Financial transactions: finance lenders and deferred deposit transactions.

(1) The California Financing Law (CFL) provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight. The CFL prohibits anyone from engaging in the business of a finance lender or broker without obtaining a license. A willful violation of the CFL is a crime, except as specified. Under the CFL, a licensee who lends any sum of money is authorized to contract for and receive charges at a maximum rate that does not exceed specified sums on the unpaid principal balance per month, ranging from 212% to 1%, based on the consumer loan amount, as specified. The CFL also authorizes a licensee, as an alternative to these rate charges, to instead contract for and receive charges at the greater of a rate not exceeding 1.6% per month on the unpaid principal balance or a rate not exceeding 56 of 1% per month, plus a specified percentage per month, as established by the Federal Reserve Bank of San Francisco, on advances to member banks under federal law, or if there is no single determinable rate, the closest counterpart of this rate. These provisions do not apply to a loan of a bona fide principal amount of $2,500 or more, as specified. This bill would authorize a licensee under the CFL, as another alternative to the above-described rate charges, to contract for and receive charges of a note rate of interest not to exceed 36%, and a monthly servicing fee of 5% of the originally contracted amount, not to exceed $25 per month, subject to certain conditions, including a prohibition on the total loan charges, including interest and servicing fees, exceeding 50% of the original loan principal. The bill would also prohibit the total required monthly payment from exceeding the greater of 5% of the borrower's verified gross monthly income or 6% of the borrower's verified net monthly income, as specified. These provisions would not apply to certain loans of a bona fide principal amount of $2,500 or more. Additionally, active duty military personnel of the United States Armed Forces and their dependents would be exempted from any monthly maintenance fees. The bill would require a licensee engaged in lending under these provisions to comply with certain written notice, disclosure, collection, loan origination, and related requirements. Because the bill would expand the scope of a crime under the CFL, the bill would impose a state-mandated local program. (2) The California Deferred Deposit Transaction Law provides for the licensure and regulation by the Commissioner of Business Oversight of persons engaged in the business of making or arranging deferred deposit transactions. Existing law, among other things, prohibits a licensee from entering into an agreement for a deferred deposit transaction with a customer during the period of time that an earlier written agreement for a deferred deposit transaction for the same customer is in effect. A knowing and willful violation of the provisions of this law is a crime. This bill would require the commissioner, by July 1, 2019, to develop operate, and maintain an Internet Web site and common database in which a licensee would be required to, by the time period described below, record each deferred deposit transaction for the purpose of preventing violations of the California Deferred Deposit Transaction Law. The bill would require the database to meet certain requirements, including that it allow real-time access to information entered into the database via an Internet connection. The bill would, alternatively, authorize the commissioner to contract with a provider to develop, operate, or maintain the database. The bill would require, on or after July 1, 2019, a licensee to conduct a search on the database before entering into any deferred deposit transaction, and would prohibit the licensee from entering into that transaction if the database reveals the customer has any outstanding deferred deposit transactions. The bill would require the licensee to adhere to generally accepted security safeguards to maintain the confidentiality and security of information transmitted to the database. By expanding the scope of an existing crime, this bill would impose a state-mandated local program. The bill would provide that the information contained in the database is confidential and not subject to public inspection, and the database and its contents are not subject to requests under the California Public Records Act, except as specified. Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. This bill would make legislative findings to that effect. 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.