22337.
Each licensed finance lender shall:(a) Deliver or cause to be delivered to the borrower, or any one thereof, at the time the loan is made, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security for the loan, if any, and the agreed rate of charge or the annual percentage rate pursuant to Regulation Z promulgated by the Consumer Financial Protection Bureau (12 C.F.R. 1026).
(b) Obtain from the borrower a signed statement as to whether any
person has performed any act as a broker in connection with the making of the loan. If the statement discloses that a broker or other person has participated, then the finance lender shall obtain a full statement of all sums paid or payable to the broker or other person. The finance lender shall keep these statements for a period of three years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.
(c) (1) Permit payment to be made in advance in any amount on any contract of loan at any time. A prepayment penalty shall not be permitted for any consumer loan, other than a loan secured by real property. If an advance payment is made on a loan secured by real property, the licensee may apply the payment first to any agreed prepayment penalty, then to all
charges due, including charges at the agreed rate or rates up to the date of payment, not to exceed the applicable maximum rate permitted by this article.
(2) The following notice shall be displayed prominently on any contract for a loan on which a prepayment penalty is prohibited: “Repaying your loan early will lower your borrowing costs by reducing the amount of interest you will pay. This loan has no prepayment penalty.”
(d) Deliver or cause to be delivered to the person making any cash payment, or to the person who requests a receipt at the time of making any payment, at the time payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which the payment is applied.
(e) Upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership, and cancel or plainly mark “paid” and return to the borrower or person making final payment, any note, mortgage, security agreement, trust deed, assignment, or order signed by the borrower, or an optical image reproduction thereof, except those documents that are a part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. When a trust deed on real property has been taken as security for a loan that has been subsequently paid in full, a duly executed request for reconveyance shall be delivered to the trustor or
trustee for the purpose of recording a reconveyance. A termination statement, furnished to the borrower as provided for in Sections 9512 and 9513 of the Commercial Code, shall be deemed a release of the security when a financing statement has been filed pursuant to Section 9501 of the Commercial Code.
For purposes of this subdivision, an optical image reproduction shall meet all of the following requirements:
(1) The optical image storage media used to store the document shall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.
(2) The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of
Standards and Technology or the Association for Information and Image Management.
(3) Written authentication identifying the optical image reproduction as an exact unaltered copy of the note, trust deed, mortgage, security agreement, assignment or order shall be stamped or printed on the optical image reproduction.
(f) Deliver or cause to be delivered to the potential borrower, or any one thereof, at the time the licensee first requires or accepts any signed instrument or the payment of any fee, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any.
(g)A licensee shall not make a loan to a borrower unless the licensee determines that the borrower has a reasonable ability to repay a loan by considering the current or reasonably expected income of the borrower, based on the following, as may be applicable to the borrower:
(1)The borrower’s current employment, history of self-employment or contract-based work, receipt of government benefits, based on evidence including, but not limited to, wage or contract
payment records, bank deposit records, or corresponding electronic records.
(2)The borrower’s credit history as set forth in a consumer credit report, as described in subdivision (h).
(3)The total of the borrower’s monthly debt service payments at the time of origination, including payments that would result from the loan for which the borrower is being considered.
(4)Other evidence indicative of a borrower’s reasonable ability to repay the loan, including, but not limited to, bank statements and written representations pertaining to income and debt service payments made by the borrower to the licensee or a third party upon which the licensee may reasonably rely.
(h)In underwriting a consumer loan, a licensee shall obtain and consider a consumer credit report, as defined in Section 1785.3 of the Civil Code, from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis during the loan underwriting process.
(g) (1) The finance lender shall underwrite each loan to determine a borrower’s ability and willingness to repay the loan pursuant to the loan terms and shall not make a loan if it determines, through its underwriting, that the borrower’s total monthly debt service payments at the time of origination, including the loan for which the borrower is being considered and across all outstanding forms of credit that can be independently confirmed by the finance lender, exceed 50 percent of the borrower’s gross monthly income for a loan of no more than two thousand five hundred dollars ($2,500) or exceed 36 percent of the borrower’s gross monthly income for a loan in excess of two thousand five hundred dollars ($2,500).
(2) (A) The finance lender shall seek information and documentation pertaining to all of a borrower’s outstanding debt
obligations during the loan application and underwriting process, including loans that are self-reported by the borrower but not available through independent confirmation. The finance lender shall confirm that information using a credit report from at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis or through other available electronic debt confirmation services that provide reliable evidence of a borrower’s outstanding debt obligations.
(B) Notwithstanding the confirmation requirement in subparagraph (A), the finance lender shall request from the borrower and include all information obtained from the borrower regarding outstanding deferred deposit transactions in the calculation of the borrower’s outstanding debt obligations.
(C) The finance lender shall not be required to consider, for purposes of debt-to-income ratio
evaluation, loans from friends or family.
(3) The finance lender shall also confirm the borrower’s income that the licensee relies on to determine the borrower’s debt-to-income ratio using information from either of the following:
(A) Electronic means or services that provide reliable evidence of the borrower’s actual income.
(B) Internal Revenue Service Form W-2, tax returns, payroll receipts, bank statements, or other third-party documents that provide reasonably reliable evidence of the borrower’s actual income.
(i)
(h) For any consumer loan, the loan agreement shall include a provision permitting the borrower to cancel the loan, at no cost to the borrower, within three calendar days of the buyer’s receipt of the loan proceeds. The licensee shall include in the loan agreement a provision in substantially the following form:
“You may cancel this transaction, without any penalty or
obligation, within three calendar days after receiving the loan proceeds. This means you may cancel until 5:00 p.m. Pacific Time, on the third calendar day after you receive your loan funds. If the lender is not open that day, you may cancel until 5:00 p.m., Pacific Time, of the next day the lender is open.
To cancel this transaction, you must deliver a signed and dated copy of this cancellation notice, or any other written notice, by the date of notice specified in your loan agreement:
Notice of Cancellation: I wish to cancel my loan.
Signature: ___________________ Date: ______________
If you cancel, you must return any loan proceeds as set forth in the loan contract. We will refund any payments we have received from you in
connection with the loan.”
(j)
(i) The following notice shall be provided in at least 10-point type on the first page of any consumer loan agreement for which the total annual interest rate on any portion of the loan exceeds the highest rate set forth in paragraph (1) of subdivision (b) of Section 22370: “YOU ARE ENTERING INTO A HIGH-COST LOAN AGREEMENT. YOU MAY BE ABLE TO OBTAIN A LOAN AT A LOWER INTEREST RATE ELSEWHERE. FOR INFORMATION ABOUT LOWER COST LENDERS LICENSED UNDER CALIFORNIA’S PILOT PROGRAM FOR INCREASED ACCESS TO RESPONSIBLE SMALL DOLLAR LOANS. PLEASE SEE [insert URL
to be provided by the Department of Business Oversight].”
(k)Each licensee shall provide access
to the public to financial literacy educational materials as described in paragraph (1) or (2). The commissioner may identify resources for inclusion in the links and printed materials required by this section.
(1)For a licensee that offers loans online, the licensee’s online lending portal shall contain a link to financial literacy educational
materials.
(2)For a licensee that offers loans at physical locations, the licensee shall provide print materials setting forth information about access to financial literacy educational materials or have a conspicuous posting of information about access to financial literacy educational materials.
(j) (1) Before disbursement of loan proceeds, the finance lender shall either:
(A) Offer a credit education program or seminar to the borrower that has been previously reviewed and approved by the commissioner for use in complying with this section.
(B) Invite the borrower to a credit education program or seminar offered by an independent third party that has been previously reviewed and approved by the commissioner for use in complying with this section.
(2) The borrower shall not be required to participate in a program or seminar offered pursuant to paragraph (1). A credit education program or seminar offered pursuant to paragraph (1) shall be provided at no cost to the borrower.