California Finance Lenders Law: regulation of lead generators.

(1) 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. Existing law regulates the charges a licensee may impose or receive on loans it makes. This bill would expand the application of that law to include lead generators. The bill would prohibit a person from engaging in business as a lead generator, defined to include any person who, for compensation or in expectation of compensation, helps facilitate a loan by introducing a prospective borrower and prospective lender in connection with certain loan activities, without first registering with the commissioner. The bill would require the commissioner to establish timelines and fees for lead generator registration and renewals, and would mandate that specified minimum information be required for applicants seeking registration, including the name, business address, and licensing details of the lead generator and his or her employees who are responsible for that lead generator's activities, and a list of activities the lead generator would perform. The bill would authorize the commissioner, upon providing reasonable notice and an opportunity to be heard, to deny an application for registration as a lead generator for specified reasons, including if a false statement has been made by the applicant. The bill would permit the commissioner to order the suspension or revocation of a lead generator's registration upon failure to pay a required fee or assessment by the specified due date. The bill also would prohibit a lead generator, during any period when its registration is revoked or suspended, from conducting any business unless permitted by the commissioner. The bill would authorize a licensee to compensate a registered lead generator for that lead generator's activities, subject to various requirements, including entering into a written agreement clearly describing the services to be performed, and complying with the applicable statutory provisions governing those transactions. The bill also would require each licensee that uses the services of a lead generator to develop and implement policies and procedures to, among other things, exercise oversight over the business practices of the lead generator. The bill would make a licensee that pays a lead generator for services in connection with a loan offered subject to discipline by the commissioner in connection with any misrepresentation made or deceptive act or practice engaged in by that lead generator. The bill would further require lead generators to develop and implement policies and procedures to respond to questions raised by borrowers and prospective borrowers and to provide specified disclosure information about the nature of the lead generator's business as a registrant with the Department of Business Oversight. (2) Existing law prohibits a person from making a materially false or misleading statement or representation about the terms or conditions of a borrower's loan, when making or brokering that loan. This bill additionally would prohibit a person from making a materially false or misleading statement or representation to a prospective borrower about the terms or conditions of a loan for which the prospective borrower may qualify, when engaging in lead generation activities subject to the act. The bill also would make related and conforming changes, including authorizing the commissioner to take various enforcement actions upon finding that a lead generator has violated the act. By expanding the definition of a crime, the bill would impose a state-mandated local program. Existing law requires finance lenders, brokers, and mortgage loan originator licensees to preserve their books, accounts, and records for at least 3 years after making the final entry on any loan recorded in those documents. This bill also would require finance lenders that utilize the services of a lead generator to maintain their records of dealings with that lead generation for at least 3 years and would require lead generators to maintain records related to lead generation activities on behalf of lenders for at least 3 years following the creation of those documents. The bill would specify that these records requirements do not require the maintenance or storage of personal identification for any borrower, except that each lead generator that does not maintain or store personal information must have a method by which the identity of individual borrowers can be reconstructed, if requested by the commissioner. The bill also would make it a violation of the act to compensate a lead generator in connection with any service provided by that lead generator, where the lead generator has made a materially false or misleading statement or engaged in other unlawful, deceptive, misleading, or unfair acts or practices, as specified. The bill would include related findings of the Legislature regarding its intent regarding the regulation of lead generators. 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.