine hundred dollars ($900) up to,
including, but not in excess of one thousand six hundred fifty
dollars ($1,650).
   (d) One percent per month on any remainder of such unpaid balance
in excess of one thousand six hundred fifty dollars ($1,650).
   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. 
   SEC. 2.    Section 22303 is added to the 
Financial Code   , to read:  
   22303.  (a) The commissioner shall establish an installment loan
rate review process for licensees that intend to offer unsecured full
amortizing installment loans of a minimum principal upon origination
of at least three hundred dollars ($300) and a maximum principal
amount of two thousand five hundred dollars ($2,500). Rate review
applications submitted to the commissioner shall be in a manner
prescribed by the commissioner accompanied by a fee to the
commissioner, in an amount calculated by the commissioner to cover
its costs to administer this section.
   (b) A licensee applying to make loans under this section shall
provide to the commissioner, at a minimum, the following information
in order for its loan product to be considered for approval:
   (1) The proposed loan fees and other charges associated with the
loan and the length of the loans.
   (2) The proposed corresponding annual percentage rate, calculated
in accordance with Federal Reserve Board Regulation Z (12 C.F.R.
226).
   (3) If loans in differing amounts and terms are priced different,
a breakdown of those costs in each category.
   (4) The underwriting standards by which a licensee will make a
determination to lend to a borrower.
   (5) Estimated number of loans that will be made in a year.
   (6) Estimated rate of return by the licensee based on projections
of the proposed loan product and an estimate of loan losses.
   (7) Whether the licensee plans to report borrower payment
performance to the credit reporting agencies.
   (c) The review of applications under this section by the
commissioner shall be conducted in accordance with subdivision (b) of
Section 11346 of, and Section 11346.45 of, the Government Code.
   (d) Any entity that is not licensed under this chapter that wishes
to offer loans subject to this section shall submit its application
for licensure with the commissioner, in a manner prescribed by the
commissioner, along with an application to make loans under this
section.
   (e) An installment loan product approved for a licensee under the
process established pursuant to this section shall be deemed approved
for any licensee in good standing. The commissioner shall maintain a
list on its Internet Web site of approved loan products. 
   SEC. 3.    Section 22304 of the   Financial
Code   is repealed.  
   22304.  As an alternative to the charges authorized by Section
22303, a licensee may contract for and receive charges at the greater
of the following:
   (a) A rate not exceeding 1.6 percent per month on the unpaid
principal balance.
   (b) A rate not exceeding five-sixths of 1 percent per month plus a
percentage per month equal to one-twelfth of the annual rate
prevailing on the 25th day of the second month of the quarter
preceding the quarter in which the loan is made, as established by
the Federal Reserve Bank of San Francisco, on advances to member
banks under Sections 13 and 13a of the Federal Reserve Act, as now in
effect or hereafter from time to time amended, or if there is no
single determinable rate for advances, the closest counterpart of
this rate as shall be determined by the Commissioner of Financial
Institutions. Charges shall be calculated on the unpaid principal
balance.
   (c) 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. 
   SEC. 4.    Section 22305 of the   Financial
Code   is repealed.  
   22305.  In addition to the charges authorized by Section 22303 or
22304, a licensee may contract for and receive an administrative fee,
which shall be fully earned immediately upon making the loan, with
respect to a loan of a bona fide principal amount of not more than
two thousand five hundred dollars ($2,500) at a rate not in excess of
5 percent of the principal amount (exclusive of the administrative
fee) or fifty dollars ($50), whichever is less, and with respect to a
loan of a bona fide principal amount in excess of two thousand five
hundred dollars ($2,500), at an amount not to exceed seventy-five
dollars ($75). No administrative fee may be contracted for or
received in connection with the refinancing of a loan unless at least
one year has elapsed since the receipt of a previous administrative
fee paid by the borrower. Only one administrative fee may be
contracted for or received until the loan has been repaid in full.
For purposes of this section, "bona fide principal amount" shall be
determined in accordance with Section 22251. 
   SEC. 5.    No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.  
  SECTION 1.    Section 22303 of the Financial Code
is amended to read:
   22303.  Every licensee who lends any sum of money may contract for
and receive charges at a rate not exceeding the sum of the
following:
   (a) Two and one-half percent per month on that part of the unpaid
principal balance of any loan up to, including, but not in excess of
two hundred twenty-five dollars ($225).
   (b) Two percent per month on that part of the unpaid principal
balance in excess of two hundred twenty-five dollars ($225) up to,
including, but not in excess of nine hundred dollars ($900).
   (c) One and one-half percent per month on that part of the unpaid
principal balance in excess of nine hundred dollars ($900) up to,
including, but not in excess of one thousand six hundred fifty
dollars ($1,650).
   (d) One percent per month on any remainder of such unpaid balance
in excess of one thousand six hundred fifty dollars ($1,650).
   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.