Financial Code, 1951

If a subject institution’s board adopted an assessment resolution before January 1, 1979, the later treatment depends on whether the assessment became a lien before that date.

This section says Article 3 of the revised Banking Law applies to certain shareholder distributions by a subject institution, with a grandfathered exception for some pre-1979 share-purchase or redemption contracts.

Certain financial and fiduciary institutions may invest in or buy specified first liens on real estate, including notes or bonds secured by those liens, if the liens have been accepted for Federal Housing Administrator insurance.

Certain listed financial and fiduciary entities may invest in or buy obligations of national mortgage associations, using their own funds or money in their custody.

Certain specified financial companies may make, invest in, or purchase loans or advances of credit insured by the Federal Housing Administrator.

Certain specified financial institutions may make loans secured by real property or leasehold if the Federal Housing Administrator insures, or commits to insure, them, and they may obtain that insurance.

For loans or investments made under this chapter, California laws about security requirements, interest-rate limits, and loan or investment periods do not apply.

Certain federally backed mortgage notes, bonds, debentures, and obligations of national mortgage associations count as eligible securities when the law requires collateral or designated securities for deposits or funds.

Educational institutions of collegiate grade may make student loans or forbearances for education expenses, but the interest rates are capped and depend on the applicable benchmark rate.

This division does not apply to community colleges.

This division may be known and cited as the Student Loan Servicing Act.

A person must get a license before servicing student loans in this state, and licenses cannot be transferred or assigned.

This section defines key terms used in the Student Loan Servicing Act.

The commissioner administers this division and has broad authority to issue licensing rules, orders, and enforcement actions.

The commissioner may investigate and examine applicants and licensees, access relevant records and information, and control certain documents during an investigation. People generally may not remove those documents while the commissioner has control, unless there is a court order or the commissioner consents.

The commissioner may set, by rule or order, when electronic records or electronic signatures will be accepted, but this section does not require acceptance.

The commissioner may require student loan servicer applicants and licensees to use the Nationwide Multistate Licensing System & Registry for filings, applications, submissions, and assessments.

An applicant must submit a license application to the commissioner with the required form, fees, and audited financial statements showing at least $250,000 net worth, unless a stated SEC-filed statement alternative applies.

The commissioner must send applicant fingerprint information to the Department of Justice, which must forward it to the FBI, review the FBI result, respond to the commissioner, and charge the applicant a processing fee.

The commissioner must investigate certain license applicants and related persons after an application and fees are filed, and must issue a license if the applicant satisfies the division and no denial facts are found.

Before a license is issued, the applicant must file an appointment naming the commissioner to receive lawful process. If service is attempted by leaving process at the commissioner’s office, extra notice and an affidavit are required for the service to count.

When a license application is complete and DOJ information has been received, the commissioner must either issue the license or give a written denial explanation.

License-denial proceedings must follow the specified Government Code procedure, and the commissioner may deny a license application for listed reasons.

The commissioner may treat a license application as abandoned if the applicant does not respond to required information requests, and must give written notice of the 60-day response deadline.

A license stays effective until the commissioner suspends or revokes it, or the licensee surrenders it.

The commissioner may work with the Nationwide Multistate Licensing System & Registry, change certain division requirements for participation, use the system to route information, and must create a process for applicants and licensees to challenge information entered by the commissioner.

Most information disclosed to the Nationwide Multistate Licensing System & Registry keeps its existing privacy, confidentiality, and privilege protections.

The commissioner must regularly report violations, enforcement actions, and other relevant information to the Nationwide Multistate Licensing System & Registry, but only when the information is a public record.

A licensee must notify the commissioner in writing about certain application-information changes within 10 business days, and must give 10 days’ advance notice before changing its business address. The commissioner must respond to an address-change request within 10 days, and late notice can trigger a civil or administrative penalty of up to $500.

A licensee must apply for a branch office license and pay the required fee before starting student loan servicing at a new location; the licensee may start 10 days after submission, subject to commissioner approval rules.

A licensee must take compliance steps, report to the commissioner when required, follow the division and commissioner orders, accept periodic examination, notify the commissioner of bankruptcy within five days, and provide borrower repayment and loan-forgiveness information on its website and by mail or email at least once a year.

A licensee does not have to follow Section 28130(g) for certain qualified written requests, but must notify the borrower in writing within 5 business days when it makes that determination.

A licensee must keep servicing records for a borrower’s student loan for at least three years after the loan is sold, assigned, transferred, or paid in full, unless federal law prohibits it.

A licensee must continuously keep net worth at or above $250,000. Some wholly owned subsidiaries of public holding companies may use SEC-filed audited financial statements to show compliance, subject to the commissioner’s sole discretion.

Licensees must keep a $25,000 surety bond on file and update it when required.

Licensees must pay annual assessments to the commissioner, follow a minimum payment floor, and may lose their license if they do not pay by October 31.

A licensee must file an annual report with the commissioner by March 15 and may also have to file special reports requested by the commissioner.

Licensees must have their books and accounts audited by an independent CPA, file the audit report with the commissioner, and fix any rejected filing deficiencies within 30 days.

If a licensee stops servicing student loans, it must notify the commissioner in writing and surrender the license and other license indicia. The commissioner may also require a disposition plan and must send written notice when accepting a surrendered license.

The commissioner must examine each licensee regularly, at least every 36 months, may inspect records and interview people under oath, and must provide findings to the licensee and correct violations.

The commissioner may require certain non-excluded persons to submit special reports or written answers, under oath or otherwise, in the form and time the commissioner sets.

A person claiming an exemption or exception from a definition must prove it in any proceeding under this division.

A licensee must file required reports on time and include all required information, or the commissioner can fine the licensee and may suspend or revoke the license.

The commissioner may censure, suspend, or bar certain people after notice and a hearing opportunity. A person subject to a proposed order may request a hearing within 15 days, and the hearing must start within 30 days unless the person agrees to a later date.

If the commissioner finds a licensee is conducting business in an unsafe or injurious way, the commissioner must issue a written order telling the licensee to stop those practices.

The commissioner may order a person to stop servicing student loans without a license, unless an exemption applies.

If the commissioner investigates and has reasonable grounds to think a licensee is not complying, the commissioner must issue a written order telling the licensee to stop the noncompliance.

This section sets the process for making a discontinuance order final, giving the licensee notice, a chance to request a hearing, and deadlines for court action or compliance.

The commissioner may suspend or revoke a license after notice and a hearing if specific grounds are found.

The commissioner may sue in superior court to stop or enforce compliance with violations of this division, and the court may grant injunctions and other relief.

The department may issue written citations for student loan servicing violations or unlicensed servicing, and may include an order to stop and an administrative penalty up to $2,500.

A person who violates this division or any rule or order under it can be fined up to $2,500 per violation, and the commissioner can bring a civil action to recover the penalty.

The commissioner may refer evidence of violations to the county district attorney, who may start criminal proceedings with or without that referral.

Hearings under this division must follow Government Code Chapter 5 procedures, and the commissioner has the powers granted by that chapter.

If part of this division is invalid, illegal, or unenforceable, the rest still applies.

Rights and remedies under this division are added to any other rights and remedies available under law.

This section says Division 12.5 becomes operative on July 1, 2018, and the commissioner may take necessary actions from January 1, 2017 to prepare for that date.

This section defines “premium financing.”

This section defines “finance charge” for this division.

This section defines “premium finance agreement.”

A person engaged in premium financing may pay compensation to a licensed insurance agent or broker, and the premium financer must keep a fee statement available for regulatory inspection for three years.

Actions or proceedings started before this code takes effect, and accrued rights, are not affected; however, any procedure already taken must conform to the code as far as possible.

This section defines certain financial terms and states that the Department of Financial Protection and Innovation is responsible for carrying out listed state laws.

This division may be cited as the “Securities Depository Law.”

This section says the chapter’s definitions control how this division is read, unless the context requires otherwise.

This section defines “Commissioner” as the Commissioner of Financial Protection and Innovation.

This section defines “person” broadly to include many kinds of entities, not just a single individual.

This section defines “securities depository” as a person or group that holds securities under a central handling system and can transfer or pledge them by bookkeeping entries instead of physical delivery.

This division does not apply to certain securities depositories that are tied to a registered national securities exchange or that are registered or regulated by specified federal or state financial regulators.

The commissioner may make reasonable or necessary rules for this division and may exempt a securities depository from some or all of the division’s provisions if it is already adequately supervised by another regulator.

This section says which parts of the Financial Code chapter and related articles apply to various divisions, and which listed sections do not apply to the Division of Corporations.

A person may not operate a securities depository in the state or solicit securities holders to use one unless it is done through a corporation licensed by the commissioner.

A securities depository may be operated only by a corporation that meets specified ownership limits.

The commissioner must charge specified fees for a securities depository license application, a related hearing, and continuing the license.

The commissioner must pay all money received into the State Treasury for the State Corporations Fund.

A securities depository license application must be signed and verified, and must include the information and exhibits required by the commissioner.

When a proper and complete license application and fees are received, the commissioner must immediately investigate the application, may require a hearing, and interested persons may speak for or against it at that hearing.

The commissioner may, and in listed cases must, refuse a license application after examination, investigation, and a hearing.

A licensee or any other person must not use false, misleading, deceptive, or incomplete statements when soliciting securities deposits or doing a licensee’s business. The commissioner may order a person to stop violating conduct.

A securities depository license cannot be transferred or assigned, and it cannot be acquired in whole or part through stock purchase or similar devices without the commissioner’s consent.

A person may not operate a securities depository or solicit holders of securities in this state to use one unless the depository has applied for and received the required license.

People subject to this division must keep and use business books, accounts, and records that let the commissioner check compliance.

The commissioner may inspect and examine the business, accounts, and records of any person licensed under this division at any time, without prior notice.

A person examined must pay the commissioner the actual cost of each inspection and examination. The commissioner may sue to recover those costs.

Covered persons must file GAAP financial statements with the commissioner within 105 days after year-end or fiscal-year end, and also file a concurrent month-end statement. They must also provide a commissioner-required report within at least 10 days of the prescribed period.

If a person subject to this division fails to make a required report, the commissioner must immediately examine that person’s books and records and may hire an independent accountant at that person’s expense.

If the commissioner finds a covered person insolvent or operating a securities depository unsafely, the commissioner may order operations or solicitation to stop, or otherwise limit the business for security-holder safety.

The commissioner may order an unlicensed person to stop operating a securities depository or soliciting securities holders in this state, and the order is rescinded if a written hearing request is filed and no hearing is held within 60 days.

The commissioner may issue, change, and cancel rules, forms, and orders needed to carry out this law, and may waive requirements in some cases.

It is unlawful for any person to tamper with records or make false statements to the commissioner in licensing, investigation, or examination matters.

A security depository license stays in effect until it is surrendered, revoked, or suspended.

If the commissioner believes a licensed securities depository has violated its articles, laws, or binding rules, the commissioner must issue a written order directing the violation to stop.

A licensed securities depository can face license suspension or revocation if it misses required reporting deadlines or does not pay due fees or charges on time.

If a licensed securities depository is operating unsafely or injuriously, the commissioner must order it to stop those practices; if an out-of-state depository is soliciting California holders, the commissioner must order it to stop those solicitations until the unsafe practices are corrected.

A licensed securities depository must show cause before the commissioner, and may have to stop the named practices if the commissioner finds unsafe, injurious, or unlawful conduct.

A licensed securities depository has 10 days after an order becomes final to sue to stop enforcement, and must comply with the order unless enforcement is enjoined within that time.

The commissioner may revoke a securities depository’s license for noncompliance with a final order, or sue in superior court to stop violations and enforce compliance.

The commissioner may bring and prosecute actions to stop violations of this division, related orders or decisions, and to enforce civil penalties under this division.

The commissioner may suspend, revoke, or refuse to renew a license after notice and a reasonable opportunity to be heard, if specified violations or disqualifying facts are found.

The commissioner may discipline certain people connected to a securities depository, and a person subject to an order may request a hearing within 15 days.

The commissioner and designated persons may administer oaths, take witness testimony, and issue subpoenas.

Rules on producing evidence out of court in Chapter 2 of the Code of Civil Procedure apply to examinations, investigations, and hearings under this division.

The commissioner may delegate examination, investigation, and hearing powers to a properly appointed deputy, investigator, or auditor, but the appointment must be in writing and signed by the commissioner.

Hearings under this division must follow the cited Government Code hearing procedures, and the commissioner has the powers granted by that chapter.

The commissioner’s orders, decisions, licenses, and other official acts are subject to review under the law.

This division may be cited as the “Business and Industrial Development Corporations Law”.

This division must be interpreted liberally to carry out its purposes.

Liability provisions in this division do not apply to acts done in good faith that follow a commissioner regulation, order, or written interpretive opinion, or an Attorney General interpretive opinion.

This section explains how references in the division should be read: references to statutes or regulations include later amendments and replacement laws, and references to agencies or public officers include successors performing substantially the same functions.

This section says which corporation law applies to licensees, depending on whether the licensee is a California nonprofit corporation or not, and it yields to Chapter 14 and to this division when there is a conflict.

This section says the division is severable: if one provision or its application is invalid, illegal, or unenforceable, the rest still stands.

The Legislature states findings supporting licensing and regulation of business and industrial development corporations in California.

This section states the purposes of the division and requires the commissioner to follow those purposes when administering it.

This section says the article’s definitions apply throughout the division, unless the context requires otherwise or a more specific definition in the division applies.

“Act” includes omission.

This section defines “affiliate” for this code provision.

“Business day” means any day except Saturday, Sunday, and holidays specified or provided for in the Government Code.

“Business firm” means a person that transacts business on a regular and continual basis.

This section defines “business firm in another state.”

This section defines “Business firm in this state.”

This section defines “California corporation.”

This section defines “California nonprofit corporation.”

This section defines “control” for a specified person and sets voting and management-based tests, including a rebuttable 20% ownership presumption.

This section defines “controlling person” as a person who controls another person, directly or through intermediaries.

This provision defines “corporate name” as the name of a corporation stated in its articles of incorporation.

This section defines “financial institution.”

“Insolvent” means a person who has stopped paying debts in the ordinary course of business, cannot pay debts when due, or whose liabilities exceed assets.

For regulations or orders, “issue” also means to adopt, amend, repeal, or rescind.

“License” means a license issued under this division that authorizes a California corporation to operate as a business and industrial development corporation.

“Licensee” means a California corporation licensed under this division.

This section defines “officer.”

This section defines “Order” as certain case-specific approvals, consents, authorizations, exemptions, denials, prohibitions, or requirements issued by the commissioner.

This section defines “Parent” as a non-natural person that controls the specified person, directly or indirectly, including through intermediaries.

This section defines “person” broadly to include many kinds of individuals, business entities, and governments, and in control-acquisition contexts it also includes two or more persons acting together.

This section defines “principal shareholder” as a person who owns 10% or more of a corporation’s voting power, directly or indirectly, whether by record or beneficial ownership.

This section defines “provide financing assistance” to include lending money or extending credit, buying the person’s securities, or leasing property to that person.

This section defines “provide management assistance” to include management or technical advice, and management or technical services, given to a person.

“Regulation” means a published regulation, rule, or standard of general application issued by the commissioner.

“Security” is defined by reference to Section 25019 of the Corporations Code.

“Subsidiary” means a non-natural person controlled, directly or indirectly through intermediaries, by the specified non-natural person.

“Commissioner” means the Commissioner of Financial Protection and Innovation, or a person delegated to act for the commissioner in the particular matter.

This section defines “voting power” by referring to Corporations Code Section 194.5.

The commissioner must administer the provisions of this division.

The commissioner may issue regulations and orders, define terms, classify matters within jurisdiction, prescribe different rules for different classes, and waive regulations or orders when not necessary in the public interest.

The commissioner may attach conditions to an order or license issued under this division.

Final orders, decisions, licenses, and other official acts of the commissioner under this division may be reviewed by a court according to law.

In proceedings under this division, the applicant must prove an application should be approved, and a person claiming an exemption or exception from a definition must prove it.

This section says the division must not be read to imply that the commissioner has to hold a hearing on any matter.

This section says the division does not, by implication, require the commissioner to make written findings on any matter.

Applications filed under this division or related regulations/orders must follow the form, content, signature, and verification requirements the commissioner sets.

The commissioner may consider an applicant’s proposals when deciding whether to approve an application, and may base findings on those proposals if implementation seems probable. If approval is based in whole or in part on a proposal, the commissioner must attach conditions requiring implementation within a time the commissioner specifies.

The commissioner may honor applications from interested persons for interpretive opinions about this division or regulations or orders under it.

The commissioner may investigate, subpoena evidence, and publish violation information, and the superior court may compel compliance with subpoenas through orders and contempt.

The commissioner may share information about a licensee with the Small Business Administration or with a government agency that licenses or regulates the licensee, or its parent or subsidiary.

If the commissioner allows certain records to be inspected, copied, or provided, the related Government Code confidentiality provisions still apply to those records.

The commissioner may refer evidence of a qualifying crime-related violation to the county district attorney, who may start criminal proceedings with or without that referral.

License applicants, their parents and subsidiaries, and later-added parents or subsidiaries must file an irrevocable consent naming the commissioner to receive service of process.

If a person covered by this section cannot otherwise be reached in California, service of process can be treated as appointing the commissioner to receive it, but only if notice and an affidavit are filed.

This section requires fees to be paid to the commissioner for listed license applications, annual licensing, and examinations, and says application filing fees are not refundable.

Most people doing business in the state, unless they are licensees, may not use a name or title that suggests they are a business and industrial development corporation or a licensee. A California corporation that has applied for or plans to apply for a license may use that name before the license is issued if it adds an approved “proposed”/similar designation and limits its actions to license-related preparation.

Only a California corporation may apply for or receive a license.

The commissioner must approve a license application if the listed financial and management requirements are met; otherwise, after notice and a hearing, the commissioner must deny it.

The commissioner may treat certain fraud- or dishonesty-related convictions or nolo contendere pleas as grounds to find an applicant or related person lacks good character or is unlikely to comply with licensing requirements.

Certain parent or subsidiary entities must file an agreement with the commissioner promising compliance with the division and related regulations or orders.

If a license application is approved and all required conditions are met, the commissioner must issue the license to the applicant.

A license may not be transferred or assigned.