California finance lender law
California Finance Lenders Law regulates the activities of California Finance Lenders or CFLs. The law provides that no person shall engage in the business of finance lender or broker without obtaining a license from the Commissioner of Corporations. This Law is contained in Division 9 of theCalifornia Financial Code, commencing with Section 22000.The regulations under the California Finance Lenders Law are contained in Chapter 3, Title 10 of the California Code of Regulations, commencing with Section 1404 (10 C.C.R. ?1404, et seq.).
Purpose of Law
To ensure an adequate supply of credit to borrowers.To simplify, clarify, and modernize the law governing loans made by finance lenders.
To foster competition among finance lenders
To protect borrowers against unfair practices by some lenders, having due regard for the interests of legitimate and scrupulous lenders.
To permit and encourage the development of fair and economically sound lending practices
To encourage and foster a sound economic climate inCalifornia.
Who is finance lender?
A finance lender is defined as "any person who is engaged in the business of making consumer loans or making commercial loans." A finance lenders license provides the licensee with an exemption from the usury provision of theCalifornia Constitution.
Who is broker?
The California Finance Lenders Law also provides limited brokering authority. A "broker" is defined in the law as "any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender." Brokers licensed under this law may only broker loans to lenders that hold aCalifornia Finance Lenders license.
REQUIREMENTS FOR A CAliFORNIA FINANCE LENDERS liCENSE:
In general, an applicant/licensee must: Have and maintain a $25,000 net worth.Obtain and maintain a $25,000 surety bond.Have a history absent any criminal history or history of sanctions by any regulatory agency resulting from dishonesty, fraud or deceit.Have a plan of business consistent with the business of finance lender.
Procedure for obtaining license
Application for license shall be in the form and contain the information that the commissioner may by the rule require.Applicant should furnish, a full set of finger prints and related information for the purpose of commissioner conducting a criminal history record check.
At the time of filing the application the applicant shall pay to the commissioner the sum of $100 as a fee for investigating the application, plus the cost of fingerprint processing and the criminal history record check, and $200 as an application fee.
The applicant shall file with the application financial statements acceptable to the commissioner normal that indicates a net worth of at $25,000.Upon the filing of an application and the payment of the fees, the commissioner shall investigate the applicant and its general partners/principal officers/directors and persons owning or controlling, directly or indirectly, 10% or more of the outstanding interestsor any person responsible for the conduct of the applicant?s lending activities in California. If the commissioner determines that the applicant has satisfied the conditions for issue of license and does not find facts constituting reasons for, the commissioner shall issue and deliver a license to the applicant.
The license shall state the name of the licensee, and the address of the licensee's principal business location License shall state whether the licensee is licensed as a finance lender or a broker.
Payment of Annual Fees
Each licensee is required to pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of this law, as estimated by the commissioner, for the ensuing year.The pro rata share shall be the proportion that a licensees gross income bears to the aggregate gross income of all licensees as shown by the annual financial reports to the commissioner.
On or before the 30th day of May in each year , the commissioner notifies each licensee by mail of the amount assessed and levied against it and that amount shall be paid within 20 days thereafter.If a licensee fails to pay the assessment on or before the 30th day of June following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the licensee.
Filing of Annual Report
Each licensee is required to file an annual report with the commissioner, on or before the 15th day of March, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee.
Exemptions
There are a number of "non-loan" transactions, such as bona fide leases, automobile sales finance contracts and retail installment sales that are not subject to the provisions of the California Finance Lenders Law.
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