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

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

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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

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BILL NUMBER: AB 268	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 15, 2015
	AMENDED IN ASSEMBLY  MARCH 26, 2015

INTRODUCED BY   Assembly Member Dababneh

                        FEBRUARY 10, 2015

   An act to  amend Section 22305 of, to  repeal 
Sections   Sectio   n  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:  charges:
administrative fees.   charges. 
   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, 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.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  Section 22303 of the Financial Code is repealed.
  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. 
  SEC. 4.    Section 22305 of the Financial Code is
repealed. 
   SEC. 4.    Section 22305 of the   Financial
Code   is amended to read: 
   22305.   In addition to the charges authorized by Section
22303 or 22304, a   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.