SB 297 amends the California Finance Lenders Law by increasing licensing and registration requirements while expanding oversight of lead generators in the lending industry. The law adds a new category of regulation to the legislation that now requires brokers and lenders to secure finance lenders licenses in California.
A revised version of SB 297 eliminates several provisions of the earlier version of the bill relating to certain activities which if performed for compensation or in expectation of compensation in helping facilitate a loan would establish that an individual was a lead generator under California law, thus subjecting him or her to certain requirements under California law. Here is an update on the SB 297.
This amended version of the bill, authored by Senator Bill Dodd (D-Napa) and Assemblyman Mathew Dababneh (D-Van Nuys), passed out of committee in April of 2017. Its present status is as a “Suspense File” in the Senate Fiscal Committee until later in May.
As more than a few industry participants believe the legislation needs to treat commercial lending separately from consumer lending, the Equipment Lease and Finance Association Work Group, created to represent the concerns of the finance industry, is in the process of meeting with the Senate Banking and Financial Institutions Committee to resolve ambiguities surrounding the new law and recommend the implementation of further revisions.
Under the new law “lead generators” will be required to register with the Department of Business Oversight, thus subjecting them to the purview of the California Finance Lenders Law. Under SB 297, this definition of “lead generators” is unclear and ambiguous.
Many industry participants have expressed their concerns about SB 297. In addition to the aforementioned need to treat commercial lending separately from consumer lending, these concerns include:
- The bill should be limited to consumers;
- The new definition of “finance broker” should be eliminated from the bill;
- The state government of California, not a current licensee, has the responsibility to ensure compliance with state law and any attempt by SB 297 to relieve government of this duty should be eliminated from the bill;
- It is not feasible to expect a licensee to undertake the duties of state government as an enforcer;
- Legislation should focus on the licensed lender rather than the “finder” that locates the lender since the licensed lender typically follows CFLL and realizes new liabilities.
- The legislation should exempt those already licensed from the definition of lead generator and relieve current licensees from obtaining a separate license or otherwise it should comply with additional reporting requirements.
- Under the bill, it is difficult for a licensee to determine if a lead generator has violated its provisions;
- The bill adds more new bureaucratic procedures which interfere with closings and information gathering.
Time will tell if SB 297 fails, passes or if the California legislature makes any more amendments. Stay tuned for more updates.
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