18435-18457
FINANCIAL CODE
SECTION 18435-18457
18435. Except as otherwise provided in this division, any person
who willfully violates any provision of this division, or who
willfully violates any rule or order adopted pursuant to this
division, shall, upon conviction, be punished by a fine of not more
than ten thousand dollars ($10,000), by imprisonment in the county
jail for not more than one year or in the state prison, or by both
that fine and imprisonment. However, no person may be imprisoned for
the violation of any rule or order unless he or she had knowledge of
the rule or order. Conviction under this section shall not preclude
the commissioner from exercising the authority provided in Section
18349.5.
18436. An industrial loan company shall not, directly or
indirectly, make any loan of money or property to or guarantee the
obligation of any of its directors or officers, or officers and
directors of its holding company, or officers and directors of its
affiliates.
18437. (a) Except as provided in subdivision (b), an industrial
loan company shall not make loans to, or purchase any obligations
from, persons who do not reside or have a place of business in the
State of California, unless those loans or obligations comply with
all of the following conditions:
(1) If the loan or obligation is unsecured, then only if the loan
or obligation bears the unqualified written guaranty of a financially
responsible person, considering the amount of the obligation, who
resides or has a place of business in the State of California.
(2) If the documents and security for the loan or obligation and
all records relating to the transaction are in California at the time
the loan or obligation is made or acquired and are thereafter kept
in California while the loan or obligation remains unsatisfied,
except that where the security is aircraft, the security need not be
in California at the time the loan or obligation is made or acquired,
nor need it thereafter be held in California while the loan or
obligation remains unsatisfied.
(b) Notwithstanding subdivision (a), an industrial loan company
may make loans to, or purchase any obligations from, persons who do
not reside or have a place of business in the State of California not
to exceed 25 percent, in the aggregate, of an industrial loan
company's total assets. Upon application to and approval by the
commissioner, an industrial loan company may increase its loans to,
or purchases of obligations from, persons who do not reside or have a
place of business in this state not to exceed 50 percent, in the
aggregate, of an industrial loan company's total assets. The
application shall include all of the following information:
(1) A description of the company's proposed plan of business.
(2) The character, business qualifications, and other experience
of the proposed officers and managers directing the line of business
for which authorization is requested.
(3) Any other facts and circumstances bearing on the proposal
that, as determined by the commissioner, may be relevant.
(c) This section does not apply to loans made to, or acquired
from, persons who do not reside or have a place of business in this
state if all of the following conditions are met:
(1) The loans are for the purchase or refinance of single- or
multi-family residential property or nonresidential property.
(2) The loans are salable in the secondary market as evidenced by
commitments to buy by a buyer in the secondary market.
(3) The loans are owned by the industrial loan company for 90 days
or less.
18438. If a loan is made or other thing is purchased or discounted
in violation of Section 18271, 18272, 18273, 18274, or 18437, the
officers, directors and shareholders of the industrial loan company,
its holding company, or its affiliates participating therein or
knowingly approving the same shall be personally liable for any loss
suffered by the industrial loan company by reason thereof.
18439. If any amount in excess of the charges permitted by this
division, including interest, is charged, contracted for, or received
in the making or collection of a contract of loan, except as a
result of an accidental and bona fide error in computation, such
contract is void and no person has any right to collect or receive
the principal, interest, or charges.
18440. An industrial loan company shall not take any confession of
judgment or any power of attorney at the time of making the loan
except a power of attorney taken to effectuate the transfer of the
ownership of any motor vehicle, the transfer of the ownership of
securities, or the cancellation of an insurance policy and the
receipt and distribution of any unearned premiums in the event of
default in the payment of a loan made to finance the purchase of any
such insurance policy.
18441. No person in connection with or incidental to the making of
any loan under this division, shall require the borrower to contract
for, purchase, or agree to purchase anything in connection with the
loan. A policy of insurance of the type specified in Article 6
(commencing with Section 18290) of Chapter 3 of this division is not
prohibited by this section.
No person shall require a borrower to enter into any collateral
sales agreement or contract except as expressly permitted by this
division.
18442. An industrial loan company shall not make any loan of money
or property to or guarantee the obligation of any person upon the
security of its capital (including the shares of capital stock) of
the company, its holding company, or its affiliates.
18443. If any loan or guaranty is made in violation of Section
18436 or 18442, the directors and officers who authorize it or assent
thereto are jointly and severally liable to the company as
guarantors for the repayment or return of the sum or value so loaned
with interest thereon at the rate of 6 percent per year until paid.
18444. Any officer or director held liable under Section 18443, who
satisfies such liability is entitled to contribution from any other
officer or director who participates in authorizing, making or
allowing any such loan or guaranty, and is subrogated to all rights
of the corporation against the borrower or principal obligor.
18445. Any director, officer, or employee of an industrial loan
company, its holding company, or its affiliates who asks for or
receives, or consents or agrees to receive any commission, emolument,
or gratuity or any money, property, or thing of value for procuring
or endeavoring to procure for any person any loan from such company,
or the purchase or discount of any note, contract, or other
obligation or property by such company, is guilty of a felony.
18446. Any director, officer, or employee of an industrial loan
company, its holding company, or its affiliates who knowingly
receives or possesses himself of any of its property otherwise than
in payment of a just demand, or with intent to defraud, omits to make
or causes to be made a full and true entry thereof in its books and
accounts or concurs in omitting to make any material entry thereof,
is guilty of a felony.
18447. Any director, officer, or employee of an industrial loan
company, its holding company, or its affiliates who knowingly makes
or concurs in making or publishing any false entry in its books or
records, any written report, exhibit, or statement of its affairs or
pecuniary condition containing any material statement which is false,
or having the custody of its books, willfully refuses or neglects to
make any proper entry in such books as required by law, or to
exhibit or allow the same to be inspected or extracts to be taken
therefrom by the commissioner or his deputies or investigators, is
guilty of a felony.
18448. No director, officer, stockholder, or employee of an
industrial loan company, its holding company, or its affiliates shall
purchase, directly or indirectly, or be interested in the purchase
of, any of the company's assets for an amount less than the then
current market value thereof and any such purchase may not be made
without the express approval of the board of directors of the
company. Title and possession of assets shall not be transferred to
the purchaser until full consideration in cash has been received by
the industrial loan company. Every person violating this section
shall be liable to the company for twice the market value of the
assets so purchased.
18449. Every director of an industrial loan company who:
(a) In the case of the fraudulent insolvency of such company,
shall have participated in such fraud; or
(b) Willfully does any act as such director which is expressly
forbidden by law or willfully omits to perform any duty imposed upon
him as such director by law,
is guilty of a misdemeanor.
The insolvency of a company is deemed fraudulent for the purposes
of this section, unless its affairs appear upon investigation to have
been administered clearly, legally, and with the same care and
diligence that agents receiving a compensation for their services are
bound by law, to observe.
18450. A director, officer, or employee of an industrial loan
company, its holding company, or its affiliates who concurs in any
vote or act by which it is intended to make a loan or purchase a
contract in violation of this division, is guilty of a misdemeanor.
18451. A director, officer, or employee of an industrial loan
company, its holding company, or its affiliates who makes or
maintains, or attempts to make or maintain, a deposit of such company'
s funds with any other person on condition, or with the
understanding, express or implied, that the person receiving such
deposit make a loan or advance, directly or indirectly, to any
director, officer, or employee of the company so making or
maintaining or attempting to make or maintain such deposit, is guilty
of a misdemeanor.
18452. Every officer or employee of an industrial loan company, its
holding company, or its affiliates who sells investment or thrift
certificates knowing that the company is insolvent, is guilty of a
misdemeanor.
18453. Any person who knowingly sells investment certificates in
violation of any provision of this division or any order or
regulation of the commissioner, is guilty of a felony.
18454. Any director, officer, agent or employee of an industrial
loan company, its holding company, or its affiliates who willfully
makes a false or untrue entry in any book or record or in any report,
tag, or statement of the business, affairs, or condition, or in
connection with any transaction of such company, with intent to
deceive any officer, director, or employee thereof, or any agent or
examiner, private or official, employed or lawfully appointed to
examine into its condition or any of its affairs or transactions, or
to any public officer who has authority to examine into its affairs
or transactions, or who, with like intent, willfully omits to make a
new entry of any matter particularly pertaining to the business
property condition, affairs, transactions, assets or accounts of such
company in any book, record, report, statement, or tag of such
company, or who, with like intent, alters, abstracts, conceals, or
destroys any book, record, report, statement, or tag of such company
made, written, or kept, or required to be made, written, or kept by
him or under his direction, is guilty of a felony.
18454.5. It is unlawful for any person to willfully make any untrue
statement of a material fact in any document filed with the
commissioner under this division, or to willfully omit to state in
any document any material fact which is required to be stated
therein.
18455. An industrial loan company shall not, directly or
indirectly, make any loan to, or purchase a contract, loan, or chose
in action from, hold a lease obligation of, or purchase a lease
contract from, any of the following:
(a) A person who is an officer or director of the industrial loan
company or of its holding or affiliated company.
(b) A person who is a holder of record or beneficiary of the
shares of the industrial loan company or of any holding or affiliated
company. This restriction shall not apply to persons holding less
than 10 percent of the shares of a holding company or affiliated
company that is exempt from the qualification requirements of the
Corporate Securities Law of 1968 contained in Section 25130 of the
Corporations Code, pursuant to subdivision (a) or (b) of Section
25101 of the Corporations Code.
(c) A person in which an officer or director of the industrial
loan company or of any holding or affiliated company directly or
indirectly is financially interested, directly or indirectly.
(d) A person in which the holder of record or beneficiary of the
shares of the industrial loan company or of any holding or affiliated
company directly or indirectly is financially interested, directly
or indirectly. This restriction shall not apply to persons holding
less than 10 percent of the shares of a holding company or affiliated
company that is exempt from the qualification requirements of the
Corporate Securities Law of 1968 contained in Section 25130 of the
Corporations Code, pursuant to subdivision (a) or (b) of Section
25101 of the Corporations Code.
(e) A person who acquired those contracts directly or indirectly
or through intervening assignments from a person described in
subdivision (a), (b), (c), or (d).
Any officer, director, or shareholder of an industrial loan
company who directly or indirectly makes or procures, or participates
in making or procuring, a loan or contract in violation of this
section or knowingly approves the same is personally liable for any
loss resulting to an industrial loan company from the loan or
contract, in addition to any other penalties provided by law.
(f) The prohibition contained in this section shall not apply to
the purchase by an industrial loan company of a contract, loan, or
chose in action from a finance lender, as described in Section 22009,
a mortgage broker, a mortgage banker, a real estate broker or other
licensed lender, provided written authorization for the purchase is
obtained from the commissioner.
(g) The prohibition contained in this section shall not apply to
the purchase of life insurance by an industrial loan company on
behalf of an officer or director as part of the officer's or director'
s employee benefit plan package.
(h) The prohibition contained in this section shall not apply to
the following transactions:
(1) A transaction between an industrial loan company and a
subsidiary corporation or other entity in which the industrial loan
company is the owner of 50 percent or more of the common stock or
equity interest, or directly controls the management of the
corporation or other entity.
(2) The purchase of loans or other obligations by an industrial
loan company from an affiliated company pursuant to a sale and
repurchase agreement.
18456. The provisions of this chapter shall be applicable to lease
obligations.
18457. Any officer, director, employee, or agent of any company who
abstracts or willfully misapplies any of the money, funds, or
property of the industrial loan company, or willfully misapplies its
credit, is guilty of a felony. Upon conviction, the court shall, in
addition to any other punishment imposed, order the person to make
full restitution to the industrial loan company. Nothing in this
section shall be deemed or construed to repeal, amend, or impair any
existing provision of law prescribing a punishment for such an
offense.