General ProvisionsExemptions

Section § 22050

Explanation

This law explains who is exempt from a specific set of financial regulations. It states that the rules do not apply to various financial entities such as banks, credit unions, trust companies, insurance agencies, community advantage lenders, and pawnbrokers when they're operating under their specific licenses. If you're a check casher with a proper permit, a licensed person under the Financial Code, or a broker-dealer working with a valid certificate, these rules don't apply to you either. Additionally, colleges or universities giving out loans for educational purposes, people who make five or fewer incidental commercial loans in a year, and certain public corporations or entities also do not fall under these regulations.

(a)CA Financial Code § 22050(a) This division does not apply to any person doing business under any law of any state or of the United States relating to banks, trust companies, savings and loan associations, insurance premium finance agencies, credit unions, small business investment companies, community advantage lenders, California business and industrial development corporations when acting under federal law or other state authority, or licensed pawnbrokers when acting under the authority of that license.
“Community advantage lender” means an entity authorized by the United States Small Business Administration to deliver community advantage loans.
(b)CA Financial Code § 22050(b) This division does not apply to a check casher who holds a valid permit issued pursuant to Section 1789.37 of the Civil Code when acting under the authority of that permit, and shall not apply to a person holding a valid license issued pursuant to Section 23005 of the Financial Code when acting under the authority of that license.
(c)CA Financial Code § 22050(c) This division does not apply to a college or university making a loan for the purpose of permitting a person to pursue a program or course of study leading to a degree or certificate.
(d)CA Financial Code § 22050(d) This division does not apply to a broker-dealer acting pursuant to a certificate then in effect and issued pursuant to Section 25211 of the Corporations Code.
(e)CA Financial Code § 22050(e) This division does not apply to any person who makes five or fewer loans in a 12-month period, these loans are commercial loans as defined in Section 22502, and the loans are incidental to the business of the person relying upon the exemption.
(f)CA Financial Code § 22050(f) This division does not apply to any public corporation as defined in Section 67510 of the Government Code, any public entity other than the state as defined in Section 811.2 of the Government Code, or any agency of any one or more of the foregoing, when making any loan so long as the public corporation, public entity, or agency of any one or more of the foregoing complies with all applicable federal and state laws and regulations.
financial regulations exemption banks trust companies ...

Section § 22050.5

Explanation
This law says that if someone makes just one commercial loan in a year, the rules in this division don't apply to them. This means they're not subject to the same regulations as those who make more than one loan in that timeframe.
This division does not apply to any person who makes no more than one loan in a 12-month period if that loan is a commercial loan as defined in Section 22502.
commercial loan exemption single loan rule loan regulation exemption ...

Section § 22051

Explanation

This law section outlines specific exceptions where a particular division of regulations does not apply. It does not apply to nonprofit cooperative associations organized for certain agricultural purposes, cooperative organizations involved in marketing agricultural products, corporations obtaining money from federal intermediate credit banks under the Agricultural Credits Act of 1923, and corporations created under specific provisions of the Corporations Code.

This division does not apply to the following:
(a)CA Financial Code § 22051(a) Any nonprofit cooperative association organized under Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code that loans or advances money in connection with any activity mentioned in that chapter.
(b)CA Financial Code § 22051(b) Any corporation, association, syndicate, joint stock company, or partnership engaged exclusively in the business of marketing agricultural, horticultural, viticultural, dairy, livestock, poultry, or bee products on a cooperative nonprofit basis that loans or advances money to its members or in connection with those businesses.
(c)CA Financial Code § 22051(c) Any corporation securing money or credit from any federal intermediate credit bank organized and existing pursuant to the provisions of an act of Congress entitled “Agricultural Credits Act of 1923” that loans or advances money or credit so secured.
(d)CA Financial Code § 22051(d) Any corporation created pursuant to the provisions of Part 5 (commencing with Section 14000) of Division 3 of Title 1 of the Corporations Code.
nonprofit cooperative association agricultural marketing federal intermediate credit bank ...

Section § 22052

Explanation

This law section states that certain credit card plans are not subject to this division's rules if they meet specific criteria. These criteria are: first, the credit cards must be issued based on a written application, allowing the issuing organization to either buy the cardholder's obligations or extend credit to them. Second, fees charged must cover administrative costs and are applied when the card is issued and annually. Third, any charges or fees that arise from these transactions are paid by the organizations or groups that have agreements with the card issuer.

This division does not apply to any loan of credit made by a person not licensed under this division pursuant to a plan having all of the following characteristics:
(a)CA Financial Code § 22052(a) Credit cards issued pursuant to a written application and to the plan whereby the organization issuing the cards can acquire those obligations that its members in good standing incur with those persons with whom the organization has entered into written agreements setting forth the plan, and where the obligations are incurred pursuant to those agreements; or whereby the organization issuing the cards can extend credit to its members.
(b)CA Financial Code § 22052(b) The fee for the credit cards is designed to cover the administrative costs of the plan and is imposed upon the issuance of the card and on annual renewal dates thereafter.
(c)CA Financial Code § 22052(c) Any charges, discounts, or fees resulting from the acquisition of the charges is paid to the organization issuing the credit cards by the persons, corporations, or associations with whom the organization has entered into written agreements.
credit card plans loan of credit unlicensed lender ...

Section § 22053

Explanation

If you are trying to claim an exemption under this law, you are responsible for proving that the exemption applies to you.

In any proceeding under this law, the burden of proving an exemption is upon the person claiming it.
burden of proof claiming exemption proving exemption ...

Section § 22054

Explanation

This law section says that the rules in this division don't apply to genuine conditional sales contracts for personal property, as long as these contracts aren't being used to get around the division's regulations.

This division does not apply to bona fide conditional contracts of sale involving the disposition of personal property when these forms of sales agreements are not used for the purpose of evading this division.
bona fide conditional contracts conditional sales personal property sales ...

Section § 22055

Explanation

This law states that the rules in this division do not apply to premium financing, which is a concept defined in another section, Section 18563.

This division does not apply to premium financing as defined in Section 18563.
premium financing exemption Section 18563 ...

Section § 22056

Explanation

This legal section specifies that certain government entities and programs are not governed by the regulations in this division. Specifically, it doesn't apply to the California Infrastructure and Economic Development Bank, certain programs related to corporations, or the California Integrated Waste Management Board.

This division does not apply to the California Infrastructure and Economic Development Bank, any program authorized pursuant to Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of Title 1 of the Corporations Code, or to the California Integrated Waste Management Board.
California Infrastructure and Economic Development Bank exempt entities economic development programs ...

Section § 22057

Explanation

This law states that real estate brokers in California don't need a separate finance license to make or arrange loans as long as they're already licensed as real estate brokers. These brokers can give loans secured by real estate or arrange for finance lenders to provide such loans without needing extra licensing in this regard.

This division does not apply to any loan that is made or arranged by any person licensed as a real estate broker by the state and secured by a lien on real property, or to any licensed real estate broker when making such a loan. A licensed real estate broker may make a loan secured by a lien on real property for sale to a finance lender or arrange for a loan secured by a lien on real property to be made by a finance lender without obtaining a license under this division.
real estate brokers loan arrangements secured by lien ...

Section § 22058

Explanation

This law states that anyone who is a licensed cemetery broker under the Cemetery Act is not governed by the rules in this division.

This division does not apply to any cemetery broker licensed under the Cemetery Act (Chapter 19 (commencing with Section 9600) of Division 3 of the Business and Professions Code).
cemetery broker Cemetery Act exemption ...

Section § 22059

Explanation

If you have a license to work as a broker in this area, you cannot negotiate or carry out broker activities for loans from a lender who isn't licensed as a finance lender under this specific division.

A license to act as a broker under this division does not authorize the licensee to negotiate or perform any act as a broker in connection with loans made or to be made by a lender not licensed as a finance lender under this division.
broker license negotiate loans finance lender ...

Section § 22060

Explanation

This law says that if a loan is made or managed by a residential mortgage lender or servicer who is properly licensed, this division of the law doesn't apply to them.

This division does not apply to a loan made or arranged by a licensed residential mortgage lender or servicer when acting under the authority of that license.
licensed residential mortgage lender mortgage servicer loan exemption ...

Section § 22061

Explanation

This law states that nonprofit church extension funds are not subject to the rules in this division. These are nonprofit organizations linked with a church, formed to loan money to church groups for buying land, constructing new buildings, or improving existing ones for the church's benefit. To be considered a church, several criteria are outlined, including having a distinct religious identity, worship services, and ordained ministers. Also, these funds must show they are exempt from federal taxes, and no person is liable for repaying loans given by these funds.

(a)CA Financial Code § 22061(a) This division does not apply to any nonprofit church extension fund.
(b)CA Financial Code § 22061(b) For purposes of this section:
(1)CA Financial Code § 22061(b)(1) “Nonprofit church extension fund” means a nonprofit organization affiliated with a church, that is formed for the purpose of making loans to that church’s congregational organization or organizations for site acquisitions, new facilities, or improvements to existing facilities, purchased for the benefit of the church congregational organization.
(2)CA Financial Code § 22061(b)(2) What constitutes a “church” shall be determined from the following criteria, none of which has controlling weight: a distinct legal existence; a recognized creed and form of worship; a definite and distinct ecclesiastical government; a formal code of doctrine and discipline; a distinct religious history; a membership not associated with any other religion or denomination; a complete organization of ordained ministers ministering to their congregations; ordained ministers selected after completing prescribed courses of study; a literature of its own; established places of worship; regular congregations; regular religious services; schools for the religious instruction of youth; and schools for the preparation of its ministers.
(3)CA Financial Code § 22061(b)(3) “Church congregational organization” means a group of individuals who gather for the purpose of practicing the religion or manner of worship promulgated by the church with which the organization is affiliated.
(4)CA Financial Code § 22061(b)(4) “Site acquisitions” means purchases of land intended for use by a church congregational organization.
(5)CA Financial Code § 22061(b)(5) “New facilities” means purchases of buildings or structures intended for use by a church congregational organization.
(6)CA Financial Code § 22061(b)(6) “Improvements” means purchases of materials intended to increase the quality of existing religious sites or facilities.
(c)CA Financial Code § 22061(c) For purposes of this section, a nonprofit church extension fund shall establish that it is exempt from federal taxation pursuant to Section 501 of Title 26 of the United States Code.
(d)CA Financial Code § 22061(d) For purposes of this section, no individual may be held responsible for the repayment of any loan made by a nonprofit church extension fund.
nonprofit church extension fund church loans site acquisitions ...

Section § 22062

Explanation

This law section explains certain exceptions related to commercial bridge loans and venture capital investments. It does not apply to (1) loans made by venture capital companies to operating companies or (2) venture capital investments in operating companies.

A "venture capital company" is defined as a business entity that mainly focuses on boosting economic growth through investments or financial support to companies, maintaining a significant portfolio of such investments, and follows laws while approving these loans or investments.

"Operating companies" are businesses involved in producing or selling products or services, not involved in capital management or investment, and use loan proceeds for business operations after board approval. "Commercial bridge loans" are temporary loans intended for business purposes that meet specific criteria.

The law emphasizes that these loans must comply with good faith practices and other laws protecting borrowers, including those about licensing and usury.

(a)CA Financial Code § 22062(a) This division does not apply to either of the following:
(1)CA Financial Code § 22062(a)(1) A commercial bridge loan made by a venture capital company to an operating company.
(2)CA Financial Code § 22062(a)(2) A venture capital investment made by a venture capital company in an equity security issued by an operating company.
(b)CA Financial Code § 22062(b) For purposes of this section:
(1)CA Financial Code § 22062(b)(1) “Venture capital company” means a person other than an individual or sole proprietorship that meets all of the following:
(A)CA Financial Code § 22062(b)(1)(A) Engages primarily in the business of promoting economic, business, or industrial development through venture capital investments or the provision of financial or management assistance to operating companies.
(B)CA Financial Code § 22062(b)(1)(B) At all times maintains at least 50 percent of its assets in venture capital investments or commitments to make venture capital investments, and maintains or, assuming consummation of the equity investment to which the commercial bridge loan relates, will maintain a material equity interest in the operating company.
(C)CA Financial Code § 22062(b)(1)(C) Approves each loan made to an operating company through the venture capital company’s board of directors, executive committee, or similar policy body, based on a reasonable belief that the loan is appropriate for the operating company after reasonable inquiry concerning the operating company’s financing objectives and financial situation.
(D)CA Financial Code § 22062(b)(1)(D) Complies, when making the loan, with all applicable federal and state laws and rules or orders governing securities transactions including, but not limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Corporate Securities Law of 1968.
(2)CA Financial Code § 22062(b)(2) “Operating company” means a person that meets all of the following:
(A)CA Financial Code § 22062(b)(2)(A) Primarily engages, wholly or substantially, directly or indirectly through a majority owned subsidiary or subsidiaries, in the production or sale, or the research or development, of a product or service other than the management or investment of capital. This shall not include any of the following:
(i)CA Financial Code § 22062(b)(2)(A)(i) A person that is either an individual or a sole proprietorship.
(ii)CA Financial Code § 22062(b)(2)(A)(ii) A person that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies or other entity or person.
(B)CA Financial Code § 22062(b)(2)(B) Uses all of the proceeds of the commercial bridge loan for the operations of its business.
(C)CA Financial Code § 22062(b)(2)(C) Approves each commercial bridge loan through its board of directors, executive committee, or similar policy board, in the exercise of its fiduciary duty, based on a reasonable belief that the loan is appropriate for the operating company after reasonable inquiry concerning the operating company’s financing objectives and financial situation.
(3)CA Financial Code § 22062(b)(3) “Commercial bridge loan” means a loan that meets all of the following criteria:
(A)CA Financial Code § 22062(b)(3)(A) A loan of a principal amount of five thousand dollars ($5,000) or more, or any loan under an open-end credit program, whether secured by personal property or unsecured, the proceeds of which are intended by the operating company for use primarily for other than personal, family, or household purposes.
(B)CA Financial Code § 22062(b)(3)(B) Is made with a maturity date not to exceed three years, and in connection with or in bona fide contemplation of, an equity investment in the operating company.
(C)CA Financial Code § 22062(b)(3)(C) Is secured, if at all, solely by the operating company’s business assets, exclusive of any real property.
(D)CA Financial Code § 22062(b)(3)(D) Is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(4)CA Financial Code § 22062(b)(4) For purposes of paragraph (1), “venture capital investment” is an acquisition of securities in an operating company that a person, an investment adviser of the person, or an affiliated person of either, has or obtains management rights to.
(5)CA Financial Code § 22062(b)(5) “Equity security” shall have the same meaning as in Section 3(a)(11) of the federal Securities Exchange Act of 1934.
(c)CA Financial Code § 22062(c) For purposes of paragraph (3) of subdivision (b), for the purposes of determining whether a loan is a commercial bridge loan, a venture capital company may rely on any written statement of intended purposes signed by the operating company. The statement may be a separate statement signed by the operating company or may be contained in another document signed by the operating company, but in each case it shall be approved by its board of directors, executive committee, or similar policy body. The venture capital company may not be required to ascertain that the proceeds of the loan are used in accordance with the statement of intended purposes.
(d)CA Financial Code § 22062(d) For purposes of subparagraph (A) of paragraph (3) of subdivision (b), the principles set forth in Section 22551 shall be used to determine whether the specified amount of a commercial bridge loan is a bona fide principal amount.
(e)CA Financial Code § 22062(e) Nothing in this section is intended to abrogate or diminish the application of any other laws that are designed to protect borrowers, including, but not limited to, laws pertaining to licensing, unfair competition, usury, and conflicts of interest.
commercial bridge loan venture capital investment operating company definition ...

Section § 22063

Explanation

This law section states that certain financial division regulations do not apply to loans made by franchisors to franchisees or subfranchisors. Basically, these loans, called 'franchise loans,' are exempt if specific conditions are met. The conditions include compliance with federal and state franchise laws, use of the loan proceeds for business purposes only, and security limited solely to the business's assets. The lender must also disclose all loan terms clearly to the borrower. Furthermore, a franchisor can rely on a franchisee's written statement about how they will use the loan without verifying its actual use. Finally, the law ensures that broader borrower protection laws remain unaffected.

(a)CA Financial Code § 22063(a) This division does not apply to a franchise loan made by a franchisor to a franchisee or a subfranchisor or by a subfranchisor to a franchisee.
(b)CA Financial Code § 22063(b) For purposes of this section:
(1)CA Financial Code § 22063(b)(1) “Franchise” means “franchise,” as defined in Section 31005 of the Corporations Code.
(2)CA Financial Code § 22063(b)(2) “Franchisee” means “franchisee,” as defined in Section 31006 of the Corporations Code.
(3)CA Financial Code § 22063(b)(3) “Franchisor” means “franchisor,” as defined in Section 31007 of the Corporations Code.
(4)CA Financial Code § 22063(b)(4) “Area franchise” means “area franchise,” as defined in Section 31008 of the Corporations Code.
(5)CA Financial Code § 22063(b)(5) “Subfranchise” means “subfranchise,” as defined in Section 31008.5 of the Corporations Code.
(6)CA Financial Code § 22063(b)(6) “Subfranchisor” means “subfranchisor,” as defined in Section 31009 of the Corporations Code.
(7)CA Financial Code § 22063(b)(7) “Franchised business” means a business operated pursuant to a franchise or area franchise by a franchisee or pursuant to a franchise, area franchise or subfranchise by a subfranchisor.
(8)CA Financial Code § 22063(b)(8) “Franchise loan” means a commercial loan, as defined in Section 22502, made by a franchisor to a current or prospective franchisee or subfranchisor or a commercial loan by a subfranchisor to a current or prospective franchisee for the acquisition, construction, operation, development, equipping, expansion, contraction, consolidation, merger, recapitalization, reorganization, or termination of a franchised business provided that the following conditions are satisfied:
(A)CA Financial Code § 22063(b)(8)(A) The franchisor or subfranchisor making the franchise loan shall comply with all applicable federal and state franchise disclosure and registration laws, regulations, rules and orders, including, but not limited to, the California Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the Corporations Code) and the Federal Trade Commission Franchise Rule: Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures (Code of Federal Regulations, Title 16, Chapter 1, Subchapter D, Part 436 (16 CFR 436), as amended) in connection with the offer or sale of any franchise, area franchise, or subfranchise to which the franchise loan relates.
(B)CA Financial Code § 22063(b)(8)(B) The proceeds of the franchise loan are intended by the borrowing franchisee or subfranchisor for use primarily for other than personal, family, or household purposes.
(C)CA Financial Code § 22063(b)(8)(C) The loan, if secured, is secured solely by the assets of the franchised business to which the franchise loan relates. Property used by the borrower primarily for personal, family, or household purposes, including the borrower’s personal residence, shall not be taken as security for the loan.
(D)CA Financial Code § 22063(b)(8)(D) The loan is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(E)CA Financial Code § 22063(b)(8)(E) The lender shall fully and clearly disclose to the borrower, at or before the time the loan is made, the rates of interest, charges, and costs of the loan.
(c)CA Financial Code § 22063(c) For purposes of subparagraph (B) of paragraph (8) of subdivision (b), a lending franchisor or subfranchisor may rely on any written statement of intended purposes by the borrowing franchisee or subfranchisor. The statement may be a separate statement signed by the borrowing franchisee or subfranchisor or may be contained in another document signed by the borrowing franchisee or subfranchisor. The lending franchisor or subfranchisor may not be required to ascertain that the proceeds of a franchise loan are used in accordance with the statement of intended purposes.
(d)CA Financial Code § 22063(d) Nothing in this section is intended to abrogate or diminish the application of any other laws that are designed to protect borrowers, including, but not limited to, laws pertaining to licensing, unfair competition, usury and conflicts of interest.
franchise loan franchisor franchisee ...

Section § 22064

Explanation

This section explains certain exceptions to investment and loan regulations, particularly for tax-exempt organizations like private foundations and public charities. It clarifies that these rules do not apply to program-related investments that meet specific criteria, such as focusing on exempt charity purposes without the primary intent of generating income, ensuring no individual benefits unduly, and restricting the number of loans. The law also underscores the importance of good faith dealings and compliance with relevant laws, even for exempt transactions.

Additionally, it specifies that organizations must be tax-exempt under specific IRS codes, and any secured loans must involve accredited investors. There's also a caveat that these organizations can still charge interest or fees, and all funds received should be used for the specified charitable purposes.

(a)CA Financial Code § 22064(a) This division does not apply to the following:
(1)CA Financial Code § 22064(a)(1) A program-related investment defined in subsection (c) of Section 4944 of the Internal Revenue Code and United States Treasury Regulations Section 53.4944-3 that is made by a private foundation, tax-exempt organization within the meaning of Section 509(a) of the Internal Revenue Code.
(2)CA Financial Code § 22064(a)(2) A loan, guaranty, or investment made by a public charity, tax-exempt organization within the meaning of paragraph (1), (2), or (3) of subsection (a) of Section 509 of the Internal Revenue Code that meets all of the following requirements:
(A)CA Financial Code § 22064(a)(2)(A) The primary purpose of the loan, guaranty, or investment is to accomplish one or more of the exempt purposes of the public charity making the loan, as described in Section 170(c)(2)(B) of the Internal Revenue Code.
(B)CA Financial Code § 22064(a)(2)(B) Neither the production of income nor the appreciation of property is a significant purpose of the loan, guaranty, or investment.
(C)CA Financial Code § 22064(a)(2)(C) No purpose of the loan, guaranty, or investment is to accomplish one or more of the purposes described in Section 170(c)(2)(D) of the Internal Revenue Code.
(b)CA Financial Code § 22064(b) Subdivision (a) shall not exempt from the provisions of this division a tax-exempt organization that is making consumer loans as defined in Sections 22203 and 22204.
(c)CA Financial Code § 22064(c) A loan that is secured by any assets owned by an individual shall be exempt under subdivision (a) only if the individual providing the security is an “accredited investor” as defined in paragraph (5) or (6) of subsection (a) of Section 230.501 of Title 17 of the Code of Federal Regulations. Property held by an individual for personal, family, or household purposes, including an individual’s personal residence, may not be taken as security for a loan.
(d)CA Financial Code § 22064(d) A program-related investment by a private foundation, and any loan, guaranty, or investment made by a public charity that is exempt under subdivision (a) is subject to the implied covenant of good faith and fair dealing under Section 1655 of the Civil Code.
(e)Copy CA Financial Code § 22064(e)
(1)Copy CA Financial Code § 22064(e)(1) Subdivision (a) shall exempt from the provisions of this division a program-related investment by a private foundation, or a loan, guaranty, or investment by a public charity, only if the following conditions are satisfied:
(A)CA Financial Code § 22064(e)(1)(A) The organization making the program-related investment, loan, guaranty, or investment is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and is organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(B)CA Financial Code § 22064(e)(1)(B) No part of the net earnings of the organization making the program-related investment, loan, guaranty or investment inures to the benefit of a private shareholder or individual.
(C)CA Financial Code § 22064(e)(1)(C) No broker’s fee will be paid in connection with the making of the program-related investment, loan, guaranty, or investment or placement of the program-related investment, loan, guaranty or investment.
(2)CA Financial Code § 22064(e)(2) This subdivision does not prohibit the organization making the program-related investment, loan, guaranty, or investment from charging interest on the loan or investment or fees on the guaranty.
(f)CA Financial Code § 22064(f) Subdivision (a) shall only exempt from the provisions of this division a program-related investment by a private foundation or a loan, guaranty, or investment by a public charity that is made for the primary purpose of accomplishing one or more of the organization’s exempt purposes described in Section 501(c)(3) of the Internal Revenue Code, and no significant purpose of which is the production of income or the appreciation of property within the meaning of subsection (c) of Section 4944 of the Internal Revenue Code. A recipient shall be required to use all funds received from the private foundation or the public charity only for the charitable purposes for which the program-related investment, loan, guaranty, or investment was made.
(g)CA Financial Code § 22064(g) Subdivision (a) shall only exempt from the provisions of this division a program-related investment by a private foundation or a loan, guaranty, or investment by a public charity if the organization consummates not more than 35 loans in a calendar year. In the making and negotiating of these loans, the private foundation or public charity shall take into consideration the financial ability of the recipients to repay the loans in the time and manner provided.
(h)CA Financial Code § 22064(h) Nothing in this section is intended to abrogate or diminish the application of any other applicable laws that are designed to govern the tax-exempt organizations described in subdivision (a), including, but not limited to, laws pertaining to recordkeeping and reporting to the Attorney General and the Internal Revenue Service or to protect borrowers, including, but not limited to, laws pertaining to licenses, unfair competition, usury, and conflicts of interest.
program-related investment private foundation public charity ...

Section § 22065

Explanation

This law allows people, who aren't usually under this division, to register as an 'exempt company' if they want to sponsor mortgage loan originators under the SAFE Act. To get this registration, they must follow any rules set by the commissioner and pay an annual fee.

An insurance producer who wants to be licensed as a mortgage loan originator must have a contract with the exempt company they originate loans for, maintain a valid insurance license, and be appointed by an insurer connected to the company. Additionally, licensed mortgage loan originators can work for these exempt registrants or licensed finance lenders with certain restrictions.

(a)CA Financial Code § 22065(a) Persons not subject to this division may apply to the commissioner for an exempt company registration for the purpose of sponsoring one or more individuals required to be licensed as mortgage loan originators pursuant to the federal SAFE Act.
(b)CA Financial Code § 22065(b) An exempt person applying under the exempt company registration procedure shall comply with all rules and orders that the commissioner deems necessary to ensure compliance with the federal SAFE Act and shall pay an annual registration fee established by the commissioner.
(c)Copy CA Financial Code § 22065(c)
(1)Copy CA Financial Code § 22065(c)(1) A mortgage loan originator who is an insurance producer eligible for licensure pursuant to this section shall meet all of the following requirements:
(A)CA Financial Code § 22065(c)(1)(A) Be covered under an exclusive written contract with, and originate mortgage loans solely on behalf of, that exempt person.
(B)CA Financial Code § 22065(c)(1)(B) Hold a current insurance producer license under Article 3 (commencing with Section 1631) of Chapter 5 of Part 2 of Division 1 of the Insurance Code that is not suspended or revoked.
(C)CA Financial Code § 22065(c)(1)(C) Have a current notice of appointment under Article 9 (commencing with Section 1702) of Chapter 5 of Part 2 of Division 1 of the Insurance Code from an insurer that controls, is controlled by, or is under common control with that exempt person.
(2)CA Financial Code § 22065(c)(2) A licensed mortgage loan originator who is an insurance producer for an insurer authorized to do business in this state may originate loans on behalf of a person registered pursuant to subdivision (a) or on behalf of a licensed finance lender that originates loans exclusively for a single person that is not subject to licensure pursuant to subdivision (a) of Section 22050.
exempt company registration mortgage loan originators federal SAFE Act ...

Section § 22066

Explanation

This law encourages nonprofit organizations to offer small, interest-free loans to help people build or improve their credit. Nonprofits can be exempt from certain regulations if they meet criteria such as being tax-exempt, not profiting individuals, and filing reports with financial authorities. Loans must follow rules like being unsecured, interest-free, and have a limited administrative fee. Additional requirements include providing a credit education program, reporting to credit agencies, and verifying borrower income and debts. Nonprofits must not require borrowers to waive legal rights or offer insurance linked to loans.

Nonprofits can partner with other organizations to facilitate these loans, but the partnerships must be documented, and they have to comply with similar regulations. The commissioner has the authority to examine organizations for compliance and can take action against organizations that violate these rules. This section does not apply to loans over $2,500.

(a)CA Financial Code § 22066(a) The Legislature finds and declares that nonprofit organizations have an important role to play in helping individuals obtain access to affordable, credit-building small dollar loans. California law should refrain from creating statutory barriers that risk slowing the growth of these loans. This section shall be liberally construed to encourage nonprofit organizations to help facilitate the making of zero-interest, low-cost loans, through lending circles and other programs and services that allow individuals to establish and build credit histories or to improve their credit scores.
(b)CA Financial Code § 22066(b) For the purposes of this section, an organization described in subdivision (c) shall be known as an exempt organization, and an organization described in subdivision (d) shall be known as a partnering organization.
(c)CA Financial Code § 22066(c) There shall be exempted from this division a nonprofit organization that facilitates one or more zero-interest, low-cost loans, provided all of the following conditions are met:
(1)CA Financial Code § 22066(c)(1) The organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and is organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(2)CA Financial Code § 22066(c)(2) No part of the net earnings of the organization inures to the benefit of a private shareholder or individual.
(3)CA Financial Code § 22066(c)(3) A broker’s fee is not paid in connection with the making of the loan that is facilitated by the organization.
(4)CA Financial Code § 22066(c)(4) An organization wishing to operate pursuant to an exemption granted under this section shall file an application for exemption with the commissioner, in a manner prescribed by the commissioner, and shall pay a fee to the commissioner, in an amount calculated by the commissioner to cover his or her costs to administer this section and Section 22067. The commissioner may refuse to grant an exemption, or to suspend or revoke a previously issued exemption if he or she finds that one or more of the provisions of this section were not met or are not being met by the organization and that denial, suspension, or revocation of the exemption is in the best interests of the public.
(5)CA Financial Code § 22066(c)(5) Every organization whose exemption is approved by the commissioner shall file an annual report with the commissioner on or before March 15 of each year, containing relevant information that the commissioner reasonably requires concerning lending facilitated by the organization within the state during the preceding calendar year at all locations at which the organization facilitates lending. The commissioner shall compile the information submitted pursuant to this paragraph for use in preparing the report required by Section 22067.
(6)CA Financial Code § 22066(c)(6) Any loan made pursuant to this section shall comply with the following requirements:
(A)CA Financial Code § 22066(c)(6)(A) The loan shall be unsecured.
(B)CA Financial Code § 22066(c)(6)(B) Interest shall not be imposed.
(C)CA Financial Code § 22066(c)(6)(C) An administrative fee may be charged in an amount not to exceed the following:
(i)CA Financial Code § 22066(c)(6)(C)(i) Seven percent of the principal amount, exclusive of the administrative fee, or ninety dollars ($90), whichever is less, on the first loan made to a borrower.
(ii)CA Financial Code § 22066(c)(6)(C)(ii) Six percent of the principal amount, exclusive of the administrative fee, or seventy-five dollars ($75), whichever is less, on the second and subsequent loans made to that borrower.
(D)CA Financial Code § 22066(c)(6)(D) An organization shall not charge the same borrower an administrative fee more than once in any four-month period. Each administrative fee shall be fully earned immediately upon consummation of a loan agreement.
(E)CA Financial Code § 22066(c)(6)(E) Notwithstanding subdivision (a) of Section 22320.5 and in lieu of any other type of delinquency fee or late fee, an organization may require reimbursement from a borrower of up to ten dollars ($10) to cover an insufficient funds fee incurred by that organization due to actions of the borrower. An organization shall not charge more than two insufficient funds fees to the same borrower in a single month.
(F)CA Financial Code § 22066(c)(6)(F) The following information shall be disclosed to the consumer in writing, in a typeface no smaller than 12-point type, at the time of the loan application:
(i)CA Financial Code § 22066(c)(6)(F)(i) The amount to be borrowed, the total dollar cost of the loan to the consumer if the loan is paid back on time, including the sum of the administrative fee and principal amount borrowed, the corresponding annual percentage rate, calculated in accordance with Federal Reserve Board Regulation Z (12 C.F.R. 226.1), the periodic payment amount, the payment frequency, and the insufficient funds fee, if applicable.
(ii)CA Financial Code § 22066(c)(6)(F)(ii) An explanation of whether, and under what circumstances, a borrower may exit a loan agreement.
(G)CA Financial Code § 22066(c)(6)(G) The loan shall have a minimum principal amount upon origination of two hundred fifty dollars ($250) and a maximum principal amount upon origination of two thousand five hundred dollars ($2,500), and a term of not less than the following:
(i)CA Financial Code § 22066(c)(6)(G)(i) Ninety days for loans whose principal balance upon origination is less than five hundred dollars ($500).
(ii)CA Financial Code § 22066(c)(6)(G)(ii) One hundred twenty days for loans whose principal balance upon origination is at least five hundred dollars ($500), but is less than one thousand five hundred dollars ($1,500).
(iii)CA Financial Code § 22066(c)(6)(G)(iii) One hundred eighty days for loans whose principal balance upon origination is at least one thousand five hundred dollars ($1,500).
(H)CA Financial Code § 22066(c)(6)(H) The loan shall not be refinanced.
(I)CA Financial Code § 22066(c)(6)(I) The organization or any of its wholly owned subsidiaries shall not sell or assign unpaid debt to an independent party for collection before at least 90 days have passed since the start of the delinquency.
(7)CA Financial Code § 22066(c)(7) Prior to disbursement of loan proceeds, the organization 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, or (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. A credit education program or seminar offered pursuant to this paragraph shall be provided at no cost to the borrower.
(8)CA Financial Code § 22066(c)(8) The organization shall report each borrower’s payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, upon acceptance as a data furnisher by that consumer reporting agency. For purposes of this section, a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis is one that meets the definition in Section 603(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). An organization that is accepted as a data furnisher after being granted an exemption by the commissioner pursuant to this subdivision shall report all borrower payment performance since its inception of lending under the program, as soon as practicable after its acceptance into the program, but in no event more than six months after its acceptance into the program.
(9)CA Financial Code § 22066(c)(9) The organization shall underwrite each loan and shall ensure that a loan is not made if, through its underwriting, the organization determines that the borrower’s total monthly debt service payments, at the time of loan origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit that can be independently verified by the organization, exceed 50 percent of the borrower’s gross monthly household income except as specified in clause (iii) of subparagraph (D).
(A)CA Financial Code § 22066(c)(9)(A) The organization 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 verification. The organization shall verify 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 verification services that provide reliable evidence of a borrower’s outstanding debt obligations.
(B)CA Financial Code § 22066(c)(9)(B) The organization shall also 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)CA Financial Code § 22066(c)(9)(C) The organization shall not be required to consider, for purposes of debt-to-income ratio evaluation, loans from friends or family.
(D)CA Financial Code § 22066(c)(9)(D) The organization shall also verify the borrower’s household income that the organization relies on to determine the borrower’s debt-to-income ratio using information from any of the following:
(i)CA Financial Code § 22066(c)(9)(D)(i) Electronic means or services that provide reliable evidence of the borrower’s actual income.
(ii)CA Financial Code § 22066(c)(9)(D)(ii) 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.
(iii)CA Financial Code § 22066(c)(9)(D)(iii)  A signed statement from the borrower stating sources and amounts of income, if the borrower’s actual income cannot be independently verified using electronic means or services, Internal Revenue Service forms, tax returns, payroll receipts, bank statements, or other third-party documents. If income is verified using a signed statement from a borrower, a loan shall not be made if the borrower’s total monthly debt service payments, at the time of loan origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit, exceed 25 percent of the borrower’s gross monthly household income.
(10)CA Financial Code § 22066(c)(10) The organization shall notify each borrower, at least two days prior to each payment due date, informing the borrower of the amount due and the payment due date. Notification may be provided by any means mutually acceptable to the borrower and the organization. A borrower shall have the right to opt out of this notification at any time, upon electronic or written request to the organization. The organization shall notify each borrower of this right prior to disbursing loan proceeds.
(11)CA Financial Code § 22066(c)(11) Notwithstanding Sections 22311 to 22315, inclusive, no organization, in connection with, or incidental to, the facilitating of any loan made pursuant to this section, may offer, sell, or require a borrower to contract for “credit insurance” as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(12)CA Financial Code § 22066(c)(12) An organization shall not require, as a condition of making a loan, that a borrower waive any right, penalty, remedy, forum, or procedure provided for in any law applicable to the loan, including the right to file and pursue a civil action or file a complaint with or otherwise communicate with the commissioner or any court or other public entity, or that the borrower agree to resolve disputes in a jurisdiction outside of California or to the application of laws other than those of California, as provided by law. Any waiver by a borrower must be knowing, voluntary, and in writing, and expressly not made a condition of doing business with the organization. Any waiver that is required as a condition of doing business with the organization shall be presumed involuntary, unconscionable, against public policy, and unenforceable. The organization has the burden of proving that a waiver of any rights, penalties, forums, or procedures was knowing, voluntary, and not made a condition of the contract with the borrower.
(13)CA Financial Code § 22066(c)(13) An organization shall not refuse to do business with or discriminate against a borrower or applicant on the basis that the borrower or applicant refuses to waive any right, penalty, remedy, forum, or procedure, including the right to file and pursue a civil action or complaint with, or otherwise notify, the commissioner or any court or other public entity. The exercise of a person’s right to refuse to waive any right, penalty, remedy, forum, or procedure, including a rejection of a contract requiring a waiver, shall not affect any otherwise legal terms of a contract or an agreement.
(14)CA Financial Code § 22066(c)(14) This section does not apply to any agreement to waive any right, penalty, remedy, forum, or procedure, including any agreement to arbitrate a claim or dispute, after a claim or dispute has arisen. This section does not affect the enforceability or validity of any other provision of the contract.
(d)CA Financial Code § 22066(d) This division does not apply to a nonprofit organization that partners with an organization granted an exemption pursuant to subdivision (c) for the purpose of facilitating zero-interest, low-cost loans, provided that the requirements of paragraphs (6) to (14), inclusive, of subdivision (c), and the following additional conditions are met:
(1)CA Financial Code § 22066(d)(1) The partnership of each exempt organization and each partnering organization shall be formalized through a written agreement that specifies the obligations of each party. Each written agreement shall contain a provision establishing that the partnering organization agrees to comply with the provisions of this section and any regulations that may be adopted by the commissioner pursuant to this section. Each written agreement shall be provided to the commissioner upon request.
(2)CA Financial Code § 22066(d)(2) Each partnering organization shall meet the requirements for federal income tax exemption under Section 501(c)(3) of the Internal Revenue Code and shall be organized and operated exclusively for one or more of the purposes described in Section 501(c)(3) of the Internal Revenue Code.
(3)CA Financial Code § 22066(d)(3) No part of the net earnings of the partnering organization shall inure to the benefit of a private shareholder or individual.
(4)CA Financial Code § 22066(d)(4) Each exempt organization shall notify the commissioner within 30 days of entering into a written agreement with a partnering organization, on such form and in such manner as the commissioner may prescribe. At a minimum, this notification shall include the name of the partnering organization, the contact information for a person responsible for the lending activities facilitated by that partnering organization, and the address or addresses at which the organization facilitates lending activities.
(5)CA Financial Code § 22066(d)(5) Upon a determination that a partnering organization has acted in violation of this section or any regulation adopted thereunder, the commissioner may disqualify that partnering organization from performing services under this section, bar that organization from performing services at one or more specific locations of that organization, terminate a written agreement between a partnering organization and an exempt organization, and, if the commissioner deems such action to be in the public interest, prohibit the use of that partnering organization by all organizations granted exemptions by the commissioner pursuant to subdivision (c).
(6)CA Financial Code § 22066(d)(6) The exempt organization shall include information regarding the loans facilitated by the partnering organization in the annual report required pursuant to paragraph (5) of subdivision (c).
(e)CA Financial Code § 22066(e) The commissioner may examine each exempt organization and each partnering organization for compliance with the provisions of this section, upon reasonable notice to the party responsible for the lending activities facilitated by that organization. An organization so examined shall make available to the commissioner or his or her representative all books and records requested by the commissioner related to the lending activities facilitated by that organization. The cost of the examination shall be paid by the exempt organization.
(f)CA Financial Code § 22066(f) This section does not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,500) or more as determined in accordance with Section 22251. For purposes of this subdivision, “bona fide principal amount” shall be determined in accordance with Section 22251.
nonprofit loans interest-free loans credit-building loans ...

Section § 22067

Explanation

This statute requires the commissioner to publish an annual report on the department's website by July 1, detailing specific financial activities with exempt and partnering organizations. The report includes data on exemptions applied for and granted to organizations, reasons for denials, and statistics on borrowers and loans facilitated by these organizations. It touches on the number of loans, purposes for loans, borrower credit scores, income distribution, use of bank accounts, and loan performance.

Additionally, it provides information on violations of Section 22066, actions taken on exemptions, complaints received, and potential improvements. The disclosed information is for the commissioner's use and is exempt from public disclosure.

(a)CA Financial Code § 22067(a) On or before July 1 of each year, the commissioner shall post a report on the department’s internet website summarizing the information described in subdivision (b). The information disclosed to the commissioner for the commissioner’s use in preparing the report described in this section is exempted from any requirement of public disclosure by subdivision (b) of Section 7929.000 of the Government Code.
(b)CA Financial Code § 22067(b) The report required by this section shall specify the time period to which the report corresponds, and shall include, but not be limited to, the following for that time period:
(1)CA Financial Code § 22067(b)(1) The number of organizations that applied for exemptions pursuant to subdivision (c) of Section 22066, and the number of organizations that entered into partnerships with exempt organizations in accordance with subdivision (d) of Section 22066.
(2)CA Financial Code § 22067(b)(2) The number of organizations granted exemptions and the types of exemptions granted.
(3)CA Financial Code § 22067(b)(3) The reason or reasons for denying applications for exemptions, if applicable. This information shall be provided in a manner that does not identify the entity or entities denied.
(4)CA Financial Code § 22067(b)(4) The number of borrowers who applied for loans through exempt or partnering organizations, the number of borrowers granted loans facilitated by exempt or partnering organizations, the total amount loaned, and the distribution of loan lengths upon origination.
(5)CA Financial Code § 22067(b)(5) The number of borrowers who obtained more than one loan through an exempt or partnering organization and the distribution of the number of loans per borrower.
(6)CA Financial Code § 22067(b)(6) Of the number of borrowers who obtained more than one loan facilitated by an exempt or a partnering organization, the percentage of those borrowers whose credit scores increased between successive loans, based on information from at least one major credit bureau, and the average size of the increase.
(7)CA Financial Code § 22067(b)(7) The income distribution of borrowers upon loan origination, including the number of borrowers who obtained at least one loan and who resided in a low-to-moderate-income census tract at the time of their loan application.
(8)CA Financial Code § 22067(b)(8) The number of borrowers who obtained loans facilitated by an exempt or a partnering organization for the following purposes, based on borrower responses at the time of their loan applications indicating the primary purpose for which the loan was obtained:
(A)CA Financial Code § 22067(b)(8)(A) Medical.
(B)CA Financial Code § 22067(b)(8)(B) Other emergency.
(C)CA Financial Code § 22067(b)(8)(C) Vehicle repair.
(D)CA Financial Code § 22067(b)(8)(D) Vehicle purchase.
(E)CA Financial Code § 22067(b)(8)(E) To pay bills.
(F)CA Financial Code § 22067(b)(8)(F) To consolidate debt.
(G)CA Financial Code § 22067(b)(8)(G) To build or repair credit history.
(H)CA Financial Code § 22067(b)(8)(H) To finance a purchase of goods or services other than a vehicle.
(I)CA Financial Code § 22067(b)(8)(I) For other than personal, family, or household purposes.
(J)CA Financial Code § 22067(b)(8)(J) Other.
(9)CA Financial Code § 22067(b)(9) The number of borrowers who self-report that they had a bank account at the time of their loan application, the number of borrowers who self-report that they had a bank account and used check-cashing services, and the number of borrowers who self-report that they did not have a bank account at the time of their loan application.
(10)CA Financial Code § 22067(b)(10) The performance of loans under Section 22066, as reflected by all of the following:
(A)CA Financial Code § 22067(b)(10)(A) The number and percentage of borrowers who experienced at least one late payment lasting between 7 and 29 days and who subsequently brought the loan current, and the distribution of principal loan amounts corresponding to those late payments.
(B)CA Financial Code § 22067(b)(10)(B) The number and percentage of borrowers who experienced at least one late payment lasting between 30 and 59 days and who subsequently brought the loan current, and the distribution of principal loan amounts corresponding to those late payments.
(C)CA Financial Code § 22067(b)(10)(C) The number and percentage of borrowers who experienced at least one late payment lasting 60 days or more and who subsequently brought the loan current, and the distribution of principal loan amounts corresponding to those late payments.
(D)CA Financial Code § 22067(b)(10)(D) The number and percentage of borrowers who experienced at least one late payment of greater than seven days and who did not subsequently bring the loan current.
(E)CA Financial Code § 22067(b)(10)(E) Among loans that were ever late for seven days or more, the average number of times borrowers experienced a late payment of seven days or more.
(11)CA Financial Code § 22067(b)(11) The number and types of violations of Section 22066 by exempt organizations, which were documented by the commissioner.
(12)CA Financial Code § 22067(b)(12) The number and types of violations of Section 22066 by partnering organizations, which were documented by the commissioner.
(13)CA Financial Code § 22067(b)(13) The number of times the commissioner suspended or revoked an exemption granted to an exempt organization pursuant to paragraph (4) of subdivision (c) of Section 22066 and the number of times a partnering organization was sanctioned by the commissioner pursuant to paragraph (5) of subdivision (d) of Section 22066.
(14)CA Financial Code § 22067(b)(14) The number of complaints received by the commissioner about an exempt organization or a partnering organization, and the nature of those complaints.
(15)CA Financial Code § 22067(b)(15) Recommendations, if any, for improving the program.
annual report exempt organizations partnering organizations ...

Section § 22068

Explanation
This law states that certain exemptions and exclusions do not apply to people working as program administrators or PACE solicitors, which are roles related to managing and promoting property assessed clean energy programs. This rule has been in effect since January 1, 2019.
(a)CA Financial Code § 22068(a) The exemptions and exclusions in this article are not applicable to a person engaged in business as a program administrator or a PACE solicitor.
(b)CA Financial Code § 22068(b) This section shall become operative on January 1, 2019.
exemptions and exclusions program administrator PACE solicitor ...