Consumer loans: restrictions.

(1) Existing law, the California Financing Law (CFL) , generally provides for the licensure and regulation of finance lenders by the Commissioner of Business Oversight. A knowing and willful violation of the CFL, or a rule or order adopted pursuant to the CFL, is a crime, except as specified. Among other things, the CFL regulates the provision of loan documents to borrowers, the collection of unpaid consumer loans, the repossession of motor vehicles that secure consumer loans, and the collateral sale of products in connection with a consumer loan. The CFL requires a consumer loan to be payable in advance and permits the licensee to apply an advance payment first to any prepayment penalty. This bill, with regard to a loan secured by a lien on a motor vehicle, would prohibit the licensee from repossessing the vehicle if the borrower has made a full installment payment within the past 30 calendar days. The bill would prohibit any prepayment penalty on a consumer loan, other than one secured by real property, and would require a specified notice with regard to repaying a loan early to be included on a loan contract for which a prepayment penalty is prohibited. The bill would prohibit a licensee from making a consumer loan unless the licensee determines that the borrower has a reasonable ability to repay the loan by considering various factors. The bill would require a finance lender to seek information and documentation pertaining to all of a borrower's outstanding debt obligations during the loan application and underwriting process, as specified. The bill would require a finance lender to confirm that information using a credit report and also to confirm the borrower's income, as specified. The bill would grant a borrower under a consumer loan a 3 calendar day right to cancel at no cost to the borrower and would require consumer loan agreements to include a statement regarding this right. The bill would also require loan agreements on specified loans that have interest rates exceeding a certain threshold to include a statement that, among other things, identifies the loan as a high-cost loan. The bill would require a finance lender to offer a credit education program or seminar to the borrower that has been previously reviewed and approved by the commissioner or to invite a borrower to participate in a previously reviewed credit education program or seminar offered by a third party. The bill would prohibit a borrower from being required to participate in those programs and would prohibit the borrower from being charged to participate in those programs. This bill would require a finance lender to notify a borrower on a consumer loan, except those secured by real property, at least 2 days before each payment due date, and inform the borrower of the amount due and the payment due date. The means of notification would be subject to agreement between the borrower and the finance lender, and the bill would permit the borrower to opt out of notification at any time. The bill would authorize a finance lender to modify terms of a loan upon request of a borrower, as specified, would require that a modification be in writing, and would prohibit a finance lender from charging a borrower a fee for a modification. The bill would prohibit a finance lender or its corporate affiliates from selling or assigning a borrower's delinquent debt to an independent third party for collection until the finance lender or affiliate has attempted to obtain payment directly from the borrower for a period of at least 30 days following a missed payment or delinquency. By broadening the definition of a crime, this bill would impose a state-mandated local program. (2) 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.