22348-22362
FINANCIAL CODE
SECTION 22348-22362
22348. (a) The Pilot Program for Affordable Credit-Building
Opportunities is hereby established and is intended to increase the
availability of affordable credit-building opportunities to
underbanked individuals seeking low-dollar-value loans and to help
those individuals move into the financial mainstream.
(b) All references in this article to the program shall mean and
refer to the Pilot Program for Affordable Credit-Building
Opportunities.
22349. Any licensee wishing to participate in the program, who is
in good standing with the commissioner and has no outstanding
enforcement actions or deficiencies at the time of its application,
shall file an application 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
its costs to administer this article.
22349.1. The commissioner shall not approve any licensee to
participate in the program, unless that licensee has been accepted as
a data furnisher by at least one of the national credit reporting
agencies for the purpose of reporting borrower payment performance.
22349.2. Every licensee approved by the commissioner to participate
in the program shall file with the commissioner on or before the
15th day of March an annual report consistent with Section 22159,
separate from any other annual report the licensee may be required to
file.
22350. Nothing in this article shall exempt any licensee from any
of the provisions of this division or Section 1632 of the Civil Code.
22351. No licensee may offer or make a loan, nor impose any charges
or fees pursuant to Section 22352, nor use a finder pursuant to
Section 22353, without prior approval from the commissioner to
participate in the program.
22352. (a) Any loan made pursuant to this section shall comply with
the following requirements:
(1) The loan shall be unsecured.
(2) Interest on the loan accrues on a simple-interest basis,
through the application of a daily periodic rate to the actual unpaid
principal balance each day.
(3) The licensee discloses the following to the consumer in
writing at the time of application:
(A) The annual percentage rate, the periodic payment amount, and
the total finance charge, calculated as required by Federal Reserve
Board Regulation Z, as to a loan of an amount and term substantially
similar to the loan applied for by the consumer.
(B) That the consumer shall have the right to rescind the loan by
notifying the licensee of the consumer's intent to rescind the loan
and returning the principal advanced by the end of the business day
following the date of the consummation of the loan.
(4) The loan has a minimum principal amount upon origination of
two hundred fifty dollars ($250) and a term of not less than the
following:
(A) Ninety days for loans whose principal balance upon origination
is less than five hundred dollars ($500).
(B) 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).
(C) One hundred eighty days for loans whose principal balance upon
origination is at least one thousand five hundred dollars ($1,500).
(5) The licensee complies with the requirements of any applicable
state or federal law.
(b) As an alternative to the charges authorized by Section 22303
or 22304, a licensee approved by the commissioner to participate in
the program may contract for and receive charges for a loan made
pursuant to this section at a rate not exceeding the sum of the
following:
(1) Two and one-half percent per month on that part of the unpaid
principal balance of the loan up to and including, but not in excess
of, one thousand dollars ($1,000).
(2) Two and one-sixth percent per month on that portion of the
unpaid principal balance of the loan in excess of one thousand
dollars ($1,000).
(c) Notwithstanding subdivision (b), a licensee approved by the
commissioner to participate in the program shall reduce the rate on
each subsequent loan to the same borrower by a minimum of one-twelfth
of 1 percent per month, if all of the following conditions are met:
(1) The subsequent loan is originated no more than 180 days after
the prior loan is fully repaid.
(2) The borrower was never more than 15 days delinquent on the
prior loan.
(3) The prior loan was outstanding for at least one-half of its
original term prior to its repayment.
(d) As to any loan made under this section, a licensee approved by
the commissioner to participate in the program may contract for and
receive an administrative fee, which shall be fully earned
immediately upon making the loan, in an amount not in excess of
either 5 percent of the principal amount, exclusive of the
administrative fee, or sixty-five dollars ($65), whichever is less. A
licensee shall not charge the same borrower more than one
origination fee in any six-month period. An administrative fee shall
not 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 shall be contracted for or received until the loan
has been repaid in full. Section 22305 shall not apply to any loan
made under this section.
(e) Notwithstanding subdivision (a) of Section 22320.5, a licensee
approved by the commissioner to participate in the program may
contract for and receive a delinquency fee that is one of the
following amounts:
(1) For a period in default of not less than seven days, an amount
not in excess of twelve dollars ($12).
(2) For a period in default of not less than 14 days, an amount
not in excess of eighteen dollars ($18).
(f) If a licensee opts to impose a delinquency fee, it shall use
the delinquency fee schedule described in subdivision (e), subject to
all of the following:
(1) No more than one delinquency fee may be imposed per delinquent
payment.
(2) No more than two delinquency fees may be imposed during any
period of 30 consecutive days.
(3) No delinquency fee may be imposed on a borrower who is 180
days or more past due if that fee would result in the sum of the
borrower's remaining unpaid principal balance, accrued interest, and
delinquency fees exceeding 180 percent of the original principal
amount of the borrower's loan.
(4) The licensee or any of its wholly owned subsidiaries shall
attempt to collect a delinquent payment for a period of at least 30
days following the start of the delinquency before selling or
assigning that unpaid debt to an independent party for collection.
(g) The following shall apply to a loan made by a licensee
pursuant to this section:
(1) Prior to disbursement of loan proceeds, the licensee 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.
The borrower shall not be required to participate in either of these
education programs or seminars.
(2) The licensee shall report each borrower's payment performance
to at least one of the national credit reporting agencies in the
United States.
(3) (A) The licensee shall underwrite each loan to determine a
borrower's ability and willingness to repay the loan pursuant to the
loan terms, and shall not make a loan if it determines, through its
underwriting, that the borrower's total monthly debt service
payments, at the time of 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 licensee, exceed 50
percent of the borrower's gross monthly income.
(B) (i) The licensee 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 licensee shall verify that information
using a credit report from at least one of the three major credit
bureaus or through other available electronic debt verification
services that provide reliable evidence of a borrower's outstanding
debt obligations.
(ii) Notwithstanding the verification requirement in subparagraph
(A), the licensee shall 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.
(iii) The licensee shall not be required to consider, for purposes
of debt-to-income ratio evaluation, loans from friends or family.
(C) The licensee shall also verify the borrower's income that the
licensee relies on to determine the borrower's debt-to-income ratio
using information from either 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.
(h) (1) Notwithstanding Sections 22311 to 22315, inclusive, no
person, in connection with, or incidental to, the making of any loan
made pursuant to this article, may offer, sell, or require the
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.
(2) Notwithstanding Sections 22311 to 22315, inclusive, no
licensee, finder, or any other person that participates in the
origination of a loan under this article shall refer a borrower to
any other person for the purchase of "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.
(i) (1) No licensee shall require, as a condition of providing the
loan, that the 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 such waiver
by a borrower must be knowing, voluntary, and in writing, and
expressly not made a condition of doing business with the licensee.
Any such waiver that is required as a condition of doing business
with the licensee shall be presumed involuntary, unconscionable,
against public policy, and unenforceable. The licensee 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.
(2) No licensee shall 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.
(3) This subdivision shall 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. Nothing in this subdivision shall affect the enforceability
or validity of any other provision of the contract.
(j) This section shall 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.
22353. (a) A licensee who is approved by the commissioner to
participate in the program may use the services of one or more
finders as provided in this article.
(b) For purposes of this article, a "finder" means an entity that,
at the finder's physical location for business, brings a licensee
and a prospective borrower together for the purpose of negotiating a
loan contract.
22354. (a) A finder may perform one or more of the following
services for a licensee at the finder's physical location for
business:
(1) Distributing, circulating, using, or publishing preprinted
brochures, flyers, factsheets, or other written materials relating to
loans that the licensee may make or negotiate and that have been
reviewed and approved in writing by the licensee prior to their being
distributed, circulated, or published.
(2) Providing written factual information about loan terms,
conditions, or qualification requirements to a prospective borrower
that has been either prepared by the licensee or reviewed and
approved in writing by the licensee. A finder may discuss that
information with a prospective borrower in general terms, but may not
provide counseling or advice to a prospective borrower.
(3) Notifying a prospective borrower of the information needed in
order to complete a loan application without providing counseling or
advice to a prospective borrower.
(4) Entering information provided by the prospective borrower on a
preprinted or electronic application form or onto a preformatted
computer database without providing counseling or advice to a
prospective borrower.
(5) Assembling credit applications and other materials obtained in
the course of a credit application transaction for submission to the
licensee.
(6) Contacting the licensee to determine the status of a loan
application.
(7) Communicating a response that is returned by the licensee's
automated underwriting system to a borrower or a prospective
borrower.
(8) Obtaining a borrower's signature on documents prepared by the
licensee and delivering final copies of the documents to the
borrower.
(b) A finder shall not engage in any of the following activities:
(1) Providing counseling or advice to a borrower or prospective
borrower.
(2) Providing loan-related marketing material that has not
previously been approved by the licensee to a borrower or a
prospective borrower.
(3) Interpreting or explaining the relevance, significance, or
effect of any of the marketing materials or loan documents the finder
provides to a borrower or prospective borrower.
(c) Any person who performs one or more of the following
activities is a broker within the meaning of Section 22004 rather
than a finder within the meaning of this section:
(1) Negotiating the price, length, or any other loan term between
a licensee and a prospective borrower.
(2) Advising either a prospective borrower or a licensee as to any
loan term.
(3) Offering information pertaining to a single prospective
borrower to more than one licensee, except that, if a licensee has
declined to offer a loan to a prospective borrower and has so
notified that prospective borrower in writing, the person may then
offer information pertaining to a single prospective borrower to
another licensee with which it has a finder's agreement.
(4) Personally contacting or providing services to a borrower or
prospective borrower at any place other than the finder's physical
location for business.
(d) A finder shall comply with all laws applicable to the licensee
that impose requirements upon the licensee for safeguards for
information security.
22355. (a) At the time the finder receives or processes an
application for a pilot program loan, the finder shall provide the
following statement to the applicant, on behalf of the licensee, in
no smaller than 10-point type, and shall ask the applicant to
acknowledge receipt of the statement in writing:
"Your loan application has been referred to us by