Enforcement - - CA Financial

Section § 4974

This law covers what happens if someone who originates a loan makes a mistake. If the mistake was not done on purpose and was a genuine error, like a typo or computer glitch, it needs to be fixed within 45 days once it's noticed. If they fix it, they won't get into legal trouble.

However, if they make a loan and ignore rules violations by a broker, they can be held responsible for damages along with the broker. This section doesn’t transfer the broker’s specific obligations to the loan originator.

(a) Any compliance failure that was not willful or intentional and resulted from a bona fide error, that occurred notwithstanding the maintenance of procedures reasonably adopted to avoid those errors, including, but not limited to, those involving clerical, calculation, computer malfunction and programming, and printing errors shall be corrected no later than 45 days after receipt of the complaint or discovery of the error. A person who originates a covered loan shall not be administratively, civilly, or criminally liable for a bona fide error corrected pursuant to this section.

(b) If a person who originates covered loans makes a loan where the person knew of and showed reckless disregard for a violation of this division by a broker, the person and broker shall be jointly and severally liable for all damages awarded under this division with respect to the broker’s unlawful conduct.

This section does not impose or transfer liability for a breach of the broker’s fiduciary duty.

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(Amended by Stats. 2001, Ch. 733, Sec. 3. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4975

If a licensed individual breaks certain rules, it's considered a breach of their licensing law. If done knowingly and willingly, the licensing agency can suspend their license for 6 months to 3 years. Repeated violations can lead to permanent license revocation or other penalties lasting at least three years.

The agency can use all its legal powers to investigate and enforce these rules, including examining the person's records and charging reasonable investigation costs. They can't charge twice for the same service. The agency's enforcement powers remain unaffected by this section.

(a)

(1) Any licensed person who violates any provision of Section 4973, 4979.6, or 4979.7 shall be deemed to have violated that person’s licensing law.

(2) After a knowing and willful violation, the licensing agency may bring a proceeding to suspend the license of the licensed person for not less than six months and not more than three years.

(b) After a knowing and willful violation resulting in a second or subsequent administrative or civil action, the licensing agency may bring a proceeding to permanently revoke the license of the licensed person or impose any lesser licensed sanction for at least three years.

(c) A licensing agency may exercise any and all authority and powers available to it under any other provisions of law, to administer and enforce this division including, but not limited to, investigating and examining the licensed person’s books and records, and charging and collecting the reasonable costs for these activities. The licensing agency shall not charge a licensed person twice for the same service. Any civil, criminal, and administrative authority and remedies available to the licensing agency pursuant to its licensing law may be sought and employed in any combination deemed advisable by the licensing agency to enforce the provisions of this division.

(d) Nothing in this section shall be construed to impair or impede a licensing agency’s authority under any other provision of law.

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(Amended by Stats. 2001, Ch. 733, Sec. 4. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4977

This law allows a licensing agency to impose penalties on individuals who break certain rules. If someone violates these rules, they can be fined up to $2,500 per violation. A more serious, knowing violation can result in a fine up to $25,000 per violation. These cases can be taken to court without needing to go through all administrative procedures first. A court can also grant other types of remedies, like returning money (restitution) if it's in the public interest. The Attorney General can help the licensing agency enforce the law. Any fines collected are used for education and enforcement against unfair lending practices.

(a) A licensing agency may, after appropriate notice and opportunity for hearing, by order levy administrative penalties against a person who violates any provision of this division, and the person shall be liable for administrative penalties of not more than two thousand five hundred dollars ($2,500) for each violation. Except for licensing agencies exempt from the provisions of the Administrative Procedure Act, any hearing shall be held in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the licensing agency shall have all the powers granted under that act.

(b) Any person who willfully and knowingly violates any provision of this division shall be liable for a civil penalty of not more than twenty-five thousand dollars ($25,000) for each violation which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the licensing agency in any court of competent jurisdiction.

(c) Nothing in this section requires exhaustion of administrative remedies prior to an injured party bringing a civil action.

(d) If the licensing agency determines that it is in the public interest, the licensing agency may include, in any action for penalties authorized by subdivision (b), a claim for relief in addition to the penalties, including a claim for restitution or disgorgement, and the court shall have jurisdiction to award the additional relief.

(e) Nothing in this section shall be construed to impair or impede the Attorney General from representing a licensing agency in bringing an action to enforce this division at the request and on behalf of the licensing agency.

(f) In any action brought by the licensing agency, or the Attorney General acting at the request and on behalf of the licensing agency, under this division in which a judgment against a person is rendered, the licensing agency or the Attorney General shall be entitled to recover costs which, in the discretion of the court, may include an amount representing reasonable attorney’s fees and investigative expenses for services rendered for deposit in the appropriate fund of that licensing agency.

(g) The amounts collected under subdivisions (a) and (b) shall be deposited in the appropriate fund of the licensing agency to be used by that licensing agency, subject to appropriation by the Legislature, for the purposes of education and enforcement in connection with abusive lending practices.

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(Amended by Stats. 2001, Ch. 733, Sec. 5. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4978

If someone breaks the rules outlined in this division, they have to pay the consumer any real losses they suffered, plus legal fees. If the violation was intentional and knowing, the person owes $15,000 or the consumer's actual damages, whichever is more, again plus legal fees.

If any part of a loan contract breaks certain rules, those parts can't be enforced. A court can change the terms of the loan to match the rules. Additionally, the court might grant extra punishment payments, called punitive damages, if justifiable.

This section doesn't change the law that prevents getting compensated twice for the same harm.

(a) A person who fails to comply with the provisions of this division is civilly liable to the consumer in an amount equal to any actual damages suffered by the consumer, plus attorneys fees and costs. For a willful and knowing violation of this division, the person shall be liable to the consumer in the amount of fifteen thousand dollars ($15,000) or the consumers actual damages, whichever is greater, plus attorneys fees and costs.

(b)

(1) If a provision in a contract in a covered loan violates subdivision (a), (b), (c), (d), (e), or (i) of Section 4973, Section 4979.6, or Section 4979.7, that provision is unenforceable. A court in which any action is brought by, or on behalf of, an aggrieved consumer for relief may issue an order or injunction to reform the terms of the covered loan to conform to the provisions of this division.

(2) A court may, in addition to any other remedy, award punitive damages to the consumer upon a finding that such damages are warranted pursuant to Section 3294 of the Civil Code.

(c) Nothing in this section is intended, nor shall be construed, to abrogate existing common law provisions prohibiting double recovery of damages.

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(Amended by Stats. 2001, Ch. 733, Sec. 6. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4978.6

If someone is responsible for issuing certain types of loans, they must inform their employees about the possible penalties they face if they break the rules related to these loans.

A person who originates covered loans shall inform any employee, who originates covered loans on behalf of the person, of the administrative or civil penalties for a violation of this division.

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(Amended by Stats. 2001, Ch. 733, Sec. 7. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4979

If you take out a 'covered loan,' the lender must provide you or the licensing agency with documentation, free of charge, that shows if your loan is indeed a 'covered loan.' This documentation must include details like the original amount borrowed, the interest rate, and any fees involved as defined in a different section.

Upon request, a person who originates a covered loan shall provide the licensing agency or the consumer, at no cost, documentation regarding his or her loan that clearly demonstrates whether any loan is a covered loan. This documentation shall include, but not be limited to, full disclosure of the original principal balance, the annual percentage rate, and the total points and fees, as defined in Section 4970.

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(Amended by Stats. 2001, Ch. 733, Sec. 8. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4979.5

This law specifies that if you are a broker helping someone get a loan backed by real estate, you have to act in the best interest of the borrower; this is known as a fiduciary duty. If you don't follow these responsibilities, you're breaking this law. Even if you're working for someone else during the loan process, your duty to the borrower doesn't change.

Additionally, this duty only applies to brokers or those offering brokerage services. Other licensed people or those who take over the loan later do not face penalties under this law if this fiduciary duty is breached.

(a) A person who provides brokerage services to a borrower in a covered loan transaction by soliciting lenders or otherwise negotiating a consumer loan secured by real property, is the fiduciary of the consumer, and any violation of the person’s fiduciary duties shall be a violation of this section. A broker who arranges a covered loan owes this fiduciary duty to the consumer regardless of who else the broker may be acting as an agent for in the course of the loan transaction.

(b) Except for a broker or a person who provides brokerage services, no licensed person or subsequent assignee shall have administrative, civil, or criminal liability for a violation of this section.

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(Added by Stats. 2001, Ch. 732, Sec. 1. Effective January 1, 2002. Applicable, by Sec. 3 of Ch. 732, to consumer loans applied for on or after July 1, 2002.)

Section § 4979.6

This law says that if you're giving out a covered loan, you can't include points and fees that are more than $1,000 or more than 6% of the loan's original principal balance, whichever is larger.

A person who originates a covered loan shall not make a covered loan that finances points and fees in excess of one thousand dollars ($1,000) or 6 percent of the original principal balance, exclusive of points and fees, whichever is greater.

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(Added by Stats. 2001, Ch. 732, Sec. 1. Effective January 1, 2002. Applicable, by Sec. 3 of Ch. 732, to consumer loans applied for on or after July 1, 2002.)

Section § 4979.7

Starting from July 1, 2002, anyone originating a consumer loan cannot add insurance premiums like credit life, disability, property, or unemployment insurance, or fees for agreements that cancel or suspend debt to the loan itself, or offer such finance options to the same borrower within 30 days. However, if those premiums or fees are calculated and paid monthly, they aren't considered part of the loan. This rule excludes insurance from a government agency or private mortgage insurance that protects lenders from losses if borrowers default.

On or after July 1, 2002, a person who originates a consumer loan shall not finance, directly or indirectly, into a consumer loan or finance to the same borrower within 30 days of a consumer loan any credit life, credit disability, credit property, or credit unemployment insurance premiums, or any debt cancellation or suspension agreement fees, provided that credit insurance premiums, debt cancellation, or suspension fees calculated and paid on a monthly basis shall not be considered financed by the person originating the loan. For purposes of this section, credit insurance does not include a contract issued by a government agency or private mortgage insurance company to insure the lender against loss caused by a mortgagor’s default.

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(Amended by Stats. 2001, Ch. 733, Sec. 9. Effective January 1, 2002. Applicable, by Sec. 10 of Ch. 733, only to covered loans applied for on or after July 1, 2002.)

Section § 4979.8

This law section states that certain protections are in place for specific financial actors. For example, an assignee who is classified as a 'holder in due course' won't be held liable under this division. Also, organizations created by Congress for buying and selling mortgages won't be subject to these rules. Essentially, it's about specifying who is exempt from liability in certain mortgage transactions.

The provisions of this division shall not impose liability on an assignee that is a holder in due course. The provisions of this division shall not apply to persons chartered by Congress to engage in secondary mortgage market transactions.

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(Added by Stats. 2001, Ch. 732, Sec. 1. Effective January 1, 2002. Applicable, by Sec. 3 of Ch. 732, to consumer loans applied for on or after July 1, 2002.)