Law:Division 7. Industrial Loan Companies (California)

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Contents

Chapter 1. General Provisions

Article 1. Definitions

Ca Codes (fin:18000-18019) Financial Code Section 18000-18019



18000. This division shall be known and may be cited as the "Industrial Loan Law," the "Industrial Banking Law," or the "Thrift and Loan Law."

18001. The definitions given in this article govern the construction of this division unless the context otherwise requires.


18002. "Commissioner" means the Commissioner of Financial Institutions of the State of California.


18002.5. "Department" means the Department of Financial Institutions.

18003. "Industrial loan company," "thrift and loan company," or "company" as used in this division means a premium finance agency as defined in Section 18560. Notwithstanding any other provision of this chapter, these terms and this division do not apply to an industrial bank subject to and governed by Chapter 11 (commencing with Section 1400) of Division 1.


18003.1. "Investment and loan" means an industrial loan company.


18003.2. (a) Any reference in a provision of any statute or regulation of this state to an industrial loan company or a thrift and loan company means an insurance premium finance agency as defined in Section 18560. (b) Subdivision (a) does not apply in any of the following cases: (1) In case the provision or a related provision expressly provides otherwise. (2) In the case of any provision of Division 1 (commencing with Section 99) or Division 1.5 (commencing with Section 4800).


18003.5. (a) When used with respect to an industrial loan company, "insured" means an industrial loan company that is insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.). (b) When used with respect to an investment certificate, "insured" means an investment certificate that is insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.).

18003.6. "Certificate of deposit" as that term is used by an industrial loan company licensed under this division means an investment certificate representing the obligation of an industrial loan company to repay a nondemand deposit as deposit is defined in Section 3(1) of the Federal Deposit Insurance Act.


18003.7. "Demand deposit" means investment or thrift certificates in account, passbook, or certificate form which are redeemable and payable upon demand to the owner.


18004. "Borrower" means the person receiving the proceeds or benefits of a loan.


18005. "Consumer loan or consumer obligation" means a loan made to, or an obligation incurred by, a natural person in which the money loaned, or the property delivered or service rendered under the obligation is primarily for personal, family, or household purposes.


18006. "Primarily secured by real property", as used in this division, means the fair market value of the real property less prior encumbrances, at the time the loan is made or other obligation is acquired, is more than 50 percent of the principal amount owing on the loan or obligation.


18007. "Charges", as used in this division, include the aggregate interest, fees, bonuses, commissions, brokerage, discounts, expenses, and other forms of costs charged, contracted for, or received by an industrial loan company or any other person in connection with the investigating, arranging, negotiating, procuring, guaranteeing, making, servicing, collecting, or enforcing of a loan, or for forbearance of money, credit, goods, things in action, or any other service or services rendered.


18008. "Charges" also include any profit or advantage of any kind that any person may contract for, collect, receive, or in any manner obtain by a collateral sale, purchase, or agreement, in connection with the negotiating, arranging, making, or otherwise in connection with any loan, except commissions received on insurance sold as provided in this division.


18009. "Principal amount", as used in this division, means the net amount of money, credit, goods, or things in action received by the debtor or borrower or disbursed on the borrower's instructions at the time of entering into the transaction.


18010. "Principal balance", and "face amount" as used in this division, means the unpaid balance of a loan or other obligation.


18011. "Affiliated company", as used in this division, is a company under substantially the same management or control, directly or indirectly, as the industrial loan company.


18011.1. "Affiliate" means an affiliated company or a person who, directly or indirectly, controls over 10 percent of the voting stock of an industrial loan company.


18012. "Corporate Securities Law" means the Corporate Securities Law of 1968, Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code.

18013. "Outstanding loans and obligations," as used in this division, means total outstanding loans and obligations, including lease obligations, less unearned interest or charges, unearned discount, reserve or allowance for losses, and other applicable allowances or deductions as determined by regulation of the commissioner.


18014. "Obligation" as used in Sections 18265, 18271, 18272, and 18343 includes lease obligations as authorized by Section 18310.


18015. "Lease obligation" as used in this division, means a lease contract entered into by an industrial loan company as lessor.


18016. "Investment certificates ratio", as used in this division, means the ratio of the aggregate sum of all of the outstanding investment certificates, exclusive of those hypothecated with the company issuing them, of a company to the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus declared not available for dividends pursuant to Section 18319.


18016.5. "Premium finance agency" has the meaning set forth in Section 18560.

18017. "Assets," as used in this division, means all assets excluding intangibles.


18018. "Capital," as used in this division, consists of all of the following: (a) Capital stock. (b) Primary capital to the extent not included in capital stock. (c) Secondary capital.


18018.1. "Primary capital," as used in this division, means the sum of common stock, perpetual preferred stock, capital surplus, undivided profits, capital reserves, and mandatory convertible debt (to the extent of 20 percent of primary capital exclusive of that debt).


18018.2. "Secondary capital," as used in this division, means the sum of mandatory convertible debt that is not included in primary capital, limited life preferred stock, and subordinated notes and debentures, all in an amount up to 50 percent of primary capital. Issues of limited life preferred stock and subordinated notes and debentures, except mandatory convertible debt, shall have original weighted average maturities of at least seven years to be included within capital surplus under primary capital.


18018.3. "Perpetual preferred stock," as used in this division, means a preferred stock that does not have a stated maturity date or that can not be redeemed at the option of the holder. It includes those issues of preferred stock that automatically convert into common stock at a stated date. It excludes those issues, the rate on which increases, or can increase, in such a manner that would effectively require the issuer to redeem the issue.


18018.4. "Mandatory convertible debt," as used in this division, means a subordinated debt instrument which requires the issuer to convert that instrument into common or perpetual preferred stock by a date at or before the maturity of the debt instrument. The maturity of those instruments shall be 12 years or less.


18018.5. "Limited life preferred," as used in this division, means preferred stock which has a maturity or which may be redeemed at the option of the holder.

18018.6. "Subordinated notes and debentures," as used in this division, means an obligation other than an investment certificate obligation that: (a) Bears on its face, in boldface type no smaller than the largest size type used in the obligation, the following: "this obligation is not a deposit and is not insured by the Federal Deposit Insurance Corporation." (b) (1) Has a maturity of at least seven years, or (2) in the case of an obligation or issue that provides for scheduled repayments of principal, has an average maturity of at least seven years; however, the commissioner may permit the issuance of an obligation or issue with a shorter maturity or average maturity if the commissioner has determined that exigent circumstances require the issuance of that obligation or issue. This subdivision shall not apply to mandatory convertible obligations or issues. (c) States expressly that the obligation is subordinated and junior in right of payment to the issuing industrial loan company's obligations to its investment certificate holders and to the industrial loan company's other obligations to its general and secured creditors, and is ineligible as collateral for a loan by the issuing industrial loan company. (d) Is unsecured. (e) States expressly that the issuing industrial loan company may not retire any part of its obligation without the prior written consent of the commissioner. (f) Includes, if the obligation is issued to a depository institution, a specific waiver of the right of offset by the lending depository institution.


18019. "Capital Stock," as used in this division, means one-class voting common stock.


Article 2. General Provisions

Ca Codes (fin:18020-18030) Financial Code Section 18020-18030



18020. An industrial loan company shall not appoint or continue in office any officer, director or management personnel who do not have the qualifications required by Section 18117 (d).


18021. (a) An industrial loan company shall not deposit its funds except with a bank, trust company, or savings association authorized to do business in this state, except as provided in subdivision (b). (b) An industrial loan company which is insured, as that term is defined in Section 18003.5, may also deposit its funds in an out-of-state financial institution, the accounts of which are insured by the Federal Deposit Insurance Corporation. (c) Funds deposited in an out-of-state financial institution shall not in any case exceed the applicable amount of federal deposit insurance. (d) The depository shall be approved by a majority vote of the board of directors or the executive committee, exclusive of the vote of any director who is an officer, director, trustee, or shareholder of the depository so designated. An out-of-state savings association subject to the Management Consignment Program of the Office of Thrift Supervision shall not be used as a depository. (e) An industrial loan company shall furnish an authorization for disclosure to the commissioner of the financial records of deposits pursuant to Section 7473 of the Government Code. No deposit shall be made in an out-of-state financial institution unless that institution agrees in writing to disclose financial records of the industrial loan company to the commissioner.


18022. No industrial loan company shall invest any of its funds, except as authorized in this division. Industrial loan companies may invest their funds in investments that are legal investments for commercial banks, including the capital stock, obligations, or other securities of one or more corporations, subject to rules and orders prescribed by the commissioner. Companies may also invest their funds in the choses in action issued by any other industrial loan company.


18022.5. An industrial loan company may organize, sponsor, operate, control, or render investment advice to, an investment company, or underwrite, distribute, or sell securities of any investment company which has qualified to sell its securities in this state pursuant to Part 2 (commencing with Section 25100) of Division 1, Title 4 of the Corporations Code, if the officers and employees of the industrial loan company who sell these securities meet such standards with respect to training experience, and sales practices as established by the Secretary of the Business, Transportation and Housing Agency or the secretary's designee. For the purpose of this section, "investment company" means an investment company as defined in the Investment Company Act of 1940 (15 U.S.C., Sec. 80a-1 et seq.).


18023. If an industrial loan company has investment or thrift certificates outstanding, then such company shall not borrow, except by the sale of investment or thrift certificates, in an amount in excess of 300 percent of the amount represented by its outstanding capital stock, surplus and undivided profits, without the written consent of the commissioner. All sums so borrowed in excess of 150 percent of outstanding capital stock, surplus and undivided profits shall be unsecured borrowings or, if secured, approved in writing by the commissioner in advance of the borrowings, and be included as investment or thrift certificates for purposes of computing the ratio allowed under Sections 18319 and 18320.


18023.1. In addition to the borrowings under Section 18023, an industrial loan company may borrow funds from the Federal Home Loan Bank, the Federal Deposit Insurance Corporation, or a Federal Reserve Bank, which borrowed funds shall not be included in the borrowing limitations contained in Section 18023.


18024. An industrial loan company shall not transact business or make any loan provided for by this division under any other name than that set forth in the articles of incorporation as filed with the commissioner.

18025. No person shall use a holding company or any other device for the purpose of evading or avoiding any of the provisions of this division. This section shall not affect the right of a holding company to issue preferred stock or debentures when permitted to do so under the Corporate Securities Law of 1968. "Holding company" means any company which directly or through one or more intervening subsidiaries, whether or not wholly owned, controls or has the power to control a majority of the shares of an industrial loan company.


18027. Corporations subject to this division are not subject to the provisions or regulations of the Personal Property Brokers Law, Division 9 (commencing with Section 22000), the Consumer Finance Lenders Law, Division 10 (commencing with Section 24000), or the Commercial Finance Lenders Law, Division 11 (commencing with Section 26000).


18028. All corporations formed under the provisions of this division are taxed in the same manner and at the same rates as other corporations are taxed pursuant to Section 27 of Article XIII of the Constitution of this state.

18029. Each industrial loan company shall keep and use in its business, books, accounts, and records which will enable the commissioner to determine if the company is complying with the provisions of this division and with the rules and regulations made by the commissioner.


18030. Each industrial loan company shall preserve the books, accounts, and records, including cards used in the card system, if any, for a least two years after making the final entry on any loan or purchased obligation recorded therein.


Article 3. Real Property Held

Ca Codes (fin:18040-18043) Financial Code Section 18040-18043



18040. An industrial loan company may purchase, hold and convey real property for the following purposes only: (a) Real property conveyed to it in satisfaction of debts previously contracted in the course of its business. (b) Real property purchased at sale under judgments, decrees or mortgage foreclosures or foreclosures of or trustees' sales under deeds of trust under securities held by it. No company shall bid at any such sale a larger amount than is necessary to satisfy its debt and costs. (c) Real property necessary as premises for the transaction of its business. No company shall invest directly or indirectly an amount exceeding one-third of its paid-up capital stock and surplus not available for dividends as provided in Section 18319 in the lot and building in which the business of the company is carried on, leasehold improvements, furniture, fixtures, vaults, automobiles, and other personal property, necessary and proper to carry on its business. (d) The provisions of this section shall not apply to property acquired and held for lease pursuant to Section 18310.


18041. (a) The commissioner may establish rules and regulations regarding the sale of any real property acquired pursuant to subdivision (a) or (b) of Section 18040, consistent with what constitutes sound business practices for industrial loan companies. (b) Real property acquired pursuant to subdivision (a) or (b) of Section 18040 shall not be held for a longer period than five years without the written consent of the commissioner.


18042. The authority of a three-fourths vote of all the directors is necessary to authorize the purchase of a lot and building necessary as premises for the transaction of business as an industrial loan company or to authorize the construction of such building.


18043. Real property held by an industrial loan company shall be conveyed by an instrument under the corporate seal of the corporation, signed by the president or vice president, and the secretary or assistant secretary.


Article 4. Advertising

Ca Codes (fin:18055-18063) Financial Code Section 18055-18063



18055. No person shall advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, in any manner in connection with the business of an industrial loan company any statement or representation with regard to the rates, terms, or conditions for making or negotiating loans, or with regard to investment certificates, which is false, misleading, or deceptive.


18056. An industrial loan company shall not use any advertising which refers to the supervision of such company by the state or any department or official thereof.


18057. An industrial loan company shall not use any advertising nor make any representations which indicate, imply or might lead a person to believe that the company is a savings association.


18058. An industrial loan company shall not use any advertising nor make any representations which indicate, infer or might lead a person to believe that investment certificates are insured unless such is the fact.

18060. (a) Except as provided in subdivision (b), industrial loan company which issues thrift certificates shall not use any thrift advertisement which refers to the industrial loan company's ownership by, or affiliation with, any other entity unless the advertisement also discloses in as prominent a manner and as large a type size as the referenced ownership or affiliation was stated, whether or not the owner or affiliate so named guarantees thrift certificates issued by the industrial loan company. (b) (1) Subdivision (a) applies to an insured company when the other entity guarantees the thrift certificates issued by the insured company. (2) Subdivision (a) does not apply to an insured company when the other entity does not guarantee the thrift certificates issued by the insured company and the advertisement referring to the insured company's ownership by, or affiliation with, the other entity does not state or imply that the assets or reserves of the other entity may be used to guarantee thrift certificates of the insured company.


18061. If an industrial loan company refers in any advertisement to rates of charge, discount, charges or costs of loans, those charges shall be stated fully and clearly in a manner as may be necessary to prevent misunderstanding thereof by prospective borrowers and to give adequate information to prospective borrowers. If the rates or costs advertised do not apply to loans of all classes, this fact shall be clearly indicated in the advertisement.


18062. An industrial loan company shall not use any advertisement after its use has been disapproved by the commissioner and the industrial loan company has been notified in writing of the disapproval. Commencing July 1, 1990, the commissioner may require a company to obtain written or oral approval of any advertisement for investment or thrift certificates prior to publication thereof in order to avoid false, misleading, or deceptive advertising.


18063. The commissioner may require an industrial loan company to maintain a file of all advertising copy for a period of 12 months from the date of its use. The file shall be available to the commissioner upon request.


Chapter 2. Formation And Organization

Article 1. General

Ca Codes (fin:18100-18104) Financial Code Section 18100-18104



18100. When authorized by the commissioner as provided in this chapter, a corporation may be organized under the laws of this state, or an existing California corporation may amend its articles of incorporation, to engage in an industrial loan business. Except as otherwise provided in this division, an industrial loan company may be incorporated pursuant to Division 1 (commencing with Section 100), Title 1, of the Corporations Code.


18100.5. Each industrial loan company, other than a premium finance agency, that has issued and has outstanding thrift obligations shall, as a condition to its authority to conduct business under this division, participate as a member of the Federal Deposit Insurance Corporation.


18101. If the commissioner approves an application to engage in business as an industrial loan company filed pursuant to Article 2 (commencing with Section 18115) of this chapter, he shall issue a certificate in duplicate authorizing the organization of the corporation, or the amendment of its articles of incorporation, and specifying the date on which, and the conditions under which, it may commence business as an industrial loan company, including the place where it will be located.


18101.5. Upon filing an application for approval of proposed articles of incorporation with the commissioner, or upon filing an amendment to the articles of a proposed industrial loan company changing the name of an existing corporation, the incorporators shall file an application for a certificate of reservation of the name of the proposed company as set forth in the articles of incorporation with the Secretary of State pursuant to Section 201 of the Corporations Code. The application filed with the Secretary of State shall recite the fact of the pendency of the application and the Secretary of State shall issue a certificate of reservation upon such an application for a certificate and upon payment of any required fee. Notwithstanding the provisions of Section 201 of the Corporations Code, the name contained in the certificate of reservation shall be reserved to the applicant until the commissioner refuses to issue a certificate of approval or, if a certificate is issued, as long as a certificate continues in force or effect, or for a period of up to one year from the date when the application is filed in accordance with this article, pending the applicant's fulfillment of any requirements precedent to opening for business. The Secretary of State may, upon the request of the applicant and the approval of the commissioner, extend the reservation of the name for an additional six months.


18101.6. Companies authorized to engage in the industrial loan business after the effective date of the act which added this section shall have the words "industrial loan company," "investment and loan," "thrift company," "thrift and loan company," or "bank" as part of the company name included in the articles of incorporation.


18102. The articles of incorporation of an industrial loan company, in addition to the statement required by subdivision (b) of Section 202 of the Corporations Code, shall expressly state that its purpose is to engage in an industrial loan business pursuant to this division. The Secretary of State shall not file articles for the incorporation of an industrial loan company or an amendment to the articles of an existing corporation to engage in an industrial loan business unless there is filed with the Secretary of State a duplicate of the certificate issued by the commissioner pursuant to Section 18101.

18103. An industrial loan company's certificate to engage in the industrial loan business is not transferable or assignable.


18104. Except as otherwise authorized under existing law, no person, unless lawfully authorized to do business in this state under the provisions of this division and who is actually engaged in carrying on an industrial loan business, shall: (a) Do business under any name or title that contains the following terms: (1) "Industrial Loan Company." (2) "Investment and Loan Company." (3) "Thrift Company." (4) "Thrift and Loan Company." (b) Use any name or sign, or circulate or use any letterhead, billhead, circular, or paper, whatever, or advertise or represent in any manner that indicates or reasonably implies that the business is the character or kind of business carried on or transacted by an industrial loan business or is likely to lead any person to believe that the business is that of an industrial loan company.


Article 2. Applications

Ca Codes (fin:18115-18120) Financial Code Section 18115-18120



18115. An application for authority to engage in the industrial loan business shall be in such form and contain such information as the commissioner may require and shall be accompanied by a filing fee of four hundred dollars ($400).

18116. Upon the filing of an application, the commissioner shall make or cause to be made a careful investigation and examination relative to the following: (a) The background and experience of the organizers or incorporators, the proposed officers and managers, and the proposed stockholders and directors. (b) The need for industrial loan facilities or additional industrial loan facilities, as the case may be, in the community where the proposed industrial loan company is to be located, giving particular consideration to the adequacy of existing industrial loan facilities in the community. (c) The ability of the community to support the proposed industrial loan company, giving consideration to (1) the competition offered by existing industrial loan companies; (2) the previous industrial loan history of the community; and (3) the opportunities for profitable employment of industrial loan funds as indicated by the average demand for credit, the number of potential investors, the volume of industrial loan transactions and the business and industries of the community with particular regard to their stability, diversification and size. (d) Such other facts and circumstances bearing on the proposed industrial loan company as in the opinion of the commissioner may be relevant.


18117. The commissioner, upon reasonable notice and opportunity to be heard, may deny the application for any of the following reasons: (a) The public convenience and advantage will not be promoted by the establishment of the proposed industrial loan company. (b) The industrial loan company is being formed for a purpose other than the legitimate objectives contemplated by this division. (c) The proposed capital structure is inadequate. (d) Any proposed officer, director, or shareholder of the applicant has, within the last 10 years, (1) been convicted of or pleaded nolo contendere to a crime, or (2) committed any act involving dishonesty, fraud, or deceit, which crime or act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with the provisions of this division. (e) The applicant has not complied with all the applicable provisions of this division. (f) The proposed officers and directors do not have sufficient banking, industrial loan, finance company, or other experience to afford reasonable promise of successful operation. (g) A false statement of a material fact has been made in the application. (h) The applicant or any officer, director, or incorporator of the applicant has violated any provision of this division or the rules thereunder or any similar regulatory scheme of a foreign jurisdiction.

18119. Within 30 days after an application is filed for authorization to establish an industrial loan company which intends to sell and issue its investment certificates, the commissioner shall give written notice of the filing of the application to each industrial loan company subject to this division.


18120. Before the commissioner issues a certificate of authorization to operate as an industrial loan company, there must be paid in cash for the benefit of the corporation, the minimum capital stock and minimum paid-in surplus or reserve required pursuant to Article 3 (commencing with Section 18130) of this chapter.



Article 3. Capitalization

Ca Codes (fin:18130-18139) Financial Code Section 18130-18139



18130. The capital stock of an industrial loan company incorporated under this division shall not be less than: (a) Five hundred thousand dollars ($500,000), if incorporated or commencing business on or before July 8, 1975. (b) Seven hundred fifty thousand dollars ($750,000), and a paid-in surplus of five hundred thousand dollars ($500,000), at the time business is commenced, if incorporated or commencing business on or after July 9, 1975. (c) Industrial loan companies which commenced business prior to July 9, 1975, and which do not meet the capital stock and paid-in surplus requirements of this section shall be governed until January 1, 1987, by Sections 18130, 18131, 18132, 18133, 18134, and 18135 of the Financial Code, as in effect on December 31, 1983.


18131. In addition to the capital stock required by Section 18130, an industrial loan company which has branch offices or which opens an additional branch office or place of business shall have additional capital stock of fifty thousand dollars ($50,000) for each branch office.

18132. An industrial loan company may declare a dividend on its capital stock only if the company has minimum unimpaired capital of seven hundred fifty thousand dollars ($750,000) plus additional capital stock of fifty thousand dollars ($50,000) for each branch office.


18137. An industrial loan company shall not reduce its capital stock to an amount less than is required by this article to be maintained by such company or less than any indebtedness of such company other than its investment certificates.


18138. (a) No person may acquire in the aggregate 10 percent or more of the capital stock of, or the capital of, an industrial loan company through purchase, foreclosure pursuant to a pledge or hypothecation, or other devices without the written consent of the commissioner. Prior to any person acquiring 10 percent or more of the capital stock of, or the capital of, an industrial loan company, or prior to any person acquiring additional capital stock or capital of an industrial loan company which would result in an aggregate acquisition of 10 percent or more of the capital stock or of the capital, that person seeking the acquisition shall make written application to the commissioner requesting written consent for the acquisition. (b) No person may acquire in the aggregate 10 percent or more of the capital stock or other securities that have voting power or control over the management of a holding company as defined in Section 18025 through purchase, foreclosure pursuant to a pledge or hypothecation, or otherwise without the written consent of the commissioner. Prior to any person acquiring 10 percent or more of the capital stock or other securities that have voting power or control over the management of a holding company as described herein, or prior to any person acquiring additional capital stock or other securities that have voting power or control over the management of a holding company as described herein which would result in an aggregate acquisition of 10 percent or more of the capital stock or other securities, or prior to any person acquiring 10 percent or more of the capital stock or other securities that have voting power or control over the management of a holding company as described herein, through the conversion of a security into another security or through the exercise of a right to purchase or subscribe to another security, that person seeking the acquisition shall make written application to the commissioner requesting written consent for the acquisition notwithstanding subdivision (e) of Section 25017 of the Corporations Code. (c) With respect to the application required to be filed under subdivisions (a) and (b), the commissioner shall consent in writing or decline to consent within 60 days of the filing of a completed application. (d) An application for consent under subdivision (a) or (b) shall be in the form and contain information as the commissioner may by rule or order require and shall be accompanied by a fee of four hundred dollars ($400).


18139. A sale, merger, or conversion involving an industrial loan company and another industrial loan company, a bank, or a savings association is subject to Division 1.5 (commencing with Section 4800).


Article 4. Branch Offices

Ca Codes (fin:18145-18154) Financial Code Section 18145-18154



18145. Subject to Section 18145.1, when authorized by the commissioner as provided in this division, an industrial loan company, pursuant to a resolution of its board of directors, may establish and maintain one or more branch offices within the state.


18145.1. (a) The commissioner may, by order or regulation, exempt from the requirement of authorization by the commissioner set forth in Section 18145 any establishment of an office or place of business that the commissioner finds not necessary or appropriate to regulate under that section. (b) In granting an exemption under this section, the commissioner may impose any conditions that the commissioner finds necessary or appropriate.


18146. The request for authority to establish a branch office shall be set forth in an application in such form and containing such information as the commissioner may require and shall be accompanied by an application fee of one hundred dollars ($100) for each new branch office.


18147. The commissioner shall not approve an application for a branch office until the commissioner has ascertained to the commissioner's satisfaction that the facts set forth in the application are true and: (a) That the public convenience and advantage will be promoted by the establishment of the proposed branch office. (b) That the industrial loan company has the capital required by this division. (c) That the industrial loan company has established branch operational controls. (d) That the financial condition of the industrial loan company justifies the establishment of the proposed branch office. (e) (1) As to an industrial loan company transacting business before October 1, 1985, that the industrial loan company is a member of the Federal Deposit Insurance Corporation, or (2) as to an industrial loan company commencing business on or after October 1, 1985, that the industrial loan company is a member of the Federal Deposit Insurance Corporation.


18148. The failure of an industrial loan company to open and operate a branch office within six months after the commissioner has issued an order approving the application for a branch office shall automatically terminate the right of the industrial loan company to open the branch office. However, the commissioner may for good cause on written application made before the expiration of the six months' period, extend for additional periods, not in excess of six months each, the time within which the branch office may be opened.


18149. When the commissioner has approved an application for permission to establish a branch office and the applicant pays to the commissioner an additional fee of one hundred dollars ($100) for a certificate of authorization to transact business, the commissioner shall issue a certificate of authorization to transact business authorizing the opening and operation of the branch office and specifying the date on which and the conditions under which it may be opened and the place where it will be located.


18150. An industrial loan company shall keep posted in a conspicuous place in each branch office the certificate of authorization to transact business issued by the commissioner permitting the operation of the branch office.


18151. An industrial loan company which opens a branch office without first obtaining a certificate of authorization to transact business shall forfeit to the people of the state the sum of one hundred dollars ($100) for every day during which the branch office is maintained without authority.


18152. The provisions of Sections 18146, 18147, 18148, 18149, 18150, and 18151 shall not affect branch offices which are opened and operating prior to September 18, 1959.


18153. An industrial loan company which maintains a branch office or branch offices shall give to each branch office maintained by it a specified designation by name or number and include in the designation the word "branch" or the word "office" and shall prominently display the designation at the place of business of the branch.


18154. With the prior written approval of the commissioner, an industrial loan company may close or discontinue the opertion of any branch office provided public notice thereof is given in such manner as the commissioner directs at least 30 days before the date of closing or discontinuance. After a branch office has been closed or discontinued, it may not be reopened without the approval of the commissioner and compliance with the applicable provisions of this division.


Article 5. Change Of Location

Ca Codes (fin:18165-18166) Financial Code Section 18165-18166



18165. (a) Except as otherwise provided for in this division, an industrial loan company shall not transact business or make any loan provided for by this division at any other place of business than that designated in its certificate of authorization issued pursuant to Section 18101 or 18149, without having obtained the prior written approval of the commissioner. (b) An industrial loan company may solicit and make loans and acquire obligations at a place of business other than designated in its certificate of authorization upon written request to and written approval of the commissioner, except as set forth in Section 18165.1, without obtaining a certificate of authorization to conduct business at a branch office pursuant to Article 4 (commencing with Section 18145), subject to the provisions of subdivision (d). The written request for approval to conduct business shall be accompanied by a processing fee of two hundred dollars ($200) for each place of business and shall include the following: (1) The proposed location of the place of business. (2) A description of the industrial loan company's proposed plan of business, including a description of the manner and extent to which the industrial loan company proposes to direct and supervise the place of business. (3) The character, business qualifications, and other experience of the proposed officers and managers directing the line of business for which authorization is requested. (4) If the place of business is to be located outside of this state, a description of the regulation of the place of business by the state of the United States where the place of business is proposed to be located, including: (A) A summary of the laws, administrative policies, and rules or regulations of the state relating to the proposed establishment and operation of the place of business. (B) The name, address, and telephone number of the state agency having jurisdiction over the proposed establishment and operation of the place of business. (C) A description of the extent and manner in which the establishment and operation of the place of business will be regulated by the state agency. (D) Whether or not any law, administrative policy, or rule or regulation of the state of the United States where the place of business is proposed to be located would prohibit the commissioner from, or restrict the commissioner in, examining or regulating the place of business, and, if so, a citation to and summary of the law, administrative policy, rule, or regulation. (5) Any other information bearing on the proposal that, in the opinion of the commissioner, may be relevant. (c) The commissioner shall approve the request made pursuant to subdivision (b) within 30 days after filing unless the commissioner has ascertained that the company has failed to show any of the following: (1) Compliance with all applicable requirements of subdivision (b). (2) That the proposed plan of business would not violate any of the laws or the regulations of the state in which the office is proposed to conduct its business. (3) That the company has adequate internal controls to manage the conduct of the business proposed to be conducted. (4) That the company has a person with the necessary business qualifications, experience, or ability to direct and manage the operations of the proposed plan of business. (d) An industrial loan company that has given notice or has been approved by the commissioner pursuant to subdivision (b) to solicit and make loans and acquire obligations at a place of business other than designated in its certificate of authorization shall comply with the following: (1) No investment certificates shall be solicited, offered, or sold at the place of business. (2) Loan files for loans originating at the place of business shall be retained at the main or licensed branch location of the industrial loan company, and all loans originating at the place of business shall be coded in a manner so as to easily identify that place of business. (3) The place of business shall not be identified in any manner as a branch location or as a licensed location of the industrial loan company. (4) If the place of business is outside of this state, the industrial loan company shall, not less than five business days before commencing business at that place of business, file with the commissioner a report stating that the industrial loan company has complied with all laws of that state applicable to the establishment and operation of the place of business, and which contains a copy of any document issued by the state agency having jurisdiction over the proposed establishment and operation of the place of business authorizing the industrial loan company to establish the place of business. (5) All books, accounts, papers, records, and files of the place of business shall, upon request, be made available to the commissioner or the commissioner's representatives in this state within the time specified in the request. (6) Any other conditions and limitations the commissioner may require. (e) An industrial loan company that opens a place of business for which approval is required under subdivision (b) without first obtaining the commissioner's written approval shall be liable for a civil penalty of one hundred dollars ($100) for every day during which the place of business is maintained without approval. (f) The commissioner may by rule, order, or regulation permit loans to be made or entered into and loans and obligations solicited and acquired at places other than designated by an industrial loan company in its certificate of authorization if those loans can be so made consistent with the purposes of the Industrial Loan Law.


18165.1. (a) The commissioner may, by order or regulation, exempt from the requirement of authorization by the commissioner set forth in Section 18165 any establishment of an office or place of business that the commissioner finds not necessary or appropriate to regulate under that section. (b) In granting an exemption under this section, the commissioner may impose any conditions that the commissioner finds necessary or appropriate.


18166. (a) If an industrial loan company desires to change its place of business to a street address other than that designated in its authorization, it shall give written notice to the commissioner who shall issue his or her written authorization of the change, provided the commissioner finds the change would not justify a negative finding with respect to any matters set forth in Section 18117 or 18147. (b) The commissioner may, by order or regulation, exempt from the requirement of authorization by the commissioner set forth in subdivision (a) any change of location of a place of business that the commissioner finds not necessary or appropriate to regulate under that section.


Chapter 3. Loans And Purchased Obligations

Article 1. General

Ca Codes (fin:18190-18192) Financial Code Section 18190-18192



18190. An industrial loan company may: (a) Loan money, secured or unsecured, with or without the pledge of its installment investment certificates. (b) Collect and receive charges for loans in advance or otherwise. (c) Purchase, sell, or discount the following obligations: bona fide trust receipts, secured or unsecured choses in action, conditional sales contracts, or security agreements. (d) Purchase, sell, discount, or originate lease obligations.


18191. Sections 18008, 18009, 18010, 18212, 18212.1, 18214, 18219, 18220, 18222, 18230 through 18234, 18290 through 18295, and 18439 do not apply to: (a) Any bona fide loan of a principal amount of ten thousand dollars ($10,000) or more or to an industrial loan company in connection with any such loan if the provisions of the section are not used for the purpose of evading this division. (b) An amount due from a contingent guarantor on his or her obligations purchased under the provisions of this division. (c) A loan to a primary borrower who has pledged accounts receivable or installment accounts to secure loans which taken in the aggregate amount to ten thousand dollars ($10,000) or more.


18191.5. Sections 18008, 18009, 18010, 18212, 18212.1, and 18214 do not apply to: (a) Any bona fide loan of a principal amount of five thousand dollars ($5,000) or more, or to an industrial loan company in connection with any bona fide loan of a principal amount of five thousand dollars ($5,000) or more if the provisions of the section are not used for the purpose of evading this division. (b) An amount due from a contingent guarantor on his or her obligations purchased under the provisions of this division. (c) A loan to a primary borrower who has pledged accounts receivable or installment accounts to secure loans which taken in the aggregate amount to five thousand dollars ($5,000) or more.


18192. The payment of money, credit, goods, or things in action as consideration for any sale or assignment of, or order for, the payment of wages, salary, commissions, or other compensation for services, whether earned or to be earned, is, for the purposes of regulation under this division, a loan secured by such assignment, and the amount by which the assigned compensation exceeds the amount of consideration actually paid is interest and charges upon or for such loan from the date of payment to the date the compensation is payable. This section does not modify or affect existing statutes governing wage assignments in this state, or authorize such assignments.


Article 2. Terms And Maximum Charges

Ca Codes (fin:18205-18222) Financial Code Section 18205-18222



18205. Except as otherwise provided for in this division, an industrial loan company shall not make any loan or purchase or discount any other obligation that provides for a repayment of principal over more than 120 months and 30 days.


18205.5. Notwithstanding any other provision of this division, an industrial loan company may make a loan or acquire an obligation that is repayable in unequal periodic payments during its term and that is secured by either real property or personal property. In order to ensure the safety and soundness of industrial loan companies and to avoid an unreasonable concentration of loans and obligations that could result in balloon payments, all these loans and obligations with a term in excess of 10 years shall be repaid in substantially equal weekly, semimonthly, monthly, or quarterly installments during the term. For purposes of this section, "real property" means real property other than home loans and other residential real property loans subject to Title VIII (Alternative Mortgage Transaction Parity Act of 1982) of the Garn-St. Germain Depository Institutions Act of 1982, as those terms are defined in Part 541 of Title 12 of the Code of Federal Regulations, as amended. For purposes of this section, the term of a nonconsumer loan or a nonconsumer obligation secured solely or primarily by personal property shall not exceed 15 years and 30 days from the date the loan is made or obligation is acquired by the industrial loan company. For purposes of this section, the term of a nonconsumer loan or a nonconsumer obligation secured primarily by real property shall be as set forth in subdivision (a) of Section 18210.

18206. Consumer loans made and obligations acquired that are secured by a motor vehicle and repayable other than in equal periodic payments during its term shall not exceed 50 percent of all consumer loans and obligations that are secured by motor vehicles or 20 percent of assets, whichever is less. This section shall not apply to a loan made to a graduate student while attending an accredited college or university and for the purpose of actively pursuing a study program leading to a postbaccalaureate degree.


18207. An industrial loan company may make a consumer loan that is not secured primarily by real property or other type of loan which is repayable at maturity by a single payment which includes principal and charges. In no event shall such loans have a term in excess of one year or be made for the purpose of evading or avoiding this division.


18208. An industrial loan company may make a consumer loan in which the principal and charges are payable at any time during the loan, provided that the loan is secured at all times at least 100 percent by either investment certificates of an industrial loan company authorized to conduct business in the State of California under this division or traded securities.


18209. An industrial loan company may make loans, purchase or discount notes, mortgages, contracts or other commercial paper insured by the Federal Housing Administrator, Veterans Administration, other federal agency or an agency of the state. Loans so insured may be made for a term up to but not to exceed the maximum permitted by such agencies.


18210. (a) Except as provided in Sections 18205.5 and 18209 and subject to subdivisions (b) and (c), an industrial loan company shall not make any loan or purchase or discount any note secured primarily by real property unless the loan or other obligation is repayable in substantially equal weekly, semimonthly, monthly, or quarterly installments during its term, which shall not exceed 30 years and 30 days from the date the loan or other obligation is made or acquired by the company. Equal installment requirements shall not apply to adjustable or variable rate loans or obligations made or purchased by the industrial loan company in accordance with Title VIII of the Garn-St. Germaine Depository Institutions Act of 1982 and any applicable regulations, guidelines, and policies adopted thereunder. However, an industrial loan company may make loans secured by first trust deeds on real property containing single family, or one to four residential, units provided that the repayment period for each loan does not exceed 40 years and 30 days from the date the loan is made by the company. All loans with repayment periods in excess of 30 years and 30 days shall not exceed in the aggregate 5 percent of all outstanding loans and obligations of the company. (b) Any consumer loan or any purchase or discount of any consumer obligation having a term in excess of three years from the date the loan or other obligation is made or acquired by the company shall be secured solely by real property or solely by personal property. However, if the original principal amount of the consumer loan or obligation is twenty thousand dollars ($20,000) or more, then the loan or obligation shall be secured solely by real property or solely by personal property, or by both real property and personal property. All loans and obligations made and purchased pursuant to this subdivision shall be repayable in installments and within a term not to exceed the limitations set forth in subdivision (a), except that consumer loans or obligations secured solely by personal property shall have a term not to exceed the term provided for in Section 18205 and except as otherwise may be provided for in Sections 18207, 18208, and 18209. The equal installment requirements set forth in subdivision (a) shall not apply to loans or obligations made or purchased by the industrial loan company in accordance with Title VIII of the Garn-St. Germaine Depository Institutions Act of 1982 and any applicable regulations, guidelines, and policies adopted thereunder. (c) In order to ensure the safety and soundness of industrial loan companies and to avoid an unreasonable concentration of loans and obligations that could result in balloon payments, all loans and obligations with a term in excess of 15 years and 30 days shall be repaid in substantially equal weekly, semimonthly, monthly, or quarterly installments during their term.


18211. No charge shall be collected unless a loan is made, except that an industrial loan company may charge, contract for, and receive a fee in connection with making a written commitment to make a loan, secured by real property having a face amount in excess of five thousand dollars ($5,000) whether or not the loan is consummated, or in connection with the purchase, sale, or origination of a lease as lessor and may charge, contract for, and receive an application fee for a loan having an original principal balance in excess of five thousand dollars ($5,000) or for a lease which payments are in excess of five thousand dollars ($5,000), provided, however, that a disclosure statement setting forth the amount of the fee, which may be reviewed by the commissioner as to form and content, shall be provided to each person to whom an application fee is charged. The commitment fee or the loan application fee with respect to a consumer loan shall be limited to the actual expenses incurred.


18212. (a) The charges by an industrial loan company, broker, and all other persons on any loan, forbearance of money, credit, goods, or things in action under this division, shall not exceed in the aggregate: (1) Two percent per month on that part of the unpaid principal balance of any loan up to, including, but not in excess of, one thousand dollars ($1,000). (2) One percent per month on any remainder of such unpaid principal balance in excess of one thousand dollars ($1,000). (b) As an alternative to the charges authorized by subdivision (a), a company may contract for and receive charges at a rate not exceeding 1.6 percent per month on the unpaid principal balance.


18212.1. As an alternative to the charges authorized by Section 18212 a licensee may contract for and receive charges at a rate not exceeding five-sixths of 1 percent per month plus a percentage per month equal to one-twelfth of the annual rate prevailing on the 25th day of the second month of the quarter preceding the quarter in which the loan is made as established by the Federal Reserve Bank of San Francisco on advances to member banks under Section 13 and 13a of the Federal Reserve Act as now in effect or hereafter from time to time amended, or if there is no such single determinable rate for advances, the closest counterpart of such rate as shall be designated by the commissioner. Charges shall be calculated on the unpaid principal balance.


18212.2. In addition to the charges authorized by Section 18212 or 18212.1 an industrial loan company may contract for and receive an administrative fee, which shall be fully earned immediately upon making the loan, with respect to a loan of a principal amount of not more than two thousand five hundred dollars ($2,500) at a rate not in excess of 5 percent of the principal amount or fifty dollars ($50), whichever is lesser. No administrative fee may be contracted for or received in connection with refinancing a loan unless at least one year has elapsed since receipt of a previous administrative fee paid by the borrower.

18213. Notwithstanding any other provision of law not within this division, industrial loan companies making loans pursuant to this division may not precompute interest on such loans.


18214. For the purpose of computing the charges set forth in this article, a month is any period of 30 consecutive days.


18215. An industrial loan company may contract for, collect, and receive at the time of making the loan or at any time thereafter, any of the following: (a) Any cost of publication as required by law. (b) The statutory fee paid by it to any public officer for acknowledging, filing, recording, or releasing in any public office any instrument securing the loan or executed in connection with a loan. (c) Premiums of the kind and to the extent described in paragraph (2) of subsection (e) of Section 226.4 of Regulation Z promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. 226.1 et seq.). These amounts are not included in computing the maximum charges which may be made under this division.


18216. (a) Notwithstanding Section 18211, an appraisal fee may be charged to an applicant or borrower by an industrial loan company in connection with an application or request for any loan having a face amount in excess of five thousand dollars ($5,000) that is secured primarily by real property whether or not the loan is made. That fee shall not exceed the actual cost of the appraisal. The appraisal shall be rendered to the industrial loan company in writing by a qualified appraiser approved pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Public Law 101-73, and any applicable regulations, guidelines, and policies adopted thereunder. Only one fee for appraising the same real property made in connection with the same applicant or borrower may be collected unless the applicant or borrower has obtained a new or additional loan and more than one year has elapsed since the prior appraisal. The fee is not included in charges as defined in this division or in computing the maximum charges that may be made under this division. (b) If an appraisal fee is charged, a copy of the appraisal report shall be provided by the industrial loan company upon the request of the borrower or applicant at or before the closing of a loan transaction.


18217. An escrow fee of a reasonable amount may be charged for any loan made which is secured primarily by real property when such services are actually performed. Such fee shall be considered reasonable when paid to a company licensed to do business under the Escrow Law, Division 6 (commencing with Section 17000), or any person exempted by the Escrow Law, provided that such fees are comparable to fees being charged by escrow companies so authorized to do business in this state. Such fee is not included in computing the maximum charges which may be made under this division.


18218. Notwithstanding any other provision of this division, an industrial loan company, in the collection of a delinquent loan of an unpaid principal balance, may do any of the following: (a) Collect and receive the court costs and reasonable attorney's fees allowed by a court in a judgment against a defaulting debtor. (b) Contract for, collect, and receive the bona fide expenses actually incurred and paid by the industrial loan company, not exceeding 10 percent of the unpaid principal balance of the loan where no judgment at law is sought. (c) Contract for, collect, and receive the bona fide expenses actually incurred and paid by the industrial loan company in obtaining a certificate of compliance or certificate of noncompliance issued for a motor vehicle pursuant to Part 5 (commencing with Section 43000) of Division 26 of the Health and Safety Code and the rules and regulations of the State Air Resources Board prior to the consignment of the vehicle for sale at public auction, pursuant to Sections 24007 and 24007.5 of the Vehicle Code.


18218.5. With respect to a loan under this division, a fee not to exceed fifteen dollars ($15) for return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft may be charged and collected by the licensee. The fee is not included in charges as defined in this division or in determining the applicable maximum charges which may be made under this article.


18219. An industrial loan company shall not induce or permit any borrower to split up or divide any loan and thereby contract for or receive a higher rate of charge than would otherwise be permitted by this division.

18220. An industrial loan company shall not induce any husband and wife jointly or severally, to become obligated, directly or contingently or both, under more than one contract of loan at the same time, with the result of obtaining a higher rate of charge than would otherwise be permitted by this division.


18221. Nothing in this division shall prevent an industrial loan company from transacting loan contracts with different borrowers and from contracting for and receiving, up to and including the highest rate of charge permitted by this division at the time of making said loans; provided, however, that if any person is obligated to and does pay more than one loan contract outstanding at the same time, the entire amount of charges paid by such person and received by the industrial loan company on such loan contracts, shall not exceed the maximum that would be permitted by this division if all such loan contracts so paid were combined into one loan transaction.


18222. An industrial loan company shall permit payment to be made in advance in any amount on any contract of loan at any time. The industrial loan company shall apply such payment first to all charges due up to the date of such payment and the remainder to the loan balance.


Article 3. Disclosure And Loan Documents

Ca Codes (fin:18230-18235) Financial Code Section 18230-18235



18230. Each industrial loan company shall display prominently in each place of business a full and accurate schedule of the maximum charges to be made and the method of computing the same. The schedule is subject to the approval of the commissioner.


18231. Each industrial loan company shall: (a) Deliver or cause to be delivered to the borrowers, or any one thereof, at the time the loan is made, a written statement showing in clear and distinct terms the name and address of such company and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security, if any, for the loan, and the agreed rate of charge. (b) Obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If such statement discloses a broker or other person has participated, the company shall obtain a full statement of all sums paid or payable to the broker or other person. (c) Keep the statements required by this section for a period of two years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.


18233. An industrial loan company shall deliver or cause to be delivered to the person making any payment in person in cash at any office of the company, at the time such payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which such payment is applied, and showing the unpaid balance of the loan.


18234. An industrial loan company shall upon repayment of any loan in full, cancel or plainly mark "paid" and return to the borrower or person making final payment, the note evidencing the loan. If such borrower is not otherwise obligated to such company, the company shall release all security for such loan, endorse and return any certificate of ownership, and return to the borrower any security agreement, assignment, or order signed by the borrower, except such as are a part of the court record in any action, or such as have been delivered to a third person for the purpose of carrying out the terms thereof.

18235. An industrial loan company shall not take any note, promise to pay, or security agreement that does not accurately disclose the actual amount of the loan, the time for which it is made, and the agreed rate of charge, nor any instrument in which blanks are left to be filled in after execution.


Article 4. Credit Cards

Ca Codes (fin:18245) Financial Code Section 18245



18245. (a) Subject to any regulations that the commissioner may issue, an industrial loan company may issue credit cards and may acquire or hold obligations resulting from the use of credit cards. (b) Except as the commissioner may otherwise provide by regulation or order, the acquiring and holding of obligations pursuant to subdivision (a) are not subject to Article 2 (commencing with Section 18205) or Article 6.5 (commencing with Section 18300).


Article 5. Limitations And Regulations Of Loans And Purchased Obligations

Ca Codes (fin:18265-18274) Financial Code Section 18265-18274



18265. An industrial loan company that has investment certificates outstanding shall not make any loan or purchase or discount any other obligation with a maturity of more than 60 months and 15 days unless all of the following conditions are met: (a) The loan or other obligation is secured. (b) The property, or collateral securing the loan or other obligation, is of a kind or class that has been declared eligible by regulation of the commissioner. (c) The aggregate principal balance of such loans and other obligations outstanding with a remaining maturity of more than 60 months and 15 days at any time shall not exceed a percentage of the aggregate principal balance due on all loans and other obligations owing to the industrial loan company by rule of the commissioner.


18266. (a) Except as set forth in subdivisions (b) and (c), any loan or obligation made or acquired by an industrial loan company that has investment certificates outstanding that is secured primarily by real property and has an outstanding principal balance of ten thousand dollars ($10,000) or more shall be secured by real property having a fair market value, or real property and personal property combined having a fair market value, at the time the loan or other obligation is made or acquired, of at least 110 percent of the principal amount owing on the loan or obligation and on prior encumbrances, except nondelinquent tax liens, secured by the same real property with regard to loans secured solely by real property, or by both real property and personal property. Fair market value of the real property for purposes of this section shall be determined by a real property appraiser who meets the qualifications established pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Public Law 101-73, and any applicable regulations, guidelines, or policies thereunder. (b) Subdivision (a) does not apply to: (1) Any loan guaranteed in whole or in part by the Administrator of Veterans Affairs pursuant to the Servicemen's Readjustment Act of 1944 or any act of Congress supplementary or amendatory thereof. (2) Any loan insured by the Federal Housing Administration pursuant to the National Housing Act or any act of Congress supplementary or amendatory thereof. (c) Subject to all other provisions of subdivision (a) and any requirements the commissioner may impose by rule or order, the following loans may be secured by real property having a fair market value of less than 110 percent of the principal amount of the loan and prior encumbrances: (1) Any loan made by an industrial loan company to facilitate the sale of real property owned by the industrial loan company resulting from foreclosure or receipt of a deed in lieu of foreclosure. (2) Any loan renewed or modified by an industrial loan company pursuant to a clearly defined and well-documented program adopted by the board of directors of the industrial loan company to achieve orderly repayment of the loan or to maximize recovery of the loan. (3) Any loan or obligation saleable in the secondary market. For purposes of this paragraph, "saleable in the secondary market" means saleable to a qualified institutional buyer, as evidenced by irrevocable commitments to buy by those qualified institutional buyers. (4) Any loan or obligation owned for less than 90 days. (d) In complying with the requirement of subdivision (a), an industrial loan company may include the principal amount of private mortgage insurance. (e) Any loan or obligation made or acquired by an industrial loan company that has investment certificates outstanding that is secured solely by motor vehicles or other personal property shall be secured by that property having a fair market value at the time the loan or other obligation is made or acquired of at least 100 percent of the principal amount owing on the loan or obligation. The personal property held as security shall be of a class or kind that has been declared eligible by regulation of the commissioner.


18266.1. An industrial loan company may make loans and acquire obligations, the proceeds of which are used for home improvements that are secured by real property having a market value of at least 100 percent of the principal amount owing on the loan being made by the industrial loan company or obligation being acquired by the industrial loan company and on prior encumbrances, except nondelinquent tax liens, secured by the same real property. Home improvements means additions, alterations, or modifications to owner-occupied property consisting of one to four dwelling units and appurtenant buildings thereto or to the real property containing same.


18266.2. An industrial loan company shall file a written request for authorization to conduct business under Section 18266.1. The request shall include the following information: (a) A description of the company's proposed plan of business. (b) The character, business qualifications, and other experience of the proposed officers and managers directing the line of business for which authorization is requested. (c) Any other facts and circumstances bearing on the proposal that, in the opinion of the commissioner, may be relevant.


18266.3. The commissioner shall approve the request made pursuant to Section 18266.2 within 30 days after filing unless the commissioner has ascertained that the company has failed to show either of the following: (a) That the proposed plan of business has a reasonable promise of a successful operation. (b) That the company has a person with the necessary business qualifications, experience or ability to direct and manage the operations of the plan of business.

18268. An industrial loan company that has investment certificates outstanding shall not lend in the aggregate more than 5 percent of its capital stock and surplus not available for dividends as provided in Section 18319 upon the security of the stock of any one corporation and that stock may not exceed 10 percent of the outstanding stock of the corporation, or upon the security of the bonds of any one obligor except bonds of the United States or for the payment of which the credit of the United States is pledged, bonds of the State of California, or for the payment of which the credit of the State of California is pledged, and any security authorized in writing by the commissioner or any security authorized by rule of the commissioner.


18269. An industrial loan company that has investment certificates outstanding shall not make any loan secured primarily by improved real property in a principal amount in excess of 20 percent of the company's unimpaired capital stock and surplus not available for dividends as provided in Section 18319. An industrial loan company that has investment certificates outstanding shall not make any loan secured primarily by unimproved real property in a principal amount in excess of 10 percent of the company's unimpaired capital stock and surplus not available for dividends as provided in Section 18319.


18270. An industrial loan company may require the borrower to sign a contract of pledge, assignment, mortgage, security agreement, deed of trust, or trust receipt relating to real or personal property given by the borrower as security for the repayment of the loan and interest and charges thereon.


18271. An industrial loan company that has investment certificates outstanding shall not make loans to, or hold the obligations of, any one person as primary obligor in an aggregate principal amount in excess of 20 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319. Unsecured loans or obligations of any person as primary obligor made or held by a company may not, in any event, exceed in the aggregate principal amount 5 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319.

18272. An industrial loan company shall diversify the loans and lease obligations it makes and other obligations it acquires, both as to the types of debtors and obligors, types of collateral, and as to terms and types of repayment schedules. The requirement for diversification notwithstanding, an industrial loan company may specialize in its lending, leasing, and other authorized practices under this division. The commissioner may promulgate rules and regulations pursuant to this section.


18274. The principal balances of loans made, or obligations purchased, by an industrial loan company that has investment certificates outstanding, which loans or obligations are secured by unimproved real property, shall not in the aggregate exceed 5 percent of the company's assets unless the commissioner consents to the taking of collateral to protect an existing jeopardized obligation.


Article 6. Insurance Sold With Loans

Ca Codes (fin:18290-18296) Financial Code Section 18290-18296



18290. (a) As used in this division: (1) "Credit life insurance" and "credit disability insurance" have the same meanings as defined in Section 779.2 of the Insurance Code. (2) "Credit loss-of-income insurance" means insurance issued to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is involuntarily unemployed, as defined in the policy. (b) An industrial loan company may provide and collect the costs for credit life insurance on the life of one or more of the borrowers, or credit disability, or loss-of-income insurance, or any combination of these coverages, to provide indemnity for payments becoming due on the indebtedness, with his or her consent, the form to be approved by the Insurance Commissioner, and a copy, together with evidence of its approval by the Insurance Commissioner, to be filed with the commissioner, and in an amount not in excess of the amount of the indebtedness. The amount charged to the borrower for credit life or disability insurance shall not exceed, in the case of credit life insurance, fifty cents ($0.50) per year per one hundred dollars ($100) of indebtedness (and in the same proportion for longer or shorter maturities and larger or smaller amounts) or the amount established by or pursuant to Section 779.35 of the Insurance Code, whichever is less, or, in the case of credit disability insurance, the amount established by or pursuant to Section 779.35 of the Insurance Code.

18291. (a) If credit life or disability insurance is provided pursuant to this division, and if the insured borrower dies or becomes disabled during the term of the loan contract, the insurance shall be sufficient to pay the total amount due on the loan (excluding unearned charges) outstanding on the date of death, or all amounts which become due on the loan thereafter during the period of disability, as the case may be, without any exception, reservation, or limitation, subject, however, to the provisions of Section 18292. (b) Any credit life, disability, or loss-of-income insurance as provided shall be in force as soon as the loan is made. An industrial loan company shall not require any of these coverages as a condition of making a loan.


18292. (a) If credit disability insurance is provided pursuant to this division, it shall not provide indemnity against the risk of a borrower becoming disabled for a period of less than 14 days. The insurance may provide indemnity for any single period of continuous disability of 14 days or longer, after which the risk may become compensable. The insurance may be offered with retroactive coverage to an earlier date based upon the disability having continued for a period stated in the policy, but if insurance with retroactive coverage is offered, it shall also be offered without retroactive coverage, and the premium rate for each coverage shall be separately stated in writing to the borrower. (b) If insurance with retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is disabled, provided that the insured is continuously disabled during the waiting period set forth in the policy. If insurance without retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is disabled, after first excluding the elimination period set forth in the policy. For the purpose of this subdivision, a month is any period of 30 consecutive days. (c) Credit disability insurance, if made available by an industrial loan company, shall be available on a monthly or annual premium basis, and the premium by the month shall not exceed a pro rata relationship to the annual premium. Credit disability insurance need not be offered for a period less than the term of the loan to which it is applicable and no credit disability insurance shall be written for a period in excess of the term of the loan to which it is applicable. (d) The monthly disability benefit payable with respect to an open end loan shall not exceed the monthly payment computed pursuant to Section 18300 on the outstanding balance at the time the disability is incurred.


18292.5. If credit loss-of-income insurance is provided pursuant to this division, it shall be subject to the following conditions: (a) The insurance shall provide indemnity in accordance with the terms of the policy after any single period of continuous unemployment of 45 days or less as determined by the policy, after which benefits shall commence. The insurance may be offered with retroactive coverage to an earlier date based upon unemployment having continued for the period stated in the policy. (b) The statement required by Section 18293 shall include disclosure of the term of the coverage, the conditions of coverage, the benefits to be paid, and the exclusions from coverage. (c) The borrower shall sign a certificate of voluntary acceptance of any credit loss-of-income insurance purchased. The certificate shall state in boldface type which is larger than the type used in the loan contract that purchase of the insurance is not a necessary condition to receiving the loan and that the insurance may be canceled by the borrower at any time within 15 days after it goes into force, in which event a full refund shall be made of the premium paid. (d) The minimum benefit shall be payment up to the agreed amount on not less than four benefit payments, as stated in the policy, which accrue during a covered period of unemployment, except that during the first 60 days after inception of the policy, the minimum benefit may be payment up to the agreed amount of one-half the number of benefit payments, as stated in the policy, which accrue during a covered period of unemployment. The maximum benefits shall be established in the contract of insurance. (e) If combination credit disability and loss-of-income coverage is offered, credit disability and credit loss-of-income coverages shall also be offered separately. (f) Benefits may not be denied because the insured cannot establish a valid claim for unemployment compensation benefits under Part 1 (commencing with Section 100) of Division 1 of the Unemployment Insurance Code solely because the former employer was not required to contribute to the State Unemployment Fund. (g) If insurance with retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is unemployed, provided that the insured is continuously unemployed during the waiting period set forth in the policy. If insurance without retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is unemployed, after first excluding the elimination period set forth in the policy. For the purpose of this subdivision, a month is any period of 30 consecutive days. (h) When unemployment continues for a number of months equal to or greater than the maximum number of benefit payments stated in the policy, the final payment shall be equal to the difference between a benefit payment and the initial prorated payment. (i) As used in this section, "benefit payment" means payment of an amount equal to a loan repayment installment or a maximum amount established in the contract of insurance, whichever is less. (j) The minimum benefit payment offered may not be less than the amount of a loan repayment installment unless the borrower or borrowers have two or more sources of income. If the maximum benefit payment offered is less than the amount of a loan repayment installment, the borrower shall also be offered coverage in which the maximum benefit payment is equal to the amount of a loan repayment installment.

18293. If credit disability or loss-of-income insurance is provided pursuant to this division, the industrial loan company shall also deliver an understandable written statement to the borrower detailing the conditions when the borrower will be entitled to make a claim under the insurance policy and the procedure to be followed in making the claim.


18294. An industrial loan company may collect the costs for insurance of tangible personal or real property offered as security for a loan, reasonably insured against loss for a reasonable term considering the circumstances of the loan, when the policy of insurance is made payable to the borrower or any member of his family, even though the customary mortgagee clause is attached, and if the insurance is sold at standard rates through duly licensed insurance agents.

18295. An industrial loan company may collect the costs of title insurance for loans secured primarily by real property. The costs for such insurance may be collected if: (1) The principal amount of the loan is at least one thousand dollars ($1,000); (2) The loan is secured by a lien of a deed of trust or mortgage on real property which is the subject of such policy of title insurance; (3) The policy of title insurance is made payable to the lender or jointly to such lender and the borrower as their interests may appear; (4) The coverage of such insurance may not exceed the lesser of the principal amount of the loan or the fair market value of the real property less prior encumbrances; (5) The insurance is placed at standard rates through a title insurance company authorized to do business in the State of California; (6) In connection with the renewal or extension of a loan, the additional cash advance is at least one thousand dollars ($1,000). Such costs as herein authorized are not included in the maximum charges which may be made under this division.


18296. An industrial loan company may collect the costs of insurance of the type defined by subdivision (a) of Section 12640.02 of the Insurance Code. Costs authorized by this section are not included in the maximum charges which may be made under this division.


Article 6.5. Open-end Loans

Ca Codes (fin:18300-18303) Financial Code Section 18300-18303



18300. (a) As used in this article, "open-end loan" means a loan or loans made by an industrial loan company pursuant to a loan agreement which expressly states that it is made pursuant to this section and pursuant to which: (1) The industrial loan company may permit the borrower to obtain advances of money from the industrial loan company from time to time or the industrial loan company may advance money on behalf of the borrower from time to time as directed by the borrower. (2) The amount of each advance and the charges and other permitted costs are debited to an account. (3) The charges are computed from time to time on the unpaid balances of the borrower's account, excluding from the computation any unpaid charges other than permitted fees, costs and expenses. (4) The borrower has the privilege of paying the account in full at any time or in monthly installments. (b) Subject to the written approval of the commissioner of the industrial loan company's plan of business for making open-end loans as not being misleading or deceptive and subject to regulations the commissioner may promulgate with respect to open-end loans under Section 18347, an industrial loan company may make open-end loans pursuant to this section and may contract for and receive thereon charges as set forth in Section 18212. Such charges may be calculated on an amount not exceeding the greater of: (1) The actual daily unpaid balances of the open-end account in the billing cycle for which the charge is made, in which case one-thirtieth of the monthly rate may be charged for each day the unpaid balance is outstanding. (2) The average daily unpaid balance of the open-end account in the billing cycle for which the charge is made, which is the sum of the amount unpaid each day during that cycle divided by the number of days in that cycle. The amount unpaid on a day is determined by adding to the balance unpaid as of the beginning of that day all advances and other debits and deducting all payments and other credits made or received as of that day. The billing cycle shall be monthly. A billing cycle is monthly if the closing date of that cycle is the same date each month or does not vary by more than four days from the regular date. (c) No industrial loan company shall enter into any agreement for an open-end loan that provides for a minimum payment that would result in the full repayment of principal over more than the maximum periods set forth below opposite the respective size of loans. Principal amount of loan Maximum period Less than $1,500 .......... 24 months and 15 days $1,500 but less than 36 months and 15 days $2,500 .................... $2,500 but less than 48 months and 15 days $4,000 .................... $4,000 but less than 60 months and 15 days $6,000 .................... $6,000 but less than 84 months and 15 days $10,000 ................... The minimum payment shall be determined by the amount of the initial loan advance and shall continue at that amount until a subsequent loan advance is made, at which time the minimum payment shall be determined by the amount of the unpaid balance of the loan after the advance and including the advance. Minimum payments after each advance shall be determined in the same manner. (d) On open-end loans the industrial loan company may contract for and receive the fees, costs and expenses permitted on other loans, including those permitted by Sections 18215, 18218, 18290, 18294, and 18412, subject to all of the conditions and restrictions set forth in those sections with the following variations: (1) The charge for credit life insurance shall be on a monthly basis. No credit life insurance written in connection with an open-end loan shall be cancelled by the lender because of delinquency of the borrower in the making of the minimum payments thereon unless one or more of such payments is past due for a period of 90 days or more, and the lender shall advance to the insurer the amounts required to keep the insurance in force during such period, which amounts may be debited to the borrower's account. (e) An industrial loan company shall not make an open-end loan in excess of ten thousand dollars ($10,000) principal amount. (f) The loan contract shall provide for payment of minimum payments complying with subdivision (c). All loans made pursuant to this section shall be repayable by equal or substantially equal monthly payments during the term of the loan. (g) In lieu of applying the provisions of Section 18290, the provisions contained herein shall apply to open-end loans. An industrial loan company may provide insurance on the life of one or more borrowers with the borrower's consent. The form of the insurance shall be approved by the Insurance Commissioner and shall be in an amount not in excess of the indebtedness. The amount charged to the borrower for such insurance shall not exceed the amount provided in paragraph (1) or (2) following, whichever is less: (1) The premium rate filed with the Insurance Commissioner for the coverage provided pursuant to Article 5.9 (commencing with Section 779.1) of Chapter 1 of Part 2 of Division 1 of the Insurance Code and which has not been disapproved by the Insurance Commissioner. (2) Fifty cents ($0.50) per year per one hundred dollars ($100) of indebtedness (and in the same proportion for longer or shorter maturities and larger or smaller amounts) or such different maximum as is fixed by the Insurance Commissioner by a valid and effective regulation hereafter adopted. Notwithstanding Section 18291, any such life insurance shall be in force as soon as the loan is made or coverage is agreed upon, whichever is later. (h) The open-end loan agreement shall contain the name and address of the industrial loan company and shall disclose the nature of the security taken, if any, the method of determining the minimum payments which will be required to repay the initial advance, and any subsequent advances on the loan, and the agreed rate of charge. (i) At the time the open-end loan agreement is made the industrial loan company shall obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If such statement discloses a broker or other person has participated, the company shall obtain a full statement of all sums paid or payable to the broker or other person. The open-end loan agreement and the statement required by this subdivision shall be kept for a period of two years after the date the loan has been paid in full, or has matured according to its terms, or has been charged off. (j) Except in the case of an account which the industrial loan company deems to be uncollectible, or with respect to which delinquency collection procedures have been instituted, the company shall deliver or cause to be delivered to the borrower, or any one thereof, for each billing cycle at the end of which there is an outstanding balance in the account or with respect to which a finance charge is imposed, a statement setting forth the outstanding balance in the account at the beginning of the billing cycle, the date and amount of any subsequent loan advance during the period, the amounts and dates of crediting to the account during the billing cycle for payments, the amount of any finance charge debited to the account during the billing cycle, the annual percentage rate of finance charged determined under Regulation Z promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. 226), the balance on which the finance charge was computed, the closing date of the billing cycle, the outstanding balance on that date, and the minimum monthly payment required in the absence of any additional advance. If there has been any change in the nature of the security for the loan since the next preceding advance, the statement shall contain or be accompanied by a statement of the nature of the security for the loan after such change. (k) An industrial loan company shall not take any instrument in connection with an open-end loan in which blanks are left to be filled in after execution. (l) Subdivision (a) of Section 18205, and Sections 18206, 18214, 18222, 18231, and 18235 shall not apply to open-end loans. (m) An industrial loan company shall not make an open-end loan secured by real property in whole or in part. (n) An industrial loan company shall not charge for, offer or provide credit disability insurance in connection with an open-end loan. (o) This section shall not apply to loans other than open-end loans.


18301. (a) Whenever authorized by the commissioner, an industrial loan company whose thrift obligations are insured by the Federal Deposit Insurance Corporation may make a secured line of credit loan. Security for line of credit loans shall be of a kind and class that has been declared eligible by the commissioner. (b) Line of credit loans authorized under Title VIII (Alternative Mortgage Transaction Party Act of 1982) of the Garn-St. Germain Depository Institutions Act of 1982 are not subject to subdivision (a). (c) As used in this article, "line of credit loan" means a loan whereby a borrower requests and a company disburses loan proceeds in an installment or installments during the term of the loan by an advance or series of advances, whether or not the timing of the advance or advances is known on the date the loan is approved by the company. (d) This section does not apply to secured line of credit lending activities engaged in on or before May 1, 1989, unless, after that date there is a change in the secured line of credit plan of business by the company.

18302. An industrial loan company shall file a written request for authorization to conduct business under subdivision (a) of Section 18301. The request shall include all of the following information: (a) A description of the company's proposed plan of business. (b) The character, business qualifications, and other experience of the proposed officers and managers directing the line of business for which authorization is requested. (c) Any other facts and circumstances bearing on the proposal that, in the opinion of the commissioner, may be relevant.


18303. The commissioner shall approve the request made pursuant to Section 18302 within 30 days after filing unless the commissioner has ascertained that the company has failed to show either of the following: (a) That the proposed plan of business has a reasonable promise of a successful operation. (b) That the company has a person with the necessary business qualifications, experience, or ability to direct and manage the operations of the plan of business.


Chapter 4. Investment Certificates

Ca Codes (fin:18315-18325) Financial Code Section 18315-18325



18315. (a) When authorized to conduct business pursuant to this division, an industrial loan company may sell and issue its investment certificates subject to the provisions of this division. The commissioner may, by written order directed to a company or by rule or regulation, impose terms and conditions upon investment certificates and the sale or redemption thereof or the payment of interest thereon, as he or she deems reasonable and necessary or advisable for the protection of the company or the public, and he or she may from time to time in his or her discretion amend, alter or revoke any such order or regulation or any condition or provision thereof. (b) Any change in the form, terms, or provisions of outstanding investment certificates or in the rights, privileges, or restrictions upon the holder or issuer thereof is deemed a sale and issuance of investment certificates. (c) The company named in any order issued pursuant to subdivision (a) of this section may, within 15 days after receipt thereof, file with the commissioner its written request for hearing. The filing of the request shall not operate to postpone or suspend the effectiveness of any order issued by the commissioner unless otherwise directed by the commissioner. The commissioner shall, within 15 days after the receipt of the written request or at such later time as may be mutually agreed with the company, cause the matter to be heard and shall thereafter issue his final decision. The decision may be amended or set aside by the commissioner at any time. (d) Every order or decision of the commissioner made pursuant to this section is subject to judicial review in accordance with law.


18316. An industrial loan company may, in addition to the sale of installment investment certificates with loans, sell or negotiate investment certificates either in certificates, or in receipt book form. The certificates may provide for the payment of money at any time, either fixed or uncertain. The company may receive payments therefor in installments or otherwise, with or without an allowance of interest upon such installments.


18317. No company may have investment certificates outstanding with a person or related persons in an aggregate amount in excess of 20 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319.


18318. Investment or thrift certificates may be issued to or in the name of a minor and as such shall be for the exclusive right and benefit of such minor and may be redeemed in whole or part by said minor or his order and payment so made is a valid release and discharge to the company for such payment.


18318.5. An investment or thrift certificate that is a multiple-party account as defined in Section 5132 of the Probate Code is governed by Part 2 (commencing with Section 5100) of Division 5 of the Probate Code.

18319. In no event shall an industrial loan company have outstanding at any time its investment certificates (exclusive of those hypothecated with the company issuing them) in an aggregate sum in excess of 20 times the aggregate amount of its paid-up and unimpaired capital and such of its unimpaired surplus as is declared by a bylaw of the company to be not available for cash dividends. The commissioner by rule or by order issued pursuant to Section 18315, may limit the amount of outstanding investment certificates of an industrial loan company.

18320. Notwithstanding Section 18319, an industrial loan company shall in no event: (a) Have outstanding at any time during its first 12 months of operation as an industrial loan company under this division, its investment certificates (exclusive of those hypothecated with the company issuing them) in an aggregate sum in excess of six times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319. (b) After 12 months of operation as an industrial loan company under this division and during the next 12 months of operation the industrial loan company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which (exclusive of those investment certificates hypothecated with the company issuing them) in no event shall exceed eight times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319. (c) After 24 months of operation as an industrial loan company under this division and during the next 24 months of operation the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which (exclusive of those investment certificates hypothecated with the company issuing them) in no event shall exceed 12 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319. (d) If after 36 months of operation as an industrial loan company under this division the outstanding investment certificates of a company are insured by the Federal Deposit Insurance Corporation, the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which it may have outstanding to the extent authorized by the capital-adequacy requirements of the federal Deposit Insurance Corporation. An industrial loan company that is authorized to increase the aggregate sum of its investment certificates to the extent authorized by the capital-adequacy requirements of the Federal Deposit Insurance Corporation also shall meet the requirements of subdivisions (e) and (f). (e) After 48 months of operation as an industrial loan company under this division and during the next 12 months of operation the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which, exclusive of those investment certificates hypothecated with the company issuing them, in no event shall exceed 15 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319, only if both of the following requirements are met: (1) A company shall maintain a liquidity reserve in cash, or cash equivalent, equal to 1 1/2 percent of its total investment certificates outstanding. "Cash equivalent" means investments legal for commercial banks under the laws of this state, with a maturity of not more than 12 months. (2) In addition to the reserve for losses required by the commissioner pursuant to Section 18343, a company shall establish and maintain such special reserves for losses as the commissioner, by rule or order, may require. (f) After 60 months of operation as an industrial loan company under this division, the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which it may have outstanding, which, exclusive of those investment certificates hypothecated with the company issuing them, in no event shall exceed 20 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319, and which may exceed 15 times the amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319 only if the requirements of subdivision (e) are met and the capital stock is not less than one million two hundred fifty thousand dollars ($1,250,000) and the unimpaired paid-in surplus is not less than seven hundred fifty thousand dollars ($750,000). (g) Whenever the commissioner deems it reasonable and necessary or advisable for the protection of the public (including the fact that an industrial loan company is not a member of the Federal Deposit Insurance Corporation), the commissioner may at any time by order authorize said industrial loan company to have its investment certificates outstanding in either a lesser aggregate sum than the maximum aggregate amounts permitted by subdivision (a), (b), (c), (d), (e), or (f), or none at all. (h) The request for authority filed with the commissioner pursuant to subdivisions (b), (c), (d), (e), and (f) shall be set forth in an application in such form and containing such information as the commissioner may require. (i) The commissioner shall by rule or regulation set forth the criteria that must be met before an industrial loan company can be granted authority to increase the aggregate sum of its outstanding investment certificates. (j) If the commissioner does not within 60 days of the filing of an application grant a request by an industrial loan company operating under this division, for authority to increase the aggregate sum of its outstanding investment certificates to the requested amount, or issues an order pursuant to subdivision (g), the company may file with the commissioner its written request for hearing in accordance with subdivisions (c) and (d) of Section 18315.


18321. (a) Nothing in this division authorizes an industrial loan company to receive demand deposits. (b) Subject to Section 18315, an industrial loan company that is a member of the Federal Deposit Insurance Corporation pursuant to Section 18521.5 may use the term "certificate of deposit" as defined in Section 18003.6 with respect to an investment certificate that does not authorize either of the following: (1) Redemption prior to its maturity. (2) Reduction of the interest rate payable thereon other than a variable interest rate.

18322. An industrial loan company shall obtain the written consent of the commissioner prior to accepting any moneys pursuant to Section 17409. The commissioner may, by regulation or order, impose or revise limitations and requirements, including, but not limited to, liquidity and reserve requirements, as, in the opinion of the commissioner, are necessary for safety and soundness. The commissioner shall rescind that consent if, at any time, the industrial loan company exceeds the limitations or fails to adhere to the requirements imposed or, if in the opinion of the commissioner, the continued acceptance of those moneys would pose a threat to the safety and soundness of the company.


18325. (a) An industrial loan company shall not impose any charge on a periodic investment or thrift certificate, or on an investor in an account evidenced by such certificate, for the failure of an investor to invest, or for the late investment of, any agreed periodic installment investment into such an account. An industrial loan company shall pay interest on periodic investment or thrift certificates at the same rate of interest per annum as is paid on investment or thrift certificates as to which an investor has not agreed to make periodic installment investments. (b) As used in this section "periodic investment or thrift certificate" means an investment arrangement under which an investor undertakes to make periodic investments of a specified amount into one account, except, however, a periodic investment or thrift certificate shall not mean an impound account established for the purposes of the payment of taxes or other expenses and obligations in connection with a loan secured by real property, or a certificate of investment issued in connection with a loan pursuant to Section 18322.


Chapter 5. Administration And Powers Of The Commissioner

Article 1. General

Ca Codes (fin:18339-18368) Financial Code Section 18339-18368



18339. As of the operative date of this section: (a) There is established an Industrial Loan Account in the Financial Institutions Fund in the State Treasury. (b) All money on deposit with the Treasurer in the State Corporations Fund that has been received or collected by the Commissioner of Corporations under this division or any other law relating to industrial loan companies or the industrial loan business, all other assets of the State Corporations Fund that have been acquired by the Commissioner of Corporations under this division or any other law relating to industrial loan companies or the industrial loan business, and all liabilities of the State Corporations Fund that have been incurred under this division or any other law relating to industrial loan companies or the industrial loan business shall be transferred to the Industrial Loan Account.


18340. All money received or collected by the commissioner under this division or any other law relating to industrial loan companies or the industrial loan business shall be deposited in the State Treasury to the credit of the Industrial Loan Account of the Financial Institutions Fund.


18340.5. All expenses of the department in administering this division and other laws relating to industrial loan companies or the industrial loan business shall be paid out of the Industrial Loan Account; and, except as otherwise provided in Section 276 or 277, the Industrial Loan Account shall be used only for such purposes.


18342. Industrial loan companies have the powers specified in this division. In addition, industrial loan companies have the general powers conferred upon corporations by the General Corporation Law. The powers granted, including those granted by the General Corporation Law, are subject to the supervision and control of, and the conditions imposed by, the commissioner.


18343. The commissioner may require an industrial loan company to establish and maintain reasonable reserves for loans made, and contracts or other obligations purchased or discounted in accordance with sound business practices. The commissioner may by rule or order: (a) Establish reasonable standards for the classification of loans and contracts or other obligations as to their delinquency or currency. (b) Prescribe the conditions requiring the writing off of delinquent loans and contracts or other obligations and the conditions under which they may be restored as part of corporate assets. (c) Establish the basis upon which reasonable and adequate reserves shall be created and maintained.


18344. An industrial loan company shall not conduct the business of making loans under this division, within any office, room, or place of business in which any other business is solicited or engaged in, or in association or conjunction therewith, except as is authorized in writing by the commissioner upon the commissioner's finding that the character of the other business is such that the granting of the authority would not facilitate evasions of this division or of the rules and regulations made pursuant to this division.


18345. An industrial loan company shall notify the commissioner of every change in the officers, directors and management personnel of the company and of each branch of the company within 15 days of such change. Such report shall include a complete identification of each person assuming any such office or duties and such other information as the commissioner shall prescribe. The commissioner may by rule or order prescribe the positions or duties which will be deemed to be management personnel within the meaning of this section.


18346. The commissioner may require each industrial loan company to file with the commissioner a fidelity bond indemnifying the industrial loan company against loss of money or property by act of any officer, director or employee of such company, having access to assets owned by or pledged with the company. The fidelity bond shall contain a rider which provides that the coverage of the bond extends to all officers, directors and employees of the insured who are compensated by the insured. The commissioner may require that the fidelity bond contain a rider which provides that coverage of the bond extends to all officers and directors who are not compensated by the insured. The fidelity bond may be either a primary commercial blanket bond, a blanket position bond, or a banker's blanket bond, but shall be written by an admitted surety insurer. The commissioner shall by regulation prescribe the amount of fidelity coverage to be required. The sufficiency of the sureties on the bond are at all times subject to the approval of the commissioner.


18346.1. (a) In lieu of providing a bond required pursuant to Section 18346, a licensee may deposit with the commissioner security in an amount as the commissioner may determine, for the protection of the public against loss suffered through theft or mysterious disappearance. Such security may only be in the form of cash, lawful money of the United States, bearer bonds issued by the United States or the State of California or evidence of deposit in banks or investment certificates issued by insured savings and loan associations authorized or licensed to do business in the State of California. (b) Security deposited with the commissioner pursuant to subdivision (a) shall not be deemed an asset of the licensee for the purpose of complying with Article 3 of Chapter 2 of this division.


18347. The commissioner may establish rules and regulations which are reasonable and necessary to carry out the purposes and provisions of this division, including rules and regulations concerning the terms, form, offer, and sale of investment certificates.


18349. The commissioner may, upon reasonable notice and opportunity to be heard, suspend or revoke the license of an industrial loan company if the commissioner finds that the industrial loan company has violated any provision of this division or any rule or regulation of the commissioner made pursuant to this division, or if any factor or condition exists which, if it had existed at the time of the original application for a license, reasonably would have warranted the commissioner in refusing originally to issue such license.


18349.5. (a) For the purposes of this section, the following definitions are applicable: (1) "Account holder" includes, in the case of an investment certificate account, an investment certificate holder; in the case of a trust account, each trustor and beneficiary of the trust account; and, in the case of any other fiduciary account, each person who occupies, with respect to the account, a position which is similar to the position that a trustor or beneficiary occupies with respect to a trust account. (2) "Industrial loan company" means any corporation which falls within the definitions of Sections 18003 and 18003.5. (3) "Order" means any approval, consent, authorization, permit, exemption, denial, prohibition, or requirement applicable to a specific case issued by the commissioner, including without limitation, any condition thereof. "Order" does not include any certificate of authority or license issued by the commissioner, but does include any condition of a license and any written agreement made by any person with the commissioner under this division. (4) "Subject person of an industrial loan company" means any director, officer, or employee of the industrial loan company, or any person who participates in the conduct of the business of the industrial loan company. However, "subject person of an industrial loan company" does not include an individual who is a director, officer, or employee of a controlling person of an industrial loan company unless the individual is a director, officer, or employee of the industrial loan company or participates in the conduct of the industrial loan company. (5) "Controlling person" means a person who, directly or indirectly, controls an industrial loan company. (6) "Violation" includes, without limitation, any act done, alone or with one or more persons, for or toward causing, bringing about, participation in, counseling, aiding or abetting a violation. (b) If, after notice and opportunity for hearing, the commissioner finds the following, the commissioner may issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) (A) That the subject person has violated any provision of this division or of any regulation or order issued under this division, or any provision of any other applicable law relating to the business of the industrial loan company; or (B) That the subject person has engaged or participated in any unsafe or unsound act with respect to the business of the industrial loan company; or (C) That the subject person has committed or engaged in any act which constitutes a breach of his or her fiduciary duty as a subject person; and (2) (A) That the industrial loan company has suffered or will probably suffer substantial financial loss or other damage by reason of that violation, act, or breach of fiduciary duty; or (B) That the interests of the industrial loan company's accountholders have been or are likely to be seriously prejudiced by reason of the violation, act, or breach of fiduciary duty; or (C) That the subject person has received financial gain by reason of that violation, act, or breach of fiduciary duty; and (3) That the violation, act, or breach of fiduciary duty is one involving personal dishonesty on the part of the subject person, or one which demonstrates a willful or continuing disregard for the safety or soundness of the industrial loan company. (c) If, after notice and opportunity for hearing, the commissioner finds the following, the commissioner may issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) That the subject person's conduct or practice with respect to another industrial loan company or business institution has resulted in substantial financial loss or other damage; and (2) That the conduct or practice has evidenced personal dishonesty or willful or continuing disregard for the safety and soundness of the other industrial loan company or business institution; and (3) That the conduct or practice is relevant in that it demonstrates unfitness to continue as a subject person of the industrial loan company. (d) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) That it is necessary for the protection of the industrial loan company or the interests of the industrial loan company's account holders that the commissioner issue the order immediately, and (2) (A) That any of the factors set forth in paragraphs (1) and (2) of subdivision (b) and any of the factors set forth in paragraph (3) of subdivision (c) are true with respect to the subject person; or (B) That any of the factors set forth in paragraphs (1), (2), and (3) of subdivision (c), and the factor set forth in paragraph (3) of subdivision (c) are true with respect to the subject person. (e) (1) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner. (A) That the subject person has been charged in an indictment issued by a grand jury or in an information, complaint, or similar pleading issued by a United States attorney, district attorney, or other governmental official or agency authorized to prosecute crimes, with a crime which is punishable by imprisonment for a term exceeding one year and which involves dishonesty or breach of trust; and (B) That the person's continuing to serve as a subject person of the industrial loan company may pose a material threat to the interest of the industrial loan company's account holders or may threaten to materially impair public confidence in the industrial loan company. In case the criminal proceedings are terminated other than by a judgment of conviction the order shall be deemed rescinded. (2) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company or a former subject of an industrial loan company, from his or her office, if any, with the industrial loan company and prohibiting the person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the industrial loan company: (A) That the person has been finally convicted of a crime which is punishable by imprisonment for a term exceeding one year and which involves dishonesty or breach of trust; and (B) That the person's continuing to serve or resumption of service as a subject person of the industrial loan company may pose a material threat to the interests of the industrial loan company's account holders or may threaten to materially impair public confidence in the industrial loan company. (3) The fact that any subject person of an industrial loan company charged with a crime involving dishonesty or breach of trust is not finally convicted of that crime shall not preclude the commissioner from issuing an order regarding the subject person pursuant to other provisions of this division. (f) Within 30 days after an order is issued pursuant to subdivision (d) or (e), the person to whom the order is issued may file an application for a hearing. (g) Any person to whom an order is issued under subdivision (b), (c), (d), or (e) may apply to the commissioner to modify or rescind that order. The commissioner shall not grant that application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when he or she becomes a subject person of an industrial loan company, comply with all applicable provisions of this division and of any regulation or order issued thereunder. (h) A hearing held pursuant to this section shall be private unless the commissioner, in his or her discretion, after fully considering the views of the parties, determines that a public hearing is necessary to protect the public interest. (i) (1) It is unlawful for any subject person of an industrial loan company or former subject person of an industrial loan company to whom an order is issued under subdivision (b), (c), (d), or (e) to do any of the following, except with the prior consent of the commissioner, so long as the order is effective: (A) To serve or act as a director, officer, employee, or agent of any industrial loan company. (B) To vote any shares or other securities of an industrial loan company having voting rights, for the election of any person as a director of an industrial loan company. (C) Directly or indirectly, to solicit, procure, or transfer or attempt to transfer, or vote any proxy, consent, or authorization with respect to any shares or other securities of any industrial loan company having voting rights. (D) Otherwise to participate in any manner in the conduct of the business of any industrial loan company. (2) Any person who violates paragraph (1) shall, upon conviction, be punished by a fine of not more than ten thousand dollars ($10,000) or imprisoned in the state prison, or in a county jail not to exceed one year, or by both such fine and imprisonment. (3) If the commissioner believes that any person has violated paragraph (1), the commissioner may bring an action in a court of competent jurisdiction petitioning the court to assess that person a civil penalty in an amount as the commissioner may specify; provided, however, that the amount of the civil penalty shall not exceed two thousand five hundred dollars ($2,500) for each violation or, in the case of a continuing violation, two thousand five hundred dollars ($2,500) for each day for which the violation continues. In determining the amount of a civil penalty to be assessed under this paragraph, the court shall consider the financial resources and good faith of the person charged, the gravity of the violation, the history of previous violations by the person, and such other factors as in the opinion of the court may be relevant.


18349.5. (a) For the purposes of this section, the following definitions are applicable: (1) "Account holder" includes, in the case of an investment certificate account, an investment certificate holder; in the case of a trust account, each trustor and beneficiary of the trust account; and, in the case of any other fiduciary account, each person who occupies, with respect to the account, a position which is similar to the position that a trustor or beneficiary occupies with respect to a trust account. (2) "Industrial loan company" means any corporation which falls within the definitions of Sections 18003 and 18003.5. (3) "Order" means any approval, consent, authorization, permit, exemption, denial, prohibition, or requirement applicable to a specific case issued by the commissioner, including without limitation, any condition thereof. "Order" does not include any certificate of authority or license issued by the commissioner, but does include any condition of a license and any written agreement made by any person with the commissioner under this division. (4) "Subject person of an industrial loan company" means any director, officer, or employee of the industrial loan company, or any person who participates in the conduct of the business of the industrial loan company. However, "subject person of an industrial loan company" does not include an individual who is a director, officer, or employee of a controlling person of an industrial loan company unless the individual is a director, officer, or employee of the industrial loan company or participates in the conduct of the industrial loan company. (5) "Controlling person" means a person who, directly or indirectly, controls an industrial loan company. (6) "Violation" includes, without limitation, any act done, alone or with one or more persons, for or toward causing, bringing about, participation in, counseling, aiding or abetting a violation. (b) If, after notice and opportunity for hearing, the commissioner finds the following, the commissioner may issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) (A) That the subject person has violated any provision of this division or of any regulation or order issued under this division, or any provision of any other applicable law relating to the business of the industrial loan company; or (B) That the subject person has engaged or participated in any unsafe or unsound act with respect to the business of the industrial loan company; or (C) That the subject person has committed or engaged in any act which constitutes a breach of his or her fiduciary duty as a subject person; and (2) (A) That the industrial loan company has suffered or will probably suffer substantial financial loss or other damage by reason of that violation, act, or breach of fiduciary duty; or (B) That the interests of the industrial loan company's accountholders have been or are likely to be seriously prejudiced by reason of the violation, act, or breach of fiduciary duty; or (C) That the subject person has received financial gain by reason of that violation, act, or breach of fiduciary duty; and (3) That the violation, act, or breach of fiduciary duty is one involving personal dishonesty on the part of the subject person, or one which demonstrates a willful or continuing disregard for the safety or soundness of the industrial loan company. (c) If, after notice and opportunity for hearing, the commissioner finds the following, the commissioner may issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) That the subject person's conduct or practice with respect to another industrial loan company or business institution has resulted in substantial financial loss or other damage; and (2) That the conduct or practice has evidenced personal dishonesty or willful or continuing disregard for the safety and soundness of the other industrial loan company or business institution; and (3) That the conduct or practice is relevant in that it demonstrates unfitness to continue as a subject person of the industrial loan company. (d) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner: (1) That it is necessary for the protection of the industrial loan company or the interests of the industrial loan company's account holders that the commissioner issue the order immediately, and (2) (A) That any of the factors set forth in paragraphs (1) and (2) of subdivision (b) and any of the factors set forth in paragraph (3) of subdivision (c) are true with respect to the subject person; or (B) That any of the factors set forth in paragraphs (1), (2), and (3) of subdivision (c), and the factor set forth in paragraph (3) of subdivision (c) are true with respect to the subject person. (e) (1) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company from his or her office with the industrial loan company and prohibiting the subject person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the commissioner. (A) That the subject person has been charged in an indictment issued by a grand jury or in an information, complaint, or similar pleading issued by a United States attorney, district attorney, or other governmental official or agency authorized to prosecute crimes, with a crime which is punishable by imprisonment for a term exceeding one year and which involves dishonesty or breach of trust; and (B) That the person's continuing to serve as a subject person of the industrial loan company may pose a material threat to the interest of the industrial loan company's account holders or may threaten to materially impair public confidence in the industrial loan company. In case the criminal proceedings are terminated other than by a judgment of conviction the order shall be deemed rescinded. (2) If the commissioner finds the following, the commissioner may immediately issue an order suspending or removing a subject person of an industrial loan company or a former subject of an industrial loan company, from his or her office, if any, with the industrial loan company and prohibiting the person from further participating in any manner in the conduct of the business of the industrial loan company, except with the prior consent of the industrial loan company: (A) That the person has been finally convicted of a crime which is punishable by imprisonment for a term exceeding one year and which involves dishonesty or breach of trust; and (B) That the person's continuing to serve or resumption of service as a subject person of the industrial loan company may pose a material threat to the interests of the industrial loan company's account holders or may threaten to materially impair public confidence in the industrial loan company. (3) The fact that any subject person of an industrial loan company charged with a crime involving dishonesty or breach of trust is not finally convicted of that crime shall not preclude the commissioner from issuing an order regarding the subject person pursuant to other provisions of this division. (f) Within 30 days after an order is issued pursuant to subdivision (d) or (e), the person to whom the order is issued may file an application for a hearing. (g) Any person to whom an order is issued under subdivision (b), (c), (d), or (e) may apply to the commissioner to modify or rescind that order. The commissioner shall not grant that application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when he or she becomes a subject person of an industrial loan company, comply with all applicable provisions of this division and of any regulation or order issued thereunder. (h) A hearing held pursuant to this section shall be private unless the commissioner, in his or her discretion, after fully considering the views of the parties, determines that a public hearing is necessary to protect the public interest. (i) (1) It is unlawful for any subject person of an industrial loan company or former subject person of an industrial loan company to whom an order is issued under subdivision (b), (c), (d), or (e) to do any of the following, except with the prior consent of the commissioner, so long as the order is effective: (A) To serve or act as a director, officer, employee, or agent of any industrial loan company. (B) To vote any shares or other securities of an industrial loan company having voting rights, for the election of any person as a director of an industrial loan company. (C) Directly or indirectly, to solicit, procure, or transfer or attempt to transfer, or vote any proxy, consent, or authorization with respect to any shares or other securities of any industrial loan company having voting rights. (D) Otherwise to participate in any manner in the conduct of the business of any industrial loan company. (2) Any person who violates paragraph (1) shall, upon conviction, be punished by a fine of not more than ten thousand dollars ($10,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail not to exceed one year, or by both that fine and imprisonment. (3) If the commissioner believes that any person has violated paragraph (1), the commissioner may bring an action in a court of competent jurisdiction petitioning the court to assess that person a civil penalty in an amount as the commissioner may specify; provided, however, that the amount of the civil penalty shall not exceed two thousand five hundred dollars ($2,500) for each violation or, in the case of a continuing violation, two thousand five hundred dollars ($2,500) for each day for which the violation continues. In determining the amount of a civil penalty to be assessed under this paragraph, the court shall consider the financial resources and good faith of the person charged, the gravity of the violation, the history of previous violations by the person, and such other factors as in the opinion of the court may be relevant.


18350. Each industrial loan company shall pay to the commissioner its pro rata share of all costs and expenses of the department in administering this division and other laws relating to industrial loan companies or the industrial loan business, as estimated by the commissioner for the ensuing year and of any deficit actually incurred or anticipated in the year in which the assessment is made. The pro rata share shall be the proportion which a company's assets bear to the aggregate assets of all companies as shown by the latest annual reports of the companies to the commissioner. The pro rata share shall not include the costs of any examinations provided for in Section 18392, unless they cannot be collected from the company examined.


18351. On or before the 30th day of November in each year, the commissioner shall notify each industrial loan company by mail of the amount assessed and levied against it and that amount shall be paid within 20 days thereafter. If payment is not made within 20 days, the commissioner shall assess and collect a penalty in addition to the assessment, of 1 percent of the assessment for each month or part of a month that the payment is delayed or withheld.


18352. In the levying and collection of an assessment pursuant to Section 18350, an industrial loan company shall not be assessed for nor be permitted to pay less than two hundred fifty dollars ($250) per year, or not less than twenty-five dollars ($25) per month or fraction of a month for the unexpired year ending December 31st following its incorporation.


18353. If an industrial loan company fails to pay the assessment provided in Section 18350 on or before the 30th day of December following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to that company. If, after such an order is made, a request for hearing is filed in writing within 15 days from the date of service of the order and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a company shall not issue thrift certificates or make loans or otherwise conduct business pursuant to this division except as may be permitted by order of the commissioner; provided, however, that neither the revocation, suspension or surrender of a certificate shall affect the powers of the commissioner as provided in this division. This section shall become operative January 1, 1969. For the purpose of making its provisions operative, the commissioner shall issue to all industrial loan companies authorized to conduct business under this division on said date a certificate of authorization to conduct business pursuant to this division in such form as the commissioner may prescribe and as provided in Section 18101 and thereafter all such companies shall be conclusively presumed to be conducting business under this division pursuant to such certificate of authorization.


18354. The commissioner may require the attendance of witnesses and examine under oath all persons whose testimony he requires relative to the affairs of an industrial loan company or to the subject matter of any examination, investigation, or hearing.


18355. Whenever, after an examination, investigation or hearing under this division, the commissioner deems it of public interest or advantage, he may certify a record to the proper prosecuting official of the county or city in which the act complained of, examined, or investigated, occurred.

18356. The commissioner may order any industrial loan company to desist from any conduct which the commissioner finds in violation of this division or any rule or order of the commissioner made pursuant to this division.

18357. (a) If it appears to the commissioner that an industrial loan company has violated or failed to comply with the provisions of its articles of incorporation, or with any law of this state, the commissioner may by written order addressed to the company, direct that company to discontinue the violation and to comply with the law. (b) Whenever it appears from the report of an industrial loan company or the commissioner has reason to conclude, that the capital stock of an industrial loan company is impaired or reduced below the amount required by this division, the commissioner shall by written order addressed to the company, direct that company to make good the alleged deficiency or impairment of capital. If the company fails to make good the alleged deficiency or impairment of capital, the commissioner may forthwith take possession of the property and business of the industrial loan company pursuant to Section 18415. If the company fails to make good the alleged deficiency or impairment of capital within 60 days of the date of the order, the commissioner shall take possession of the industrial loan company pursuant to Section 18415. The capital of an industrial loan company is impaired when the minimum amount of capital required by Sections 18130 and 18131 is reduced by a net deficit balance in the company's surplus account.

18358. If it appears to the commissioner that an industrial loan company is conducting business in an unsafe, unsound, or injurious manner, the commissioner may, by written order, direct the discontinuance of any such unsafe or injurious practices.


18359. Whenever the commissioner is authorized to issue an order pursuant to Section 18357 or Section 18358 of this division, the commissioner may issue an order directing an industrial loan company to discontinue or limit the sale of its investment certificates or to impound the proceeds from the sale of its investment certificates in such manner as the commissioner may specify in such order.


18360. The company named in any order issued pursuant to this division for which no express hearing right is provided, including Sections 18356, 18357, 18358, 18359, 18363, and 18415.3 may, within 15 days after receipt thereof, file with the commissioner its written request for hearing. The filing of that request shall not operate to postpone or suspend the effectiveness of any order issued by the commissioner unless otherwise directed by the commissioner. The order may be amended or set aside by the commissioner at any time. The commissioner shall, within 30 business days after the receipt of that written request or at a later time as may be mutually agreed with the company, cause that matter to be heard.

18361. After any order is made final, the industrial loan company shall have 10 days in which suit may be commenced to restrain enforcement of such order and unless such action is commenced and enforcement of the final order is enjoined within 10 days by the court in which such suit is brought, the company shall comply with the final order.


18362. (a) If the commissioner believes that an industrial loan company or its directors, officers, agents, or employees have violated or are about to violate any of the provisions of this division, or any provision of an order, license, permit, decision, demand, or requirement of the commissioner, the commissioner may bring an action against such persons to enjoin those persons from continuing the violation or the attempt to violate this division, or doing any act in furtherance thereof. The commissioner shall bring such action in the name of the people in the superior court, and the court may enter an order or judgment awarding a preliminary or final injunction as is proper. (b) If the commissioner determines it is in the public interest, the commissioner may include in any action authorized by subdivision (a) a claim for ancillary relief, including, but not limited to, a claim for restitution or disgorgement or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action, and the court shall have jurisdiction to award the additional relief. (c) Any person who violates any provision of this division, or who violates any rule or order adopted pursuant to this division, shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) 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 commissioner in any court of competent jurisdiction. (d) As applied to civil and criminal penalties for acts in violation of this division, the remedies provided by this section and by other sections of this division are not exclusive, and may be sought and employed in any combination to enforce the provisions of this division.

18363. The commissioner may order an industrial loan company to suspend the redemption of investment certificates or the payment of the liabilities of the company or limit the payment of the liabilities in such manner as he prescribes, if it appears to the commissioner that such action is necessary for the protection of the company, its investors or creditors, or in the public interest. The order is effective upon receipt of notice by the company and continues in effect until rescinded or modified by the commissioner in a writing delivered to the manager or executive officer of the company. Nothing in this section shall affect the right of any company to pay its current operating expenses and liabilities incurred during the period of suspension or limitation.


18364. After an order of suspending or limiting the payment of liabilities is effective and until that order is rescinded, the industrial loan company shall make no assignment or hypothecation of any indebtedness due to it from an investor without first crediting thereon the investment liability of the company to such investor-borrower.


18365. The authority granted to the commissioner by Section 18363, may be exercised by him in conjunction with all other powers granted by this chapter, or independently from them.


18366. Every order, decision, license, or other official act of the commissioner is subject to review in accordance with law. Upon review, the burden of proof lies upon the appellant, and the court shall receive and consider any pertinent evidence which was introduced in the formal hearing before the commissioner, whether oral or documentary, concerning the action of the commissioner under review. The review is limited to a consideration and determination of the question of whether there has been an abuse of discretion on the part of the commissioner in making such order, decision, finding, requirement, or rule.

18367. (a) If at any time the commissioner is of the opinion that the further sale of investment certificates by an industrial loan company would be unfair, unjust or inequitable to the purchasers of its investment certificates, the commissioner may, notwithstanding any other provision of this division, order the company to desist and refrain from the further sale of its investment certificates. (b) The company named in any order issued pursuant to subdivision (a) of this section may, within 15 days after receipt thereof, file with the commissioner its written request for hearing. The filing of such request shall not operate to postpone or suspend the effectiveness of any order issued by the commissioner unless otherwise directed by the commissioner. The commissioner shall, within 15 days after the receipt of such written request or at such later time as may be mutually agreed with the company, cause such matter to be heard and shall thereafter issue his final decision. Such decision may be amended or set aside by the commissioner at any time. (c) Every order or decision of the commissioner made pursuant to this section is subject to judicial review in accordance with law.


18368. (a) The commissioner may make the agreements that he or she deems necessary or appropriate in exercising his or her powers. (b) (1) The agreements authorized under subdivision (a) may include, but are not limited to, agreements with agencies of this state, of other states of the United States, or of the United States that regulate financial institutions, relating to examinations of industrial loan companies and other matters. (2) Any agreement with a government agency that regulates financial institutions is exempt from the advertising and competitive bidding requirements of the Public Contract Code.


Article 2. Examinations

Ca Codes (fin:18390-18396) Financial Code Section 18390-18396



18390. For the purpose of discovering violations of this division or securing information required, the commissioner may at any time investigate the affairs and examine the books, accounts, records, and files of every corporation engaged in the business of an industrial loan company or broker, or its holding company or affiliates, whether such corporation acts or claims to act as principal or agent, or under or without the authority of this division. For the purposes of examination and investigation, the commissioner and the commissioner' s duly designated representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes and vaults of all such corporations and their holding companies or affiliates.


18391. Whenever in the judgment of the commissioner the condition of any industrial loan company renders it necessary or expedient to devote any extraordinary attention to its affairs, the commissioner may make any extra examination or investigation and perform any necessary services in connection with its affairs.


18392. The industrial loan company examined shall pay to the commissioner the cost of any examination, investigation or services, including the salary or other compensation paid to the persons making the examination or investigation or rendering services, and overhead costs in connection therewith as fixed by the commissioner. In determining the cost of examination, investigation, or services, the commissioner may use the estimated average hourly cost for all persons performing examinations, investigations, or services for industrial loan companies for the fiscal year.


18393. The commissioner shall, upon receipt of written notification by an industrial loan company that it intends to engage in or is engaging in transactions permitted under Section 18209, make an examination of the affairs and records of each such industrial loan company at least once each year. Such examination shall be made or performed unless such company notifies the commissioner of its election to discontinue such activity and gives evidence that it has disposed of all evidences of indebtedness arising from any such transactions.

18394. Investigation and examination reports prepared by the commissioner's duly designated representatives shall not be public records. Those reports may be disclosed to the officers and directors of a company which is the subject of a report for the purpose of corrective action by those officers or directors. Any such disclosure shall not operate as a waiver of the exemption specified in subdivision (d) of Section 6254 of the Government Code.


18396. (a) In this section, "governmental agency" includes, without limitation, any agency of this state, of any other state of the United States, of the United States, or of any foreign nation. (b) The commissioner may furnish information to a governmental agency that regulates financial institutions. (c) The commissioner may furnish to a governmental agency that administers a loan guarantee or similar program, information relating to a person who participates in the program. (d) The commissioner may furnish to a governmental agency that regulates business activities, other than the type described in subdivision (b), information relating to: (1) A suspected violation of a law administered by the agency. (2) A person involved in an application to the agency for a license, approval, or other authorization. (e) The commissioner may furnish to a governmental agency that is a law enforcement agency, information relating to a suspected crime. (f) This section does not prescribe the only circumstances under which the commissioner may furnish information.


Article 3. Reports And Financial Statements

Ca Codes (fin:18405-18412) Financial Code Section 18405-18412



18405. (a) On or before the 15th day of March of every year, each industrial loan company shall file with the commissioner an audit report containing audited financial statements together with such other relevant information as the commissioner may require relating to the company and to each place of business of the company. The audited financial statements shall include a balance sheet of the company prepared as of the last day of the preceding calendar year and statements of income and of surplus for such calendar year. (b) An industrial loan company whose certificate has been surrendered or revoked shall, on or before 105 days after the effective date of such surrender or revocation, submit to the commissioner a closing audit report containing audited financial statements as of such effective date for the 12 months ending with such effective date, or for such other period as the commissioner may specify. Such report shall include the information required by subdivision (a) of this section and other relevant information specified by the commissioner. A company which has complied with this subdivision is exempted from the provisions of subdivision (a). (c) The reports and financial statements referred to in subdivisions (a) and (b) shall be prepared in accordance with generally accepted accounting principles and shall be accompanied by a report, certificate, or opinion of an independent certified public accountant or independent public accountant, and shall contain such relevant information as the commissioner may require. The audits shall be conducted in accordance with generally accepted auditing standards and the rules and regulations of the commissioner. (d) For good cause and upon written request, the commissioner may extend the time for compliance with subdivisions (a) and (b). (e) If the report, certificate or opinion of the independent accountant referred to in subdivision (c) hereof is in any way qualified, the commissioner may require the company to take such action as he deems appropriate to permit an independent accountant to remove such qualification from the report, certificate or opinion. (f) The commissioner may reject any financial statement, report, certificate or opinion filed pursuant to this section by notifying the company required to make such filing of its rejection and the cause thereof. Within 30 days after the receipt of such notice, the company shall correct such deficiency, and the failure so to do shall be deemed a violation of this division. The commissioner shall retain a copy of all filings so rejected.


18406. Each industrial loan company which has issued and which has outstanding investment certificates shall: (a) Post in a conspicuous and prominent place in each business location a condensed statement of its financial condition, and (b) Furnish to a person prior to such person's investment in an investment certificate a copy of its latest condensed statement of its financial condition. Each year a copy of the condensed statement shall be furnished by mail or hand-delivered to each investment certificate holder. (c) Maintain and have available for public inspection a copy of its latest audited financial statement required by subdivision (a) of Section 18405 in each of its business locations. Any person shall, upon request, be permitted to inspect the statement during regular business hours. (d) The statement required by subdivisions (a) and (b) shall set forth such information and be in such form as may be required by the commissioner.


18407. An industrial loan company shall, when requested by the commissioner, submit its unaudited financial statements, prepared in accordance with generally accepted accounting principles and consisting of at least a balance sheet and a statement of income as of the date and for the period specified by the commissioner. The commissioner may require the submission of such reports on a monthly or other periodic basis.


18408. An industrial loan company shall make other special reports to the commissioner as the commissioner may from time to time require.

18409. The commissioner shall make and file annually with the department as a public record a composite of reports filed by industrial loan companies, and any comments thereon that he or she deems in the public interest.

18410. For the purposes of the composite report provided for by Section 18409, an industrial loan company shall furnish statistical information as is reasonably required by the commissioner, including information for each place of business of the company and as to any parent, subsidiary or affiliated company.


18411. The commissioner may by rule or regulation specify the form and contents of the financial statements, reports, certificates and opinions required to be filed pursuant to this article, and may require that such reports and financial statements be verified in such manner as he may prescribe.


18412. Each report required under this article shall be filed with the commissioner at the time that the commissioner by regulation or order may require. If any industrial loan company fails to make any report required by this article at the time specified by the commissioner, or fails to include in that report any matter required by this article or by the commissioner, the commissioner shall assess and collect a penalty of one hundred dollars ($100) for each day which that report is delayed or withheld by the failure or neglect of that industrial loan company.


Article 4. Possession, Conservatorship, And Liquidation By The Commissioner

Ca Codes (fin:18415-18425.17) Financial Code Section 18415-18425.17



18415. The commissioner may take possession of the property and business of any industrial loan company and retain possession until the company resumes business or its affairs are liquidated if any of the following grounds exist: (a) The capital of an industrial loan company is impaired. (b) An industrial loan company has violated its articles of incorporation or any law of this state. (c) An industrial loan company is conducting its business in an unsafe or unauthorized manner. (d) An industrial loan company refuses to submit its books, papers and affairs to the inspection of any examiner. (e) An officer of any industrial loan company refuses to be examined upon oath touching the concerns of such industrial loan company. (f) An industrial loan company has suspended payment of its obligations. (g) An industrial loan company is in such condition that it is unsound or unsafe for it to transact business. (h) An industrial loan company neglects or refuses to observe any order of the commissioner made pursuant to this division, unless the enforcement of that order is restrained in a proceeding brought by the industrial loan company. (i) An industrial loan company (1) fails to become and continue as either a member of the Federal Deposit Insurance Corporation or a member of the Thrift Guaranty Corporation of California in accordance with Chapter 7 (commencing with Section 18475), (2) has its right to participate in the Thrift Guaranty Corporation of California suspended or revoked pursuant to subdivision (a) of Section 18496 and it is not a member of the Federal Deposit Insurance Corporation, or (3) fails to pay any assessment levied pursuant thereto within the time specified. (j) A member industrial loan company of Guaranty Corporation refuses to permit Guaranty Corporation, its appointed certified public accountant or public accountant, or specialized committees or employees to fulfill their duties under Section 18496. (k) An industrial loan company has sold or issued investment certificates in violation of the provisions of this division. (l) An industrial loan company has failed to maintain in effect a bond required under the provisions of this division. (m) Any fact or condition exists which, if it had existed at the time of the original application for authority to organize and establish a corporation to engage in the industrial loan business reasonably would have warranted the commissioner in disapproving the application. (n) An application for membership in the Federal Deposit Insurance Corporation has not been filed with and accepted by the Federal Deposit Insurance Corporation on or before January 15, 1990. If the commissioner takes possession of the business and property of an industrial loan company, the company, with the consent of the commissioner, may resume business upon prescribed conditions.


18415.1. Whenever the commissioner has taken possession of the property and business of an industrial loan company, that industrial loan company, within 10 days after the taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the head office of the industrial loan company is located to enjoin further proceedings. The commissioner may exercise all powers granted by this article during the 10-day period after taking possession of the property and business of the industrial loan company. The court, after citing the commissioner to show cause why further proceedings should not be enjoined and after a hearing and a determination of the facts upon the merits may dismiss the application or enjoin the commissioner from further proceedings and direct the commissioner to surrender the property and business to the industrial loan company, or make such further order as may be just.


18415.2. An appeal may be taken from the judgment of the court by the commissioner or by the industrial loan company in the manner provided by law for appeals from the judgment of a superior court to the court of appeal.

18415.3. (a) Whenever the net worth of an industrial loan company, exclusive of its good will, is less than 90 percent of the aggregate sum of its outstanding investment certificates, exclusive of those hypothecated with the company issuing them, divided by the fraction that is its investment certificates ratio permitted by the commissioner, the commissioner shall by written order direct the company to make good the alleged deficiency of net worth. Pursuant to the commissioner's orders, the company's net worth shall be at least 100 percent of the aggregate sum of its outstanding investment certificates, exclusive of those hypothecated with the company issuing them, divided by the fraction that is its investment certificates ratio permitted by the commissioner. (b) If the company fails to cure the alleged deficiency of net worth within the commissioner's specified time, not to exceed 120 days, the commissioner may take possession of the company's property and business. If the alleged deficiency is not cured within 120 days of the order, the commissioner shall take possession of the company's property and business.


18415.4. The commissioner may also, upon the request of the board of directors of a company, take possession of the property and business of a company and as conservator, take such action as the commissioner deems proper.

18415.5. Upon taking possession of the property and business of any industrial loan company, the commissioner shall give notice of that fact to all persons holding or having in their possession any assets of the company. The notice required by this section shall not be deemed to be a prerequisite to the taking of possession of the property and business of the industrial loan company. No person knowing of the taking, or who has been notified thereof, shall have a lien or charge upon any assets of the company for any payment, advance or clearance thereafter made, or for any liability thereafter incurred. Notice is deemed given when the commissioner has either made personal service of the notice, or mailed the notice to the person by certified mail.


18415.6. Any officer, agent, employee, director, or stockholder of a company who refuses to comply with the demand for possession issued under Section 18415 shall be guilty of a misdemeanor punishable by a fine of not more than one thousand dollars ($1,000) or imprisonment not exceeding one year or by both such fine and imprisonment.


18415.7. On demand of the commissioner, it shall be the duty of the sheriff of any county of the state, and of the police department of any municipal corporation therein, to furnish the commissioner with deputies, patrolmen, or officers as may be necessary to assist the commissioner in making and enforcing any seizure under Section 18415.


18415.8. Upon taking possession of the property and business of any company, the superior court for the county in which the head office of the company is located shall have exclusive original jurisdiction of all proceedings relating thereto and of any action or other proceedings brought under the provisions of this chapter. All papers relating to the taking of possession, including copies of the certificate of appointment of any special deputy, shall be filed and be made a part of the record of the proceeding within 45 days of the date of taking possession. All papers filed with the superior court, including inventories required to be filed, shall be made a part of the record of the proceeding without the payment of any additional fees therefor.


18415.9. At any time after the order taking possession issued under Section 18415 has been filed with the court, the commissioner may remove the principal office of the person proceeded against to the City and County of San Francisco or to the City of Los Angeles. In the event of removal, the court where the proceeding was commenced shall, upon the application of the commissioner, direct the superior court clerk to transmit all of the papers filed therein with that clerk to the Superior Court Clerk of the City and County of San Francisco or of the County of Los Angeles as the case may require. The proceeding shall thereafter be conducted in the same manner as though it had been commenced in the county to which it had been transferred.


18415.10. The commissioner may, at any time, examine under oath any officer, director, agent, employee or stockholder of a company to determine whether or not all property and assets have been transferred or delivered to the commissioner's possession.


18415.11. Upon taking possession of the property and business of any company, the commissioner has authority and the duty to collect all moneys due to the company and to do such other acts as are necessary or expedient to collect, conserve, or protect its assets, property and business. The commissioner shall also proceed to conserve or liquidate the affairs thereof as provided in this chapter.

18415.12. The commissioner may file a petition with the court and the court shall issue such injunctions or orders, as may be deemed necessary, to prevent any of the following occurrences: (a) Interference with the commissioner or the proceeding. (b) The institution of any actions or proceedings, or the prosecution of any actions or proceedings already commenced. (c) Waste of assets of the entity. (d) The obtaining of preferences, judgments, attachments or other liens against the company or its assets. (e) The making of any levy against the company or its assets. (f) The sale or deed for nonpayment of taxes or assessments levied by any taxing agency of any of the following: (1) Property owned by the company. (2) Property upon which the company holds an encumbrance. (3) Property upon which the company has prior thereto commenced an action to foreclose any deed of trust or mortgage or has exercised the power of sale under any trust deed or mortgage which sale or foreclosure proceedings have not yet been completed or upon which no trustee's deed or judgment of court or sheriff's certificate of sale has been issued. "Taxing agency," as used in this section, has the same meaning as defined in Section 121 of the Revenue and Taxation Code. The injunctions or orders authorized by this subdivision may be modified, dissolved, or rescinded by the court on motion of the commissioner, the Controller, or the person charged with the collection of taxes or assessments on such property. The recording in the office of the county recorder of any county in the state of an order or injunction issued pursuant to this section, shall constitute service of the order or injunction upon any taxing agency with respect to property or interest therein located in such county.


18415.13. After the taking of possession of the property and business of any company, the commissioner may terminate or adopt any executory contract to which the company may be a party, including leases of real or personal property. The termination or adoption shall be made within six months after obtaining knowledge of the existence of the contract or lease. Any provision in the contract or lease which provides for damages or cancellation fees upon termination shall not be binding on the commissioner or the company seized. The commissioner and the company shall only be liable for actual damages and in no event in excess of one thousand dollars ($1,000). Any claim must be filed within 30 days of the date of the termination.


18415.14. The commissioner may proceed against any debtor or alleged debtor by way of summary procedure or by order to show cause issued by the court upon application by the commissioner.


18415.15. The commissioner may make examinations of the seized company and review the activities of any conservator or liquidator.


18415.16. The actual cost of any examination, investigation or services, including the actual amount of salary or other compensation paid to the persons making the examination, investigation or rendering services and the overhead costs in connection therewith, as fixed by the commissioner, shall be paid out of the assets of the company.


18415.17. The determination by the commissioner to liquidate a company, evidenced by filing written notice of the determination with the court, operates to stay or dissolve all actions or attachments instituted or levied within 90 days next preceding the taking of possession of the company by the commissioner, and pending the process of liquidation, no attachment or execution shall be levied or lien created upon any of the property of the company.


18415.18. Upon taking possession of the property, and business of a company in any proceeding under this article, the commissioner shall have the power to do all of the following: (a) Appoint one or more special deputy commissioners as his or her agent or agents with the powers specified in the certificate of appointment to assist in the duty of conservation or of liquidation and distribution. (b) Employ the Attorney General as counsel or employ private counsel as may be deemed necessary to assist the commissioner in the performance of his or her duties under this chapter. Appointment of private counsel shall be made only with the consent of the Attorney General. The compensation of that counsel shall be fixed by the commissioner, subject to the approval of the court. (c) Set the compensation of a special deputy commissioner. (d) Require from each special deputy commissioner and from each assistant such security for the faithful performance of their duties as the commissioner may deem proper.


18415.19. All expenses of taking possession of, conserving, conducting, liquidating, disposing of or otherwise dealing with the business and property of any company under this article shall be paid out of the assets of that company. Those expenses shall include, among other things, the compensation of special deputy commissioners, clerks and assistants and the actual cost of any services attributable to the conservatorship or liquidation performed by the commissioner and staff, including the actual amount of salary or compensation paid to the person performing the services and overhead costs in connection therewith as fixed by the commissioner.


18415.21. Any transaction occurring within six months of the date of taking possession shall be voidable by the conservator or liquidator if the transaction has the effect of giving to, or enabling any creditor of, the company, any affiliate of the company, any officer, director, stockholder, employee or any relative thereof, to obtain a preference over any other creditor of the company.


18415.22. No obligation may be purchased or discounted under any agreement between the company and any person involving the purchase or discount of obligation from the person, with or without recourse, from the moment of taking possession pursuant to Section 18415. Any guarantees, recourse or repurchase agreements given at the time of purchase, or discount of any obligation prior to the date of taking possession, shall continue to be binding on the person. Any reserves, withholds or other security held by the company under the terms of the agreement shall be considered liabilities of the company in the general creditor classification and may not be used as offset against any obligation purchased or discounted under the agreement. No distribution of assets shall be made on these liabilities until the obligations purchased or discounted under the agreement have been satisfied. In case of sale of the obligations by the liquidator, the reserves, withholds or other security shall remain as a liability to be paid off in the normal course of liquidation.


18415.23. No attachment or execution shall be issued against the property of any company before final judgment in any action or proceeding in any court.

18420. The commissioner, as conservator or liquidator, after taking possession of the company, shall, in his or her name, in the name of the company, in the name of both, or otherwise, have authority to do all of the following: (a) Collect all obligations and money due the company. (b) Exercise and possess all the rights, powers and privileges of the company, its officers and directors. (c) Institute, prosecute, maintain, defend, intervene, and otherwise participate in any and all actions, suits, or other legal proceedings by and against the conservator or liquidator or company, or in which the conservator, the company or its creditors or debtors, or any of them, have an interest, and in every way to represent the company, its creditors, and debtors. (d) Execute, acknowledge, and deliver any and all deeds, contracts, leases, assignments, bills of sale, releases, extensions, satisfactions, and other instruments necessary or proper for any purposes. (e) Be the custodian of all moneys collected by the commissioner or coming into his or her possession in the course of any proceeding under this chapter, but he or she may deposit those moneys, or any part thereof, in a bank insured by the Federal Deposit Insurance Corporation. (f) Invest or reinvest such portions of funds and assets of the company, in a manner as he or she may deem suitable for the best interests of the creditors of the company. (g) To revise, refinance, extend, or settle any loan or obligation upon those terms and conditions as he or she may deem to be most advantageous to the company. (h) To sell, compound, compromise or assign for the purpose of collection upon those terms and conditions he or she deems best, any bad or doubtful debts due the company. (i) To compound, compromise, or in any manner negotiate settlements of claims against the company upon those terms and conditions as he or she shall deem to be most advantageous to the company. (j) To sell, acquire, hypothecate, encumber, lease, improve, abandon, or otherwise dispose of or deal with any real or personal property which has come into ownership of the company by way of repossession, foreclosure, execution, suit or by other such means on a basis of reasonable market value, without notice, for cash, on terms, or upon such other terms and conditions as he or she may deem proper. (k) To settle, compromise, or obtain the release of, for cash or other consideration, claims and demands against the company or the conservator. (l) To sell for cash or on terms, exchange, or otherwise dispose of, in whole or in part, any or all the assets and property of the company, real, personal, and mixed, tangible and intangible, of any nature. (m) Execute, acknowledge, and deliver any and all deeds, contracts, leases, assignments, bills of sale, releases, extensions, satisfactions, and any other instruments necessary or proper for any purposes, including, but not limited to, the effectuation, termination, or modification of any sale, lease, or transfer of real, personal, or mixed property, or that shall be necessary or proper to liquidate or carry on the business of the company. Any deed or other instrument executed pursuant to the authority hereby given shall be as valid and effectual for all purposes as if it had been executed as the act and deed of the company. (n) Pay out and expend such sums as the commissioner deems necessary or advisable including the following: (1) To pay off or discharge any taxes, assessments, liens, claims, or charges of any nature against the company, the conservator or liquidator, any asset or property of any nature of the company, or upon any asset or property on which the company or conservator or liquidator has an interest of a value of any nature. (2) For or in connection with the preservation, maintenance, conservation, protection, remodeling, repair, rehabilitation, or improvement of any asset or property of any nature of the company. (3) To pay all costs and expenses of the conservatorship or liquidation and all costs of carrying out or exercising the commissioner's rights, powers, privileges, and duties as conservator. (4) To pay valid creditor obligations, interest owed on debts, debts incurred during conservatorship or liquidation and all other debts of the company or conservatorship or liquidation of any nature. (5) To pay all costs and expenses in the operation of the conservatorship or liquidation of the company. (o) Do such things, and have such rights, powers, privileges, immunities and duties, whether or not otherwise granted in this chapter, as shall be authorized, directed, conferred, or imposed from time to time in specific cases by order of the court.


18420.1. No transaction involving real or personal property, investment or reinvestment of funds or assets, or settlement or compromise of pending lawsuits shall be made without first obtaining permission of the court, and then only in accordance with such terms as the court may prescribe, when either of the following exist: (a) The principal sum of any obligation due the company or settlement or compromise of a pending lawsuit exceeds the sum of fifteen thousand dollars ($15,000). (b) The market value of any real or personal property, except obligations due the company, exceeds the sum of ten thousand dollars ($10,000).

18420.2. The commissioner may, with ex parte approval of the court, sell all or any part of the company's assets to another industrial loan company, to a bank, to a savings and loan association, to Guaranty Corporation, or to an instrumentality of the United States government. In like manner, the commissioner may borrow from Guaranty Corporation, an instrumentality of the United States government, or a private insurer which insures or guarantees the company's investment certificates, any amount necessary to facilitate the assumption of investment certificate liabilities by a newly chartered or existing industrial loan company, assigning any part or all of the assets of the company as security for that loan.


18420.5. The commissioner may appoint a person to act as conservator or liquidator of the company. The person appointed may be Thrift Guaranty Corporation of California. If the company's outstanding thrift obligations are insured by an instrumentality of the United States government, the commissioner may appoint that instrumentality to act as conservator or liquidator of the company. Subject to the other provisions of this division, a conservator or liquidator, while in possession of the property and business of a company, has the same powers and rights and is subject to the same duties and obligations as the commissioner while in possession of the property and business of a company. During such time, the rights of the company and of all persons with respect thereto, subject to the other provisions of this chapter, are the same as if the commissioner had taken possession of such properties and business, except that the commissioner may limit those powers and rights as he or she may deem necessary.

18420.6. The commissioner shall have the authority to terminate the appointment of a conservator or liquidator whenever the commissioner deems it in the best interest of the company, its creditors, and investors. The commissioner shall file a copy of the notice of termination with the court.


18420.7. The commissioner may require a conservator or liquidator to provide such bond as the commissioner deems proper. The conservator or liquidator shall receive a salary, fixed by the commissioner, in an amount no greater than that which would be paid by the commissioner to a special deputy commissioner in charge of the liquidation of the company.


18425. If at any time after taking possession of the property and business of a company it shall appear to the commissioner that it would be futile to proceed as conservator with the conduct of the business of the company, the commissioner may order the company to be liquidated. A copy of the liquidation order shall be filed with the clerk of the superior court.


18425.1. The liquidator shall cause notice to be given by publication for four successive weeks in a newspaper of general circulation at or near the principal place of business in the state of the company, to all persons having claims against the company, other than investment certificate holders, whether or not an action is pending to enforce any claim for demand, requiring them to present and file their claims and make legal proof thereof at a place and within a time designated in the notice. The time shall not be less than 90 days after the first publication of the notice. The notice shall also state that all claims other than those of investment certificate holders appearing upon the books or records of the company and any claims, whether or not an action is pending to enforce any such claim or demand, shall be forever barred if not filed within the time designated. The liquidator shall also mail a similar notice to all persons whose names appear as creditors upon the books of the company and any person who has an action pending to enforce a claim or demand whose address appears upon the books or records of the company and shall enclose therewith a printed form or notice of claim.


18425.2. All claims, demands, or causes of action of creditors, and persons other than investors against any property owned or held by it in trust, or otherwise, must be presented to the liquidator in writing, verified by the claimant, or someone on his or her behalf, within the period specified in the notice for the presentation of claims, whether or not an action is pending to enforce any such claim or demand. The liquidator shall not approve any claim not so presented, and any such claim, demand, or cause of action not so presented is forever barred.


18425.3. If the liquidator doubts the validity of any claim, the liquidator may reject the claim and serve notice of rejection upon the claimant either by certified mail or personally. A notice of rejection given by mail, addressed to the claimant at the address set forth in the claim, shall constitute sufficient notice of the rejection. Any action upon a claim so rejected must be brought within 30 days after the mailing of the notice or personal service of the notice in the court in which the liquidation proceeding is pending for an order to show cause why the claim should not be allowed. Failure to bring such action within 30 days to enforce the payment of or establish any rejected claim shall forever bar any such action.


18425.4. A claim shall set forth, under oath, on the form prescribed by the commissioner, all of the following: (a) The particulars of the claim, and the consideration for the claim. (b) Whether the claim is secured or unsecured, and, if secured, the nature and amount of the security. (c) The payments, if any, made thereon. (d) That the sum claimed is justly owing from such person to the claimant. (e) That there is no offset to the claim. (f) Such other data or supporting documents as the liquidator requires.

18425.5. When an investment certificate holder is also a debtor, the liquidator may offset any balance due the investment certificate holder against the debt and the interest due on that debt up to the date of offset, in an amount not to exceed the amount of the debt or the amount of the thrift obligation guaranteed by the Thrift Guaranty Corporation of California, whichever is less.


18425.6. The amount of a claim of an investment certificate holder shall be the amount which the investment certificate holder would have been entitled to withdraw as of the date of taking possession, pursuant to Section 18415, plus interest thereon accrued to that date, without regard to whether the account is subject to any pledge. In the case of an account with a fixed or minimum term or a qualifying or notice period that has not expired as of the date of taking possession, interest shall be computed as if the account had been withdrawn on that date without penalty or reduction in interest. The liquidator shall give notice to each investment certificate holder of the amount of his or her claim and the investment certificate holder shall not be required to file a claim unless he or she disputes the amount of the liquidator's determination.


18425.7. When the time fixed for the presentation of claims has expired, the liquidator shall make in duplicate a full and complete list of all claims presented, including and specifying those claims that have been rejected by the liquidator, and a list of all claims of investment certificate holders as shown by the books or records of the company, and shall file one copy of the list in the commissioner' s office and one with the clerk of the superior court in which the liquidation proceedings are being held. Before each application to the court for leave to declare a dividend, the liquidator shall file a supplemental list of claims presented since the last preceding list was filed, including and specifying the claims as have been rejected by the liquidator. The list of claims and of claims of investment certificate holders as shown by the books or records of the company shall be open for inspection at all reasonable times.


18425.8. Objections to any claim not rejected by the liquidator may be made by any person interested by filing his or her objections, in writing, with the liquidator, who shall present the objections to the court. The court shall dispose of the objections or may order reference for that purpose, and should the objections to any claim be sustained by the court or by the referee, that claim shall not be allowed by the liquidator until the claimant has established his or her claim by judgment. Any objections to a claim shall be filed within 60 days from the date of filing of the schedule of claims as required by this article with the court or be forever barred.


18425.9. The liquidator, with the approval of the court, may pay one or more dividends to investment certificate holders prior to the expiration of the time for filing claims. After the time for filing of claims has elapsed, the liquidator, after obtaining approval of the court, may pay one or more dividends upon all approved claims out of the funds remaining in the liquidator's possession after the payment of expenses and after setting aside an amount to pay creditors whose claims have been rejected and whose time for filing an application to show cause under this article has not yet elapsed or whose application is still pending. At any time after the expiration of one year from the date of the first publication of notice of creditors, and with court approval, the liquidator may pay a final distribution which shall consist of the remaining funds available for distribution, being distributed pro rata to all approved creditor claims.

18425.10. (a) Claims allowed in a proceeding under this article shall be given preference in the following order: (1) All costs and expenses of administration of conservatorship and liquidation. (2) Taxes due to the State of California. (3) Claims having preference by the laws of the United States and by laws of this state. (4) All claims of creditors, including contractual claims for interest to the date of payment, whose claims are fully secured. (5) Claims of investment certificate holders. (6) Claims of general creditors. (7) Claims on obligations subordinated to the claims of investment certificate holders and general creditors. Paragraphs (5) and (6) apply only in liquidation proceedings, where the commissioner has taken possession of the property and business of the company on or after the effective date of this section, and paragraph (6) shall apply only with respect to persons who become general creditors on or after that date. It is the intent of the Legislature that no change in the law contained in this section shall be construed to affect the rights and obligations of parties with regard to transactions occurring prior to the effective date of this section. It is the intent of the Legislature that the rights and obligations of parties existing prior to the effective date of this section shall be determined by the law in effect prior to the effective date of this section and without application of changes in the law effected by this section. (b) All approved claims shall bear interest at the rate provided by law or judgments from the date that the commissioner takes possession of the property and business of the company, to the extent funds are available to pay such interest, otherwise interest shall be prorated. Interest shall be given the same preference as the claim on which it is based, but no interest on any claim shall be paid until all claims within the same class have received the full principal amount of the claim. (c) Any funds remaining shall be returned to the stockholders of the company pursuant to the provisions of this article.


18425.11. Whenever the commissioner determines to liquidate a company, the commissioner shall cause an inventory of all the assets of the company to be made in duplicate, file the original with the court, and file the duplicate in the commissioner's office.


18425.12. If it appears improbable that anything can be realized from any property of the company and that the cost of maintaining, preserving, or protecting the property would probably be lost, the court may direct the liquidator to abandon the property.


18425.13. If a purchaser of any property or any bad or doubtful debt or claim of a company cannot be obtained and it appears improbable that recovery thereon can be had, and that the cost of action to enforce collection of the same would probably be lost, the superior court may direct that suit on the debt or claim need not be brought.


18425.14. When the liquidator has fully liquidated all claims other than claims of stockholders, made due provision for any and all known but unclaimed liabilities, excepting claims of stockholders, and paid all expenses of liquidation, the liquidator may file an application for an order for the liquidation of a domestic corporation, or at any time thereafter, the commissioner may apply for, and the court shall make, an order dissolving the corporation.


18425.15. Upon the payment of a final dividend in liquidation, the commissioner shall prepare and file with the court a full and final statement of the liquidation, including a summary of the receipts and disbursements, and a duplicate of the statement shall be filed in the office of the commissioner. After hearing and approval by the court, the liquidation shall be closed.


18425.16. In making its order approving the commissioner's final statement of the liquidation of the company, the court shall determine the amounts of the liquidating dividends to which claimants are entitled but which then remain unpaid or unclaimed in the hands of the commissioner. The order of the court shall direct the commissioner to deposit those amounts with the Treasurer. All amounts so deposited shall be deemed to be deposited in the State Treasury under the provisions of Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure, and shall be subject to claim or disposition as provided in that chapter.


18425.17. The order of the court approving the final statement on liquidation shall provide for the destruction or other disposition of the books and records of the company or pertaining to the liquidation of the company, and the court may declare the company dissolved as a corporation. The liquidator shall file a copy of the order of dissolution with the Secretary of State.


Article 5. Securities Transactions

Ca Codes (fin:18427-18427.11) Financial Code Section 18427-18427.11



18427. Unless the context otherwise requires, in this article: (a) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security for value. (b) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security for value. "Sale" or "sell" includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities. (c) "Security" means any stock or debenture, or any warrant, right, or option to subscribe to or purchase any of the foregoing. (d) The terms defined in subdivisions (a) and (b) of this section do not include any stock dividend payable with respect to common stock of an industrial loan company solely (except for any cash or script paid for fractional shares) in shares of such common stock, if such industrial loan company has no other class of voting stock outstanding; provided, that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued.


18427.1. No industrial loan company organized under the laws of this state shall offer or sell any security issued by it unless the commissioner has issued a permit authorizing such sale.


18427.2. An application for a permit shall be in such form and contain such information as the commissioner may prescribe.


18427.3. The commissioner shall charge and collect fees for applications filed under this article as fixed in this section. (a) The fee for a negotiating permit shall be fifty dollars ($50). (b) The fee for a permit to exchange a security or to make any change in the rights, preferences, privileges, or restrictions of or on outstanding securities shall be fifty dollars ($50). (c) The fee for any permit to sell securities other than as specified in subdivision (b) shall be one hundred dollars ($100) plus one-tenth of one percent of the aggregate value of the securities sought to be sold, up to a maximum aggregate fee of one thousand seven hundred fifty dollars ($1,750).


18427.4. If the commissioner finds that the proposed sale of securities is fair, just, and equitable, he or she shall issue to the applicant a permit authorizing it to offer and sell the securities in such amount and upon such terms and conditions as he or she may provide in the permit. If the commissioner finds otherwise, he or she shall deny the application.


18427.5. The commissioner may impose conditions in any permit issued under Section 18427.4, requiring the deposit in escrow of securities, imposing a legend condition restricting the transferability thereof, impounding the proceeds from the sale thereof, limiting the expense in connection with the sale thereof, or such other conditions as he or she deems reasonable and necessary or advisable in the public interest.


18427.6. Every permit issued pursuant to Section 18427.4 shall recite that it is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be sold.


18427.7. The commissioner may amend, alter, suspend, or revoke any permit issued pursuant to Section 18427.4.


18427.8. Whenever an industrial loan company applies for a permit to issue any security or to deliver any other consideration (whether or not such security or such transaction is exempt from, or not subject to, the provisions of Section 18427.1) in exchange for one or more bona fide outstanding securities (as defined in Section 25019 of the Corporations Code), claims, or property interests, or partly in such exchange and partly for cash, the commissioner is authorized to approve the terms and conditions of such issuance and exchange or such delivery and exchange and the fairness of such terms and conditions and is authorized to hold a hearing on the fairness of such terms and conditions, at which all persons to whom it is proposed to issue any security or to deliver any other consideration in such exchange shall have the right to appear.


18427.9. There shall be exempted from the provisions of Section 18427.1 all of the following: (a) (1) Any offer, not involving a public offering, to an affiliate or to a person of the type described in subdivision (i) of Section 25102 of the Corporations Code or in the regulations of the Commissioner of Corporations adopted thereunder. (2) The execution and delivery of an agreement for the sale of securities to any person of the type described in paragraph (1), subject to all of the following: (A) The agreement shall contain substantially the following provision: "The sale of the securities which are the subject of this agreement has not been authorized by a permit issued by the Commissioner of Financial Institutions of the State of California. The issuance of the securities or the payment or receipt of any part of the consideration therefor prior to the issuance of a permit is unlawful, unless the sale of securities is exempt from Section 18427.1 of the California Financial Code. The rights of all parties to this agreement are expressly conditioned upon the issuance of a permit, unless the sale is so exempt." (B) No part of the purchase price may be paid or received, and none of the securities may be issued, until a permit authorizing the sale of the securities is issued, unless the sale is exempt from Section 18427.1. (b) Any transaction or security which the commissioner by regulation or order exempts as not being comprehended within the purposes of this article and the regulation of which he or she finds is not necessary or appropriate in the public interest or for the protection of investors.


18427.10. Nothing contained in this article shall affect the Corporate Securities Law of 1968, Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code.


18427.11. The commissioner may by regulation or order restrict, limit, prohibit or otherwise condition the uses of the proceeds from the sale of securities, the extent to which a security may be included within the definition of capital, or the extent to which the proceeds from the sale of securities may be included in the investment certificate ratio as defined by Section 18016, or used to increase outstanding investment certificates.


Chapter 6. Prohibited Practices And Penalties

Ca Codes (fin:18435-18457) Financial Code Section 18435-18457



18435. Except as otherwise provided in this division, any person who willfully violates any provision of this division, or who willfully violates any rule or order adopted pursuant to this division, shall, upon conviction, be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in the county jail for not more than one year or in the state prison, or by both that fine and imprisonment. However, no person may be imprisoned for the violation of any rule or order unless he or she had knowledge of the rule or order. Conviction under this section shall not preclude the commissioner from exercising the authority provided in Section 18349.5.


18435. Except as otherwise provided in this division, any person who willfully violates any provision of this division, or who willfully violates any rule or order adopted pursuant to this division, shall, upon conviction, be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in a county jail for not more than one year or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment. However, no person may be imprisoned for the violation of any rule or order unless he or she had knowledge of the rule or order. Conviction under this section shall not preclude the commissioner from exercising the authority provided in Section 18349.5.


18436. An industrial loan company shall not, directly or indirectly, make any loan of money or property to or guarantee the obligation of any of its directors or officers, or officers and directors of its holding company, or officers and directors of its affiliates.


18437. (a) Except as provided in subdivision (b), an industrial loan company shall not make loans to, or purchase any obligations from, persons who do not reside or have a place of business in the State of California, unless those loans or obligations comply with all of the following conditions: (1) If the loan or obligation is unsecured, then only if the loan or obligation bears the unqualified written guaranty of a financially responsible person, considering the amount of the obligation, who resides or has a place of business in the State of California. (2) If the documents and security for the loan or obligation and all records relating to the transaction are in California at the time the loan or obligation is made or acquired and are thereafter kept in California while the loan or obligation remains unsatisfied, except that where the security is aircraft, the security need not be in California at the time the loan or obligation is made or acquired, nor need it thereafter be held in California while the loan or obligation remains unsatisfied. (b) Notwithstanding subdivision (a), an industrial loan company may make loans to, or purchase any obligations from, persons who do not reside or have a place of business in the State of California not to exceed 25 percent, in the aggregate, of an industrial loan company's total assets. Upon application to and approval by the commissioner, an industrial loan company may increase its loans to, or purchases of obligations from, persons who do not reside or have a place of business in this state not to exceed 50 percent, in the aggregate, of an industrial loan company's total assets. The application shall include all of the following information: (1) A description of the company's proposed plan of business. (2) The character, business qualifications, and other experience of the proposed officers and managers directing the line of business for which authorization is requested. (3) Any other facts and circumstances bearing on the proposal that, as determined by the commissioner, may be relevant. (c) This section does not apply to loans made to, or acquired from, persons who do not reside or have a place of business in this state if all of the following conditions are met: (1) The loans are for the purchase or refinance of single- or multi-family residential property or nonresidential property. (2) The loans are salable in the secondary market as evidenced by commitments to buy by a buyer in the secondary market. (3) The loans are owned by the industrial loan company for 90 days or less.


18438. If a loan is made or other thing is purchased or discounted in violation of Section 18271, 18272, 18273, 18274, or 18437, the officers, directors and shareholders of the industrial loan company, its holding company, or its affiliates participating therein or knowingly approving the same shall be personally liable for any loss suffered by the industrial loan company by reason thereof.


18439. If any amount in excess of the charges permitted by this division, including interest, is charged, contracted for, or received in the making or collection of a contract of loan, except as a result of an accidental and bona fide error in computation, such contract is void and no person has any right to collect or receive the principal, interest, or charges.


18440. An industrial loan company shall not take any confession of judgment or any power of attorney at the time of making the loan except a power of attorney taken to effectuate the transfer of the ownership of any motor vehicle, the transfer of the ownership of securities, or the cancellation of an insurance policy and the receipt and distribution of any unearned premiums in the event of default in the payment of a loan made to finance the purchase of any such insurance policy.


18441. No person in connection with or incidental to the making of any loan under this division, shall require the borrower to contract for, purchase, or agree to purchase anything in connection with the loan. A policy of insurance of the type specified in Article 6 (commencing with Section 18290) of Chapter 3 of this division is not prohibited by this section. No person shall require a borrower to enter into any collateral sales agreement or contract except as expressly permitted by this division.


18442. An industrial loan company shall not make any loan of money or property to or guarantee the obligation of any person upon the security of its capital (including the shares of capital stock) of the company, its holding company, or its affiliates.


18443. If any loan or guaranty is made in violation of Section 18436 or 18442, the directors and officers who authorize it or assent thereto are jointly and severally liable to the company as guarantors for the repayment or return of the sum or value so loaned with interest thereon at the rate of 6 percent per year until paid.


18444. Any officer or director held liable under Section 18443, who satisfies such liability is entitled to contribution from any other officer or director who participates in authorizing, making or allowing any such loan or guaranty, and is subrogated to all rights of the corporation against the borrower or principal obligor.


18445. Any director, officer, or employee of an industrial loan company, its holding company, or its affiliates who asks for or receives, or consents or agrees to receive any commission, emolument, or gratuity or any money, property, or thing of value for procuring or endeavoring to procure for any person any loan from such company, or the purchase or discount of any note, contract, or other obligation or property by such company, is guilty of a felony.


18446. Any director, officer, or employee of an industrial loan company, its holding company, or its affiliates who knowingly receives or possesses himself of any of its property otherwise than in payment of a just demand, or with intent to defraud, omits to make or causes to be made a full and true entry thereof in its books and accounts or concurs in omitting to make any material entry thereof, is guilty of a felony.


18447. Any director, officer, or employee of an industrial loan company, its holding company, or its affiliates who knowingly makes or concurs in making or publishing any false entry in its books or records, any written report, exhibit, or statement of its affairs or pecuniary condition containing any material statement which is false, or having the custody of its books, willfully refuses or neglects to make any proper entry in such books as required by law, or to exhibit or allow the same to be inspected or extracts to be taken therefrom by the commissioner or his deputies or investigators, is guilty of a felony.

18448. No director, officer, stockholder, or employee of an industrial loan company, its holding company, or its affiliates shall purchase, directly or indirectly, or be interested in the purchase of, any of the company's assets for an amount less than the then current market value thereof and any such purchase may not be made without the express approval of the board of directors of the company. Title and possession of assets shall not be transferred to the purchaser until full consideration in cash has been received by the industrial loan company. Every person violating this section shall be liable to the company for twice the market value of the assets so purchased.


18449. Every director of an industrial loan company who:

(a) In the case of the fraudulent insolvency of such company, shall have participated in such fraud; or (b) Willfully does any act as such director which is expressly forbidden by law or willfully omits to perform any duty imposed upon him as such director by law,

is guilty of a misdemeanor. The insolvency of a company is deemed fraudulent for the purposes of this section, unless its affairs appear upon investigation to have been administered clearly, legally, and with the same care and diligence that agents receiving a compensation for their services are bound by law, to observe.


18450. A director, officer, or employee of an industrial loan company, its holding company, or its affiliates who concurs in any vote or act by which it is intended to make a loan or purchase a contract in violation of this division, is guilty of a misdemeanor.


18451. A director, officer, or employee of an industrial loan company, its holding company, or its affiliates who makes or maintains, or attempts to make or maintain, a deposit of such company' s funds with any other person on condition, or with the understanding, express or implied, that the person receiving such deposit make a loan or advance, directly or indirectly, to any director, officer, or employee of the company so making or maintaining or attempting to make or maintain such deposit, is guilty of a misdemeanor.


18452. Every officer or employee of an industrial loan company, its holding company, or its affiliates who sells investment or thrift certificates knowing that the company is insolvent, is guilty of a misdemeanor.

18453. Any person who knowingly sells investment certificates in violation of any provision of this division or any order or regulation of the commissioner, is guilty of a felony.


18454. Any director, officer, agent or employee of an industrial loan company, its holding company, or its affiliates who willfully makes a false or untrue entry in any book or record or in any report, tag, or statement of the business, affairs, or condition, or in connection with any transaction of such company, with intent to deceive any officer, director, or employee thereof, or any agent or examiner, private or official, employed or lawfully appointed to examine into its condition or any of its affairs or transactions, or to any public officer who has authority to examine into its affairs or transactions, or who, with like intent, willfully omits to make a new entry of any matter particularly pertaining to the business property condition, affairs, transactions, assets or accounts of such company in any book, record, report, statement, or tag of such company, or who, with like intent, alters, abstracts, conceals, or destroys any book, record, report, statement, or tag of such company made, written, or kept, or required to be made, written, or kept by him or under his direction, is guilty of a felony.


18454.5. It is unlawful for any person to willfully make any untrue statement of a material fact in any document filed with the commissioner under this division, or to willfully omit to state in any document any material fact which is required to be stated therein.


18455. An industrial loan company shall not, directly or indirectly, make any loan to, or purchase a contract, loan, or chose in action from, hold a lease obligation of, or purchase a lease contract from, any of the following: (a) A person who is an officer or director of the industrial loan company or of its holding or affiliated company. (b) A person who is a holder of record or beneficiary of the shares of the industrial loan company or of any holding or affiliated company. This restriction shall not apply to persons holding less than 10 percent of the shares of a holding company or affiliated company that is exempt from the qualification requirements of the Corporate Securities Law of 1968 contained in Section 25130 of the Corporations Code, pursuant to subdivision (a) or (b) of Section 25101 of the Corporations Code. (c) A person in which an officer or director of the industrial loan company or of any holding or affiliated company directly or indirectly is financially interested, directly or indirectly. (d) A person in which the holder of record or beneficiary of the shares of the industrial loan company or of any holding or affiliated company directly or indirectly is financially interested, directly or indirectly. This restriction shall not apply to persons holding less than 10 percent of the shares of a holding company or affiliated company that is exempt from the qualification requirements of the Corporate Securities Law of 1968 contained in Section 25130 of the Corporations Code, pursuant to subdivision (a) or (b) of Section 25101 of the Corporations Code. (e) A person who acquired those contracts directly or indirectly or through intervening assignments from a person described in subdivision (a), (b), (c), or (d). Any officer, director, or shareholder of an industrial loan company who directly or indirectly makes or procures, or participates in making or procuring, a loan or contract in violation of this section or knowingly approves the same is personally liable for any loss resulting to an industrial loan company from the loan or contract, in addition to any other penalties provided by law. (f) The prohibition contained in this section shall not apply to the purchase by an industrial loan company of a contract, loan, or chose in action from a finance lender, as described in Section 22009, a mortgage broker, a mortgage banker, a real estate broker or other licensed lender, provided written authorization for the purchase is obtained from the commissioner. (g) The prohibition contained in this section shall not apply to the purchase of life insurance by an industrial loan company on behalf of an officer or director as part of the officer's or director' s employee benefit plan package. (h) The prohibition contained in this section shall not apply to the following transactions: (1) A transaction between an industrial loan company and a subsidiary corporation or other entity in which the industrial loan company is the owner of 50 percent or more of the common stock or equity interest, or directly controls the management of the corporation or other entity. (2) The purchase of loans or other obligations by an industrial loan company from an affiliated company pursuant to a sale and repurchase agreement.


18456. The provisions of this chapter shall be applicable to lease obligations.


18457. Any officer, director, employee, or agent of any company who abstracts or willfully misapplies any of the money, funds, or property of the industrial loan company, or willfully misapplies its credit, is guilty of a felony. Upon conviction, the court shall, in addition to any other punishment imposed, order the person to make full restitution to the industrial loan company. Nothing in this section shall be deemed or construed to repeal, amend, or impair any existing provision of law prescribing a punishment for such an offense.


Chapter 7. Guarantee Of Thrift Accounts

Article 1. Definitions

Ca Codes (fin:18475-18481) Financial Code Section 18475-18481



18475. "Guaranty corporation" means Thrift Guaranty Corporation of California which exists under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code).

18476. (a) "Member" means an industrial loan company required by Section 18100.5 to be a member of Guaranty Corporation. "Member" includes "special member" except where the term "special member" is used in the same section of this chapter. (b) "Special member" means a member whose thrift obligations are insured by the Federal Deposit Insurance Corporation or by the Federal Savings and Loan Insurance Corporation or, subject to any rules promulgated by the commissioner, by a private insurer, surety or guarantee corporation acceptable to and approved by the commissioner.


18477. "Thrift obligations" as used in this chapter include principal invested in investment or thrift certificates however evidenced, and unpaid interest thereon accrued as of the last interest accrual date prior to the date the commissioner takes possession of the property and business of a member or the date such member is the subject of an order for relief in bankruptcy, whichever occurs sooner.


18478. "Fund" means the Guaranty Corporation Fund established pursuant to Section 18535.


18479. "Capital contribution" means the amount each member is required to maintain as an investment in the corporation pursuant to Section 18535.

18480. "Member account" means the total of all amounts credited to a member for paid-in capital contributions, and other credits, net of any charges to that participating member.


18481. "Guaranteed investment certificate" means a thrift obligation guaranteed by Guaranty Corporation pursuant to Section 18523.


Article 2. General

Ca Codes (fin:18490-18512) Financial Code Section 18490-18512



18490. When the property and business of a member, other than a special member, has been liquidated or is in the process of liquidation by the commissioner and the proceeds of liquidation distributed ratably are insufficient to pay up to fifty thousand dollars ($50,000) of each thrift obligation specified in Section 18523, the commissioner shall direct Guaranty Corporation to pay and Guaranty Corporation shall pay each such deficiency at the direction of and in amounts as directed by the commissioner within 10 days from the date the commissioner makes demand for payment. If the total funds available from Guaranty Corporation at that time are insufficient to pay in full the amounts provided by Section 18523, the amount paid to each thriftholder shall be ratably reduced in proportion to the amount by which the fund is deficient, and thereafter further payments shall be made ratably to such thriftholders in accordance with the directions of the commissioner as additional funds are paid into the fund from assessments or otherwise. If the thrift obligations are paid, each member's account and special member's account shall be reduced ratably based on the account balance for the total amount paid.


18491. (a) When the property and business of a member, other than a special member, is being liquidated, the commissioner may direct Guaranty Corporation to pay each thrift obligation of the member specified in Section 18523 up to fifty thousand dollars ($50,000). Guaranty Corporation shall pay the thrift obligations at the direction of, and in the amounts directed by, the commissioner within 10 days from the date the commissioner makes demand for payment under this section. If the total funds available from Guaranty Corporation at that time are insufficient to pay in full the amounts provided by Section 18523, the amount paid to each thriftholder shall be ratably reduced in proportion to the amount by which the fund is deficient, and thereafter further payments shall be made ratably to those thriftholders in accordance with the directions of the commissioner as additional funds become available to Guaranty Corporation. (b) When any thrift obligation is paid up to the guaranteed amount as provided in subdivision (a), Guaranty Corporation shall be assigned all rights, title, and interest to each individual thrift obligation up to the amount paid by Guaranty Corporation to each individual thriftholder. (c) Guaranty Corporation shall first receive ratable liquidation proceeds up to the amount paid by Guaranty Corporation to a thriftholder prior to any payment of liquidation proceeds to a thriftholder whose account was in excess of fifty thousand dollars ($50,000). (d) Each member's account and each special member's account shall be reduced ratably based on the account balance for the total amount paid pursuant to subdivision (a). Liquidation proceeds paid to Guaranty Corporation pursuant to subdivision (c) shall ratably increase each member and special member account based on the account balance for the total amount paid pursuant to subdivision (a).


18493. Whenever it appears to the commissioner that Guaranty Corporation has: (a) Violated its articles of incorporation or any law of this state; (b) Not paid amounts as directed by the commissioner pursuant to Section 18490; (c) Invested its funds in violation of Section 18497; (d) Not levied assessments as required by Sections 18535 and 18536; (e) Has not brought and diligently prosecuted an action to enforce payment as required by Section 18538; (f) Violated any section of this chapter; or (g) Neglected or refused to submit its books, papers, and affairs to the inspection of any examiner; the commissioner may forthwith take possession of the property and business of Guaranty Corporation and retain possession until Guaranty Corporation satisfies the commissioner that it will operate in conformity with this chapter. During the time the commissioner has such possession he shall perform the duties and carry out the obligations of Guaranty Corporation.


18494. Whenever the commissioner has taken possession of the property and business of Guaranty Corporation, Guaranty Corporation within 10 days after such taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the head office of Guaranty Corporation is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined, and after a hearing and a determination of the facts upon the merits, may dismiss such application or enjoin the commissioner from further proceedings and direct him to surrender the property and business to Guaranty Corporation, or make such further order as may be just.


18495. An appeal may be taken from the judgment of the court by the commissioner or by Guaranty Corporation in the manner provided by law for appeals from the judgment of a superior court to the court of appeal. An appeal from the judgment of the court does not operate as a stay of the judgment unless the court, on good cause, so orders.


18496. (a) Guaranty Corporation shall have independent authority to approve membership, or suspend or revoke the right to participate in Guaranty Corporation by any member for cause and to submit reports and make recommendations to the commissioner regarding the financial condition of any member and shall also do so if requested by the commissioner. These reports and recommendations shall not be public documents. There shall be no liability on the part of, and no cause of action of any nature shall arise against, Guaranty Corporation or its members, directors, officers, employees or agents, or the commissioner or his or her authorized representatives, for any statements made by them in any reports or recommendations made hereunder. (b) In order to permit Guaranty Corporation to fulfill its obligations under subdivision (a), upon the written request of Guaranty Corporation the commissioner may furnish to Guaranty Corporation a copy of financial statements or reports filed by a member or an industrial loan company making application to participate in Guaranty Corporation and a copy of the commissioner's analysis of an industrial loan company's receivables. Except for reports filed under Sections 18407 and 18410, such statements and reports shall not be public documents, and the information contained therein shall be privileged, and confidential to Guaranty Corporation for its sole use in carrying out its statutory functions. There shall be no liability on the part of, and no cause of action of any nature shall arise against the State of California, the commissioner or members of the commissioner's staff or the commissioner's authorized representatives, for the release of any information furnished to Guaranty Corporation pursuant to this subdivision. (c) By written consent of a majority of its directors, Guaranty Corporation, in order to fulfill its obligations under subdivision (a), may appoint an independent certified public accountant or public accountant to prepare an audit report containing audited financial statements, together with such other information as Guaranty Corporation, in good faith, requires regarding the financial condition of any member. For the purposes of examination and investigation the certified public accountant or public accountant appointed by Guaranty Corporation shall have free access to the offices and places of business, books, accounts, papers, records, files, safes and vaults of the member. (d) By written consent of a majority of its directors, Guaranty Corporation, in order to fulfill its obligations under subdivision (a), may hire or appoint specialized committees or employees to investigate the operations of a member company. Guaranty Corporation may have its specialized employees or committees investigate the affairs and examine the books, accounts, records and files used in the business of the member. For the purposes of examination and investigation the specialized employees and committees of Guaranty Corporation shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of the member. (e) Costs and expenses for such audit report or special investigation report shall be paid by Guaranty Corporation. (f) Any person who uses any information obtained under subdivision (b), (c) or (d) for any purpose not authorized by subdivision (a) is guilty of a misdemeanor. (g) The powers granted to the Guaranty Corporation by this section may not be exercised in connection with special members.


18496.1. (a) A director, officer, employee, or agent of Thrift Guaranty Corporation shall be subject to liability for acts of fraud, willful misconduct, or reckless or criminal acts arising out of, or in connection with, the performance of his or her duties on behalf of Thrift Guaranty Corporation, but shall not be subject to liability or causes of action for acts other than those set forth in this section. (b) The board of directors shall exercise reasonable efforts to obtain directors, officers, employees, and agents, errors and omissions liability insurance coverage and shall within 30 days from the end of each fiscal year submit to the commissioner its reports, advising the commissioner of the terms and costs of such coverage, if available.


18497. Guaranty Corporation may invest its funds only in readily marketable securities as provided by rules of the commissioner. Upon request of the commissioner, Guaranty Corporation shall furnish an authorization for disclosure to the commissioner of financial records of such funds pursuant to Section 7473 of the Government Code.


18498. Income from investments shall be recorded in an income account and be used to defray expenses of administration. Income from investments that exceeds an amount determined by the board of directors to be adequate to provide for current expenses may be credited to members' accounts. Each member's account shall receive credit ratably based on the account balance, for the amount of the excess. Income received by Guaranty Corporation, whether or not credited to members' accounts, shall be subject to a demand of the commissioner made pursuant to Section 18490 except as to that portion reserved by the board of directors for expenses of administration during the calendar year.


18499. Expenses of administration that exceed income from investments at year end shall be charged to members' accounts. Each member's account shall be charged ratably based on the account balance for the amount of the excess.


18500. Guaranty Corporation shall have authority to: (a) Borrow funds when necessary to effectuate the provisions of this chapter. (b) Make loans to, deposits in, purchase assets or securities of, assume liabilities of, or make contributions to any Guaranty Corporation member to minimize the deficiency payments that might be required under Article 2 (commencing with Section 18490). (c) Organize a new thrift company to assume the thrift obligations and temporarily perform the functions of the closed company. The commissioner may waive any provision of the Industrial Loan Law necessary to enable Guaranty Corporation to organize a new thrift company. (d) Act as a conservator or receiver of a member company that the commissioner has taken possession of. (e) Guaranty Corporation may use the fund, or any portion of the fund, in exercising its authority. (f) Employ consultants, advisors, and others to assist Guaranty Corporation in fulfilling its obligations and objectives.


18501. The commissioner shall give prompt notice to Guaranty Corporation when the commissioner takes possession of the property and business of a member and shall give further prompt notice when the commissioner determines to liquidate the property and business of a member.


18502. Memberships issued by Guaranty Corporation shall be nontransferable and shall be exempt from the provisions of the Corporate Securities Law of 1968.

18503. The commissioner and the commissioner's duly designated representatives may at any time investigate the affairs and examine the books, accounts, records and files used by Guaranty Corporation. The commissioner and the commissioner's duly designated representatives shall have free access to the offices, books, accounts, papers, records, files, safes, and vaults of Guaranty Corporation.

18504. Any member or industrial loan company making application to participate in Guaranty Corporation aggrieved by any action or decision of Guaranty Corporation may appeal to the commissioner within 30 days from the action or decision.

18505. (a) After consultation with, and approval by, the Thrift Guaranty Corporation, the commissioner shall adopt rules and regulations regarding information to be given to holders of investment certificates of industrial loan companies including, but not limited to, information containing any reference to a guarantee or insurance program of investment certificates, and the time and conditions for payments to the holders of investment certificates, in the event an industrial loan company is taken over by the commissioner. These regulations shall include the means for informing investment certificate holders of their rights. (b) It is the intent of the Legislature that the commissioner authorize information which can be clearly understood by a typical investment certificate holder. In addition, the information may in no way imply that the State of California stands behind or is involved with any type of guarantee or insurance program for industrial loan companies investment certificate holders. (c) These rules and regulations shall be adopted on an emergency basis within 60 days of the effective date of this section.


18506. No person shall advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, in any manner any statement or representation with regard to its membership in Guaranty Corporation or that any of its thrift obligations are in any manner guaranteed.


18507. In order to permit Guaranty Corporation to fulfill its obligations under this chapter, the commissioner shall furnish to Guaranty Corporation a list of all industrial loan companies that are not insured companies which have outstanding thrift obligations and one copy of the independent audit report on each such industrial loan company filed with him as of the preceding December 31 and not later than April 1 of each year.


18508. An industrial loan company or its successor shall not be entitled to receive a refund, return, withdrawal, or distribution of the amount in its member's account or of any assessments paid by it except upon liquidation of Guaranty Corporation.


18509. (a) Guaranty Corporation may elect to wind up and dissolve upon approval of the commissioner, the board, and the members in accordance with Section 8610 of the Corporations Code, after (1) each industrial loan company has become a member of the Federal Deposit Insurance Corporation or redeemed all of its outstanding thrift obligations or (2) Guaranty Corporation has satisfied its guarantee of thrift obligations as provided in this chapter. (b) Upon liquidation, after complying with the provisions of Section 8713 of the Corporations Code and notwithstanding Section 8717 of the Corporations Code, the assets of Guaranty Corporation shall be distributed to its members, past and present, including special members, ratably based on the balance of the members' accounts, as established by resolution of the Board of Directors of Guaranty Corporation in accordance with the following: (1) The account of each member, past and present, including special members, shall be credited with all assessments paid by the member to Guaranty Corporation. (2) For each fiscal year, all current and prior expenses of administration of Guaranty Corporation shall be charged to the accounts of all members, past and present, including special members, ratably based on the balance of each account. (3) With respect to the account of each member to whom Guaranty Corporation has advanced funds or on whose behalf Guaranty Corporation has paid claims and expenses, the following adjustments shall be made: (A) The member's account shall be charged in the amount of the funds advanced or paid as of the date of advance or payment. (B) If the amount advanced or paid exceeds the balance of the member's account, then (i) the member's account shall be deemed to have been closed, and the excess shall be allocated and charged ratably to the accounts of all other members, past and present, including special members, and (ii) if the member continued to operate after the date of the advance or payment, whether under new ownership or management or under the management of Guaranty Corporation, then a new member account shall, for purposes of this section, be deemed to have been established for the member with a zero balance, which shall be credited with subsequent assessments paid.

18510. The Board of Directors of Guaranty Corporation shall be composed of five members, at least two of which shall be public members. The five members shall be appointed by the commissioner. The commissioner shall consult with the President of Thrift Guaranty Corporation before making an appointment. Public members shall not be affiliated with any company or affiliate of any company or employed by any state agency. A public member shall not be a relative of any officer or director of any company or its affiliates.


18511. Guaranty Corporation shall establish a permanent office in this state.

18512. The commissioner may require Guaranty Corporation to obtain a bond, insurance, or reinsurance which provides additional protection against losses to its members' thriftholders. The type, amount, and form of this protection is subject to the commissioner's written approval.


Article 3. Purpose And Scope Of Guaranty Corporation

Ca Codes (fin:18520-18525) Financial Code Section 18520-18525



18520. It shall be the purpose of Guaranty Corporation to guarantee full payment of guaranteed accounts of members, exclusive of special members, up to fifty thousand dollars ($50,000) for each account, subject to the express limitations provided in this chapter.


18521.5. (a) Notwithstanding Section 18521 or 18100.5, until July 1, 1990, each industrial loan company, other than a premium finance agency, which has issued and has outstanding thrift obligations shall, as a condition of its authority to continue to conduct business under this division, have its outstanding thrift obligations insured or guaranteed by Thrift Guaranty Corporation, or participate as a member of the Federal Deposit Insurance Corporation; however, each industrial loan company shall, as a condition of its authority to continue to conduct business under this division, continue to participate as a member or a special member as defined in Section 18476, in Thrift Guaranty Corporation in accordance with this chapter and rules established by the Board of Directors of Thrift Guaranty Corporation until it has paid assessments required by Section 18537. (b) On and after July 1, 1990, each industrial loan company, other than a premium finance agency, which has issued and has outstanding thrift obligations, shall, as a condition of its authority to continue to conduct business under this division, participate as a member of the Federal Deposit Insurance Corporation. (c) Any person not transacting the business of an industrial loan company prior to the effective date of this section, who thereafter commences business under the provisions of this division, shall, upon commencement of its business, participate as a member of the Federal Deposit Insurance Corporation. (d) Thrift Guaranty Corporation shall have the power to seek insurance, guarantee, or surety, with an insurer or surety, or guarantor authorized to transact business in this state. The insurance shall be subject to the approval of the commissioner after consultation with the Insurance Commissioner. It is the intent of the Legislature to permit Thrift Guaranty Corporation to seek insurance and Thrift Guaranty Corporation's insurer to seek reinsurance. Thrift Guaranty Corporation shall remain in existence after July 1, 1990, to assist in the winding up, liquidation, or merger of industrial loan companies unable to comply with the requirements of subdivision (b) by that date. Thrift Guaranty Corporation shall continue to guarantee outstanding thrift obligations sold and issued prior to July 1, 1990, by an industrial loan company which has not complied with the requirements of subdivision (b) by July 1, 1990, until all outstanding thrift obligations have been redeemed by the issuer, a successor to the issuer in compliance with the requirements of subdivision (b), or Thrift Guaranty Corporation. (e) In addition to any other provision of this section, if during that period of time ending July 1, 1990, the United States Congress or the Board of Governors of the Federal Reserve System adopt or amend a law or regulations which pertain to an industrial loan company applying for and obtaining membership in the Federal Deposit Insurance Corporation, and the new federal law or regulations prevent an industrial loan company from obtaining Federal Deposit Insurance Corporation coverage solely because the company's holding company status prevents Federal Deposit Insurance Corporation membership, a successor to the Thrift Guaranty Corporation approved by the commissioner, or some other institutional mechanism approved by the commissioner, which obtains insurance in accordance with this subdivision, may continue to discharge its function so long as the insurance remains in effect. (f) Within one year of the effective date of the act which adds this section, and annually thereafter until July 1, 1990, the commissioner shall report to the Legislature on the following: (1) The progress of Thrift Guaranty Corporation in obtaining reinsurance. (2) The progress of licensees in converting to coverage by an instrumentality of the United States government or by a private insurer, surety, or guarantor. (3) Recommendations for additional legislation if, in the commissioner's opinion, additional legislation would be desirable to encourage industrial loan companies to seek coverage for investment certificates from sources other than Thrift Guaranty Corporation. The commissioner shall submit special reports on these matters as may be required by the circumstances.


18521.6. No industrial loan company which fails to comply with the requirements of subdivision (b) of Section 18521.5 by June 30, 1990, may continue to sell and issue investment certificates beyond that date.

18523. The following described thrift obligations will be guaranteed by Guaranty Corporation in the amounts hereinafter set forth below: (a) Single ownership investment certificates. Funds owned by an individual and invested in the manner set forth below shall be added together and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (1) Individual investment certificates (or investment certificates of the husband-wife community of which the individual is a member) and invested in one or more investment certificates in his or her own name shall be guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (2) Funds owned by a principal and invested in one or more investment certificates in the name or names of agents or nominees shall be added to any individual investment certificates of the principal and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (3) Investment certificates held by guardians, custodians or conservators for the benefit of their wards or for the benefit of a minor under a Uniform Gifts to Minors Act and invested in one or more investment certificates in the name of the guardian, custodian or conservator shall be added to any individual investment certificates of the ward or minor and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (b) Testamentary investment certificates. (1) Funds owned by an individual and invested in a revocable trust investment certificate, tentative trust investment certificate, payable-on-death investment certificate, or similar investment certificate evidencing an intention that on his or her death the funds shall belong to his or her spouse, child or grandchild, shall be guaranteed up to fifty thousand dollars ($50,000) in the aggregate, as to each such named beneficiary, separately from any other investment certificates of the owner. (2) If the named beneficiary of such an investment certificate is other than the owner's spouse, child or grandchild, the funds in the investment certificate shall be added to any individual investment certificates of such owner and guaranteed up to fifty thousand dollars ($50,000) in the aggregate, separately from the individual investment certificates of the beneficiaries of the estate or of the executor or administrator. (c) Investment certificates held by executors or administrators. Funds of a decedent held in the name of the decedent or in the name of the executor or administrator of his or her estate and invested in one or more investment certificates shall be guaranteed up to fifty thousand dollars ($50,000) in the aggregate, separately from the individual investment certificates of the beneficiaries of the estate or of the executor or administrator. (d) Corporation or partnership investment certificates. Investment certificates of a corporation or partnership engaged in any independent activity shall be guaranteed up to fifty thousand dollars ($50,000) in the aggregate. An investment certificate of a corporation or partnership not engaged in an independent activity shall be deemed to be owned by the person or persons owning such corporation or comprising such partnership and, for guarantee purposes, the interest of each person in the investment certificate shall be added to any other investment certificates individually owned by such person and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. The term "independent activity" means any activity other than one directed solely at increasing guarantee coverage under this chapter. (e) Unincorporated associations. Investment certificates of an unincorporated association engaged in any independent activity shall be guaranteed up to fifty thousand dollars ($50,000) in the aggregate. An investment certificate of an unincorporated association not engaged in an independent activity shall be deemed to be owned by the persons comprising such association and, for guarantee purposes, the interest of each owner in the investment certificate shall be added to any other investment certificates individually owned by such person and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (f) Joint investment certificates. (1) Investment certificates owned jointly, whether as joint tenants with right of survivorship, as tenants by the entireties, as tenants in common, or by husband and wife as community property, shall be guaranteed separately from investment certificates individually owned by the co-owners. (2) A joint investment certificate shall be deemed to exist, for purposes of guarantee of investment certificates, only if each co-owner has personally executed an investment certificate signature card and possesses redemption rights. (3) An investment certificate owned jointly which does not qualify as a joint investment certificate for purposes of guarantee of investment certificates shall be treated as owned by the named persons as individuals and the actual ownership interest of each such person in such investment certificate shall be added to any other investment certificates individually owned by such person and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (4) All joint investment certificates owned by the same combination of individuals shall first be added together and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (5) The interest of each co-owner in all joint investment certificates owned by different combinations of individuals shall then be added together and guaranteed up to fifty thousand dollars ($50,000) in the aggregate. (g) Trust investment certificates. All trust interests for the same beneficiary invested in investment certificates established pursuant to valid trust arrangements created by the same settlor (grantor) shall be added together and guaranteed up to fifty thousand dollars ($50,000) in the aggregate, separately from other investment certificates of the trustee of such trust funds or the settlor or beneficiary of such trust arrangements. (h) Thrift obligations withdrawn by checks that have not cleared a member's bank account at the time the commissioner has taken possession of the property and business of a member. The owner of the funds represented by such a check shall be recognized for all purposes of a claim for guaranteed thrift obligations to the same extent as if his or her name and interest were disclosed on the records of the member.


18525. Notwithstanding any other provision of this division, Guaranty Corporation, with the written consent of the commissioner, shall have the power to assume obligations, enter into contracts, including contracts of guarantee or suretyship, incur liabilities, borrow money, lend money or otherwise use its credit, and secure any of its obligations, contracts, or liabilities by mortgage, pledge, security interest, or other encumbrances of all or any part of its property and assets, including, but not limited to, income from assessments of members or rights thereto, and income.


Article 4. Assessments

Ca Codes (fin:18535-18538) Financial Code Section 18535-18538



18535. Guaranty Corporation shall establish and maintain a guarantee fund as follows: (a) Each new member, other than a new special member, shall pay one hundred thousand dollars ($100,000) to the guarantee fund to become a member. (b) Whenever the commissioner finds that the controlling interest or 50 percent or more of the stock of a member which paid less than one hundred thousand dollars ($100,000) to become a member has been transferred, the member shall pay to the fund whatever sums are necessary to bring the member's total contribution pursuant to subdivision (a) to one hundred thousand dollars ($100,000) or 1 percent of the member's total outstanding thrift obligations on the date of transfer, whichever is less. As used in this subdivision "controlling interest" means any percentage of stock which allows the stockholder to have control of management of the member company. The provisions of this subdivision shall not be applicable (1) if the transfer of stock is between affiliated companies of a holding company and the holding company is exempt from the qualification requirement of Section 25130 of the Corporate Securities Law of 1968 by subdivision (a) or (b) of Section 25101 of the Corporations Code, or (2) if the actual or contemplated change of ownership is to the transferor's ancestors, descendants, or spouse, or any custodian or trustee for the account of the transferor or the transferor's ancestors, descendants, or spouse, or to a transferee by a trustee or custodian for the account of the transferee or the transferee's ancestors, descendants, or spouse. This subdivision shall apply, commencing January 1, 1987, to any member in existence prior to January 1, 1982. All other members shall be subject to this subdivision on and after January 1, 1982. (c) If the total amount in the fund (less any then unpaid demand made by the commissioner pursuant to Section 18492) on March 15 of any year is less than 1 1/2 percent of the total outstanding thrift obligations of all members, other than special members, as shown on the most recent independent audit reports required by Section 18405, then on or before May 1 of that year Guaranty Corporation shall levy an assessment. Each member, other than a special member, shall be assessed an amount equal to fifteen-hundredths of 1 percent of its outstanding thrift obligations as shown on its most recent independent audit report required by Section 18405. Guaranty Corporation may levy this assessment quarterly, based on members' quarterly reports, at one quarter of the annual assessment rate authorized by this subdivision. (d) If the total amount in the fund (less any then unpaid demand made by the commissioner pursuant to Section 18492) on March 15 of any year hereafter is equal to or in excess of 1 1/2 percent of the total outstanding thrift obligations of all members, other than special members, as shown on the most recent independent audit reports required by Section 18405, then on or before May 1 of that year Guaranty Corporation shall levy an assessment on each member, other than a special member, that has not fulfilled both the following conditions as of March 15 of that year: (1) Paid total cumulative assessment payments to Guaranty Corporation exceeding in the aggregate 1 1/2 percent of the total outstanding thrift obligations of that member shown on its most recent independent audit report required by Section 18405; (2) Has a member's account balance in Guaranty Corporation exceeding 1 1/2 percent of the total outstanding thrift obligations of that member shown on its most recent independent audit report required by Section 18405. Each member who has failed to fulfill both the preceding conditions as of March 15 of that year shall be assessed an amount equal to fifteen-hundredths of 1 percent of its outstanding thrift obligations as shown on its most recent independent audit report required by Section 18405. (e) If two members merge prior to May 1 of any year, the surviving member shall be liable for the assessment of the disappearing member that would have been payable to Guaranty Corporation pursuant to subdivision (c) or (d) had the merger not occurred prior to May 1.


18536. Guaranty Corporation shall send a written notice of assessment to each member assessed within 10 days after the levy of any assessment. Amounts assessed shall be paid to Guaranty Corporation by each member assessed not later than 90 days following written notice of assessment.


18538. In the event any member fails to pay an assessment when due, Guaranty Corporation shall report such default in writing to the commissioner and the defaulting member within 24 hours of such default and thereafter the rights and benefits of membership of such defaulting member in Guaranty Corporation shall be suspended and the defaulting member shall not be authorized to sell or issue its investment certificates in any form until all delinquent assessments are paid in full; provided, however, that the thrift obligations of the defaulting member shall continue to be protected as provided in this chapter. Within 30 days after default, Guaranty Corporation shall bring an action in law or in equity to enforce payment. If Guaranty Corporation does not bring such action within the time specified, the commissioner may bring an action in law or in equity to enforce such payment. Upon payment of all sums due, the member shall be reinstated and thereafter may sell and issue its investment certificates.


Chapter 8. Insurance Premium Financing

Article 1. Definitions

Ca Codes (fin:18560-18567) Financial Code Section 18560-18567



18560. "Premium finance agency" means any industrial loan company incorporated under this division which, by the terms of its authority to engage in the industrial loan business, is permitted to issue or sell investment certificates subject to the limitations set forth in Section 18596 and its business is limited to that set forth in this chapter.


18561. Such terms relating to insurance as are used in this chapter shall have the meaning ascribed to them in the Insurance Code and in the practices of the insurance business.


18562. As used in this chapter, "insured" means the person who has purchased or arranged to purchase an insurance contract and who enters into a premium finance agreement with a premium finance agency.

18563. As used in this chapter, "premium financing" means the activities of a company engaging in the business of advancing money directly or indirectly to an insurer or producer at the request of an insured pursuant to the terms of a premium finance agreement, wherein the insured has assigned the unearned premiums, accrued dividends or loss payments as security for such advancement in payment of premiums on insurance contracts only, and acquiring premium finance agreements, and does not include the financing of insurance contract premiums purchased in connection with the financing of goods and services. The amount of such advancement in payment of premiums must bear a reasonable relationship to the premium or premiums being financed.


18564. As used in this chapter, "premium finance agreement" means a loan contract, note, agreement or obligation by which an insured agrees to pay to a company in installments the principal amount advanced by the company to an insurer or producer in payment of premium on an insurance contract or contracts, plus charges, with the assignment as security therefor of the unearned premiums, accrued dividends or loss payments, the final installment due date of the agreement not to extend beyond the term of the insurance contract included in the agreement having the latest expiration date.


18565. As used in this chapter, "company" means a premium finance agency.

18566. As used in this chapter, "principal balance" means the difference between the amount of the premium and fees charged by the insurer or producer and the downpayment on the premium.


18567. As used in this chapter, "finance charge" means any amount which the insured agrees to pay the company in excess of the premium and fees charged by the insurer or producer, and exclusive of the cost of credit life insurance and attorney fees.


Article 2. General

Ca Codes (fin:18580-18596) Financial Code Section 18580-18596



18580. A premium finance agency desiring the full authority which may be conferred by this division, shall, in respect to any lending operations other than insurance premium financing, be required to amend its articles of incorporation and meet the requirements of this division as if it were making an original application for authority to organize under this division.


18581. The articles of incorporation of any corporation organized under this division as a premium finance agency shall include reference to that fact.

18582. Capital stock of any premium finance agency shall not be less than seventy-five thousand dollars ($75,000) and need not exceed that sum regardless of the number of branch offices or business locations which may be authorized under the provisions of this division.


18583. Before a premium finance agency commences business or opens a branch office or place of business, there must be paid in cash, for the benefit of the agency, 100 percent of the amount of the minimum capital stock required under this chapter.


18584. An insurance premium finance agreement, as defined in Section 18564, may be prepared in the office of an insurance producer licensed by the Department of Insurance, and mailed or otherwise delivered to a premium finance agency for acceptance without the office of the producer thereby being constituted a place of business of the company. A producer at whose office a premium finance agreement is so prepared shall not be considered to be a broker of the company as that term is used in this division.


18585. In the event of any conflict in the provisions of this chapter with the provisions of any other chapter in this division, the provisions of this chapter shall control with regard to a premium finance agency or to insurance premium financing.


18586. The provisions of Sections 18023, 18024, 18120, 18205, 18268, 18269, 18271, 18272, 18274, and 18455 shall not apply to a premium finance agency.

18587. The provisions of Sections 18607, 18625, and 18626 shall not apply to any bona fide loan with a principal amount of two thousand five hundred dollars ($2,500) or more or to a premium finance agency in connection with such loans if the provisions of this section are not used for the purpose of evading this division.


18588. Unless the insured has notice of the assignment of a premium finance agreement, payment thereunder by him to the last known assignee of the agreement shall be binding upon all subsequent assignees. Assignment of the premium finance agreement shall not cut off any defenses which the insured would have against the company or an assignee of the agreement arising from obligations imposed by this division. The obligations and rights of a premium finance agency, under this chapter, shall also apply to the assignee of a premium finance agreement.


18589. At any time during the term of the premium finance agreement, but not later than one year after the last payment thereunder, the company shall upon written request of the insured, give or mail to him a written statement of the dates and amounts of payment, and the total amount, if any, unpaid thereunder. Such a statement shall be supplied once each year without charge; if any additional statement is requested, the company shall supply such statement at a charge not exceeding one dollar ($1) for each additional statement so supplied.

18590. Upon payment of a loan in full the company upon request shall return the premium finance agreement marked "Paid" to the insured.

18591. No filing of the premium finance agreement shall be necessary to perfect the validity of such agreement as a secured transaction as against creditors, subsequent purchasers, pledgees, encumbrances, successors or assigns of the insured.


18592. Any downpayment which is made and which is received by the company from the insured, or from the insurance producer on behalf of the insured, shall be held by the company in trust for and in transit to the insurer, and shall be paid to the insurer, together with the balance of the premium payable pursuant to the terms of the premium finance agreement within 30 days from the effective date of the policy, or within 30 days after the receipt of a proper premium finance agreement by the company, or within 15 days after the company has mailed to the insured notice of a revised finance agreement pursuant to Section 18606, whichever is later. In the event that the premium is paid to the insurance agent or broker of record, such agent or broker of record shall not be deemed the agent of the company by reason of such payment. Upon request of the commissioner, the company shall furnish an authorization for disclosure to the commissioner of financial records of such trust accounts pursuant to Section 7473 of the Government Code.


18593. The downpayments received by the company under the provisions of Section 18592, may be held by the company in trust in a separate bank account or depository, or in lieu thereof, the company may maintain a time deposit with a bank, savings and loan association, or comparable institution, or obtain a certificate or certificates of deposit or a clean and irrevocable letter or letters of credit from a bank, in an amount at least equal to the average amount of such downpayments being held at any given time by the company as ascertained by the commissioner, and which are payable to the insurer pursuant to the terms of the premium finance agreement. Such deposits, certificates, or a clean and irrevocable letter or letters of credit shall be held in trust for the benefit of the insureds, as their relative interests in such downpayments may exist at any given time, and in the event of the insolvency of a company, such funds on deposit under the provisions of this section or as represented by a certificate or certificates of deposit or a clean and irrevocable letter or letters of credit shall be first applied to remitting the amount of the downpayment to the insureds on all premium finance agreements upon which the company has not then forwarded in full the downpayments collected from and then being held for insureds, and, if insufficient to pay all such amounts in full, then such funds shall be applied for such purposes pro rata.


18594. Any corporation organized as an industrial loan company other than a premium finance agency shall conduct any insurance premium financing business under the authority of this chapter and it shall be subject to all of the provisions of this chapter in respect to such business, as if it were a premium finance agency.


18595. A premium finance agency shall not incorporate the words "industrial loan company" in its corporate name, on its loan forms, or in its advertising.

18596. A premium finance company may issue or sell investment certificates only (a) to its customers directly in connection with the financing of premiums for such customers, provided that the aggregate finance charges, including interest paid or not paid on such investment certificates, do not exceed those charges permitted under Section 18626 and (b) to any such institutional investors, governmental agency or instrumentality as the Commissioner of Corporations may designate by rule.


Article 3. Provisions Of Premium Finance Agreements

Ca Codes (fin:18605-18611) Financial Code Section 18605-18611



18605. A premium finance agreement shall be in writing and the printed portion thereof shall be in at least eight-point type. The agreement shall set forth: 1. The names and addresses of the insured and the company, and the date of the agreement. 2. A description of the insurance contracts for which the premiums are advanced including the total amount of the premiums and fees and a specific breakdown thereof by policies and a general description of coverages. 3. The amount of the downpayment. 4. The cost, if any, for credit life insurance. 5. The principal balance. 6. The finance charges. 7. The unpaid balance. 8. The due date of the first installment. 9. The number, amount and frequency of payment of the installments. 10. A statement that the insured may prepay the full amount due and receive a refund credit of the unearned finance charge, in the manner provided by Section 18629.


18606. A premium finance agreement shall not be executed by or on behalf of the insured when it contains any blank space to be filled in thereafter; however, if any insurance contract, premiums for which are advanced or to be advanced under the agreement, has not been issued at the time of execution and the premium finance agreement so provides, the name of the insurer, the policy number and the due date of the first installment may be left blank and inserted later. In connection with the financing of an additional premium or policies, upon the completion of the computations necessary to determine the amount of the revised unpaid balance and the number and amount of future installment payments, the company shall mail notice of the changes to the insured at his address shown in the agreement. The notice of the revised finance agreement shall set forth: (a) The unpaid balance, as adjusted. (b) The number and frequency of each installment under the revised finance agreement. (c) The amount of each installment. (d) A statement to the insured that he may disaffirm the revised finance agreement by mailing, to the company's office, notice of his intention to do so within 10 days of the company's mailing of the notice of the revised finance agreement. (e) A statement to the insured that the company may, in the event he disaffirms, cancel his insurance contract or contracts as provided in Section 18608, except that the 10-day period required by that section shall be deemed to commence with the mailing of the notice of the revised finance agreement.


18607. Upon receipt of the loan form the company shall promptly mail to the insured at the address shown in the agreement, or deliver to the insured personally, either a notice to the effect that the application for a loan is rejected or a copy of the agreement, thereby signifying acceptance by the company, or if the agreement contained any blank space when it was executed by or on behalf of the insured and such blank space was subsequently filled in, a copy of the agreement as so filled in and the insured shall in such event have 10 days in which to disaffirm his obligation under the premium finance agreement by giving written notice thereof to the producer and the company. In the event the agreement is not disaffirmed by the insured, the agreement shall be as binding an obligation of the insured as if the agreement were complete on its face when it was executed.

18608. (a) A premium finance agreement may contain a power of attorney or other authority enabling the company to cancel the insurance contract or contracts listed in the agreement in the event of default in the terms thereof. (b) Upon the exercise of such a right to cancel, the company shall mail to the insured, to his or her last known address or to the address shown on the premium finance agreement at least 10 days prior to cancellation, a notice of its intent to cancel the insurance contract or contracts. (c) The liability of a company to any person or corporation upon the exercise of such a right or authority of cancellation shall be limited to the amount of the principal balance, except in the event of willful failure by the company to mail the notice required by this section.


18609. All statutory, regulatory and contractual restrictions providing that the insured or the insurer shall not cancel the insurance contract unless the insured or the insurer first satisfies such restrictions by giving a prescribed notice of cancellation to a governmental agency, the insurer, the insured, the holder of a security interest in the subject of the insurance, or other prescribed party, shall not be affected by the provisions of this division. However, any cancellation notice period required by such statutory, regulatory or contractual restriction shall not be cumulative to the period required by Section 18606 or 18608. If cancellation of the insurance contract is initiated by the company under the terms of this division, the insurer shall (in accordance with the requirement for a prescribed notice), on behalf of itself or the insured, give such notice to the governmental agency, the holder of a security interest in the subject of the insurance or other prescribed party; and the insurer shall determine and calculate the effective date of cancellation (in accordance with the terms of that prescribed notice) from the date it receives the notice of request for cancellation from the company. In no instance shall the effective date of cancellation be prior to that established by the company.


18610. The insurer within a reasonable time after the effective date of cancellation shall return whatever gross unearned premiums or accrued dividends are payable under the insurance contract to the company, which financed the insurance contract, for the benefit of the insured. Whenever any funds are received by the company which are in excess of the amount due to the company, such an excess shall be remitted promptly to the insured or to his order or to the insurance agent for the account of the insured.


18611. At the time of mailing the notice required by Section 18606 or 18608, the employee of the company who is doing the mailing shall prepare and sign an affidavit setting forth the following: (a) The name and address of the employee doing the mailing. (b) That the employee is over 18 years of age. (c) The date and place of deposit in the mail. (d) The addressee's name and address as shown on the envelope mailed. (e) That the envelope weas sealed and deposited in the mail with the postage thereon fully paid. An affidavit of mailing, prepared as prescribed in this section, shall raise a rebuttable presumption that the notice was mailed to the addressee stated in the affidavit.


Article 4. Limitation On Finance Charges

Ca Codes (fin:18625-18631) Financial Code Section 18625-18631



18625. A premium finance agency shall not, except as otherwise provided by law, impose, take, receive, reserve or charge a finance charge which in the aggregate is greater than that which is permitted by this article.

18626. A premium finance agency may, in a premium finance agreement, contract for, charge, receive, and collect a finance charge which shall not exceed in the aggregate: (a) Two percent per month on that part of the unpaid principal balance of any loan up to, including, but not in excess of, one thousand dollars ($1,000). (b) One percent per month on any remainder of such unpaid principal balance in excess of one thousand dollars ($1,000). As used in this article "consumer insurance premium finance loan" shall mean an insurance premium finance loan where the insurance policies which are security for the loan are for personal, family or household use. (c) As an alternative to the charges authorized by subdivisions (a) and (b), a premium finance agency may contract for and receive charges at a rate not exceeding 1.6 percent per month on the unpaid principal balance.


18627. If the finance charge computed under Section 18626 is less than twenty-five dollars ($25), a minimum finance charge of twenty-five dollars ($25) may be imposed.


18628. The finance charge may be computed from the effective date of the insurance coverage, provided that the company shall pay the premium due the insurer, either: (a) Within 30 days from the effective date of the insurance coverage; or (b) Within 30 days after the receipt by the company of a proper premium finance agreement; or (c) Within 15 days after the company has mailed to the insured, notice of a revised finance agreement pursuant to Section 18606 whichever is later. If the conditions of subdivision (a), (b), or (c) are not met the finance charge shall be computed from the date the proceeds of the loan are forwarded to the insurer. In the event the company receives a proper premium finance agreement later than 60 days from the effective date of the policy financed, a proportioned adjustment of the finance charge shall be made after such 60-day period.


18629. Notwithstanding the provisions of any premium finance agreement to the contrary, any insured may pay the obligation in full at any time before maturity of the final installment. If he does so, he shall receive a refund credit of the unearned finance charge computed in accordance with Section 18635 or 18637, except where the amount of the refund credit is less than one dollar ($1) no refund need be made, and except that where the earned finance charge amounts to less than the minimum finance charge permitted by Section 18627, the company may retain as an earned finance charge a sum equal to the minimum permitted by Section 18627 or the maximum prescribed by Section 18627, whichever is applicable.

18630. In the event that the insurance policy or policies which are the subject of a premium finance agreement are canceled by the insured or by the insurer, for any cause, the insured shall be entitled to receive a refund credit of the unearned finance charge. This refund credit shall be calculated in the same manner as prescribed in Section 18629, and shall be paid to the insured within a reasonable time.


18631. (a) A premium finance agreement may provide for the payment of a default charge of one dollar ($1) to a maximum of 5 percent of the delinquent installment, in the event of a default for a period of not less than 10 days in the payment of any scheduled installment under the terms of a premium finance agreement. That charge may not be collected more than once for the same default and may be collected at the time of the default or at any time thereafter. If the default charge is deducted from any payment received after default occurs, and the deduction results in the default of a subsequent installment, no charge may be made for the resulting default. (b) A premium finance agreement may provide for the payment of a dishonored check fee not to exceed fifteen dollars ($15) for actual expenses incurred in the processing of a dishonored check.


Article 5. Charges On Scheduled Balances

Ca Codes (fin:18634-18643) Financial Code Section 18634-18643



18634. This article is applicable only to premium finance agencies.


18635. Whenever the interest or charges, or interest and charges deducted in advance exceed the maximum provided by this division, by reason of subsequent repayment of the loan, a new loan, refinancing, or otherwise, or any portion thereof prior to maturity, such excess shall be rebated to the borrower or credited on any balance owing by the borrower to the company. The rebate shall be the difference between the total of the precomputed charge, any charge for extending the first due date, plus any default or deferment charges and the charges at the contract rate computed on unpaid principal balances for the number of days actually elapsed by applying each payment first to charges and the remainder to principal. The tender, by the borrower or at his request, of an amount equal to the unpaid balance less the required rebate must be accepted by the company in full payment of the loan contract.


18636. (a) As an alternative to the provisions of Section 18635, if a loan is repayable in substantially equal and consecutive monthly installments of principal and charges combined, the first of which is due not less than 15 days nor more than one month and 15 days from the date the loan is made, a company may precompute charges and apply payments as provided in this article. (b) The total charges which would be earned if the loan contract were repaid exactly according to its terms, at the monthly rate stated in the loan contract, may be precomputed when the loan is made and added to the principal of the loan. Every payment may be applied to the combined total of principal and precomputed charges until the loan contract is fully paid. (c) The portion of the precomputed charge applicable to any particular monthly installment period shall bear the same ratio to the total precomputed charge, excluding any adjustment made for a first period of more or less than one month, as the balance scheduled to be outstanding during that monthly period bears to the sum of all monthly balances scheduled originally by the loan contract.


18637. If a loan contract made under Section 18636 is prepaid in full by cash, a new loan, refinancing or otherwise before the final installment date, the borrower shall receive a rebate of the portion of the precomputed charge applicable to the full installment periods following the installment date nearest the date of such prepayment; provided, however, that if prepayment in full occurs on or before the third installment date the rebate shall be the difference between the total precomputed charge and the charges at the contract rate computed on unpaid principal balances by applying each payment first to charges and the remainder to principal. After the third installment date, any prepayment made on or before the 15th day following an installment date shall be deemed to have been made on the installment date preceding such prepayment. The tender, by the borrower or at his request, of an amount equal to the unpaid balance less the required rebate must be accepted by the company in full payment of the loan contract.

18638. A special rebate of precomputed charges shall be made if three or more, but not all, installments are prepaid in full at any one time either in one transaction or over a period of time on a loan made under Section 18636. The special rebate shall be equal to the portion of precomputed charge applicable to the last installment period multiplied by the total number of full installment periods such installments and any subsequent installments are prepaid. Such special rebate shall be computed and made at the termination of the loan contract and shall be an addition to any required rebate for prepayment in full.

18640. A deferment charge may be charged and collected on a loan made under Section 18636 if the payment date of all wholly unpaid installments on which no default charge has been collected is deferred one or more full months and the loan contract so provides. Such deferment charge shall not exceed the portion of precomputed charge applicable, prior to deferment, to the first deferred monthly installment period multiplied by the number of months the maturity of the contract is deferred. Such number of months shall not exceed the number of full installments which are in default on the date of deferment or which may become due within 15 days of such date. When a deferment charge is made, no portion of the precomputed charge shall apply to the installment periods in which no installment payment is required by reason of the deferment. In computing any default charge or required rebate, the portion of the precomputed charge applicable to each deferred balance and installment period following the deferment period and prior to the deferred maturity shall remain the same as that applicable to such balances and periods under the original contract of loan. Such charge may be collected at the time of deferment or at any time thereafter. Any payment received at the time of deferment may be applied first to the deferment charge and the remainder, if any, applied to the unpaid balance of the loan contract; provided, however, if such payment is sufficient to pay, in addition to the appropriate deferment charge, any installment which is in default and the applicable default charge, it shall be first so applied and any such installment shall not be deferred nor subject to the deferment charge.


18642. If the maturity of a loan made under Section 18636 is accelerated for any reason, the company shall make the same refund or credit as would be required if the loan contract was paid in full on the date of acceleration and the unpaid balance shall be treated as the unpaid principal balance and thereafter the unpaid balance of the loan contract shall bear charges at the agreed rate of charge if the loan contract so provides.


18643. Notwithstanding any other provision of law not within this article, with respect to precomputed loans, premium finance agencies derive authority only from this article.


Chapter 9. Interstate Acquisitions

Ca Codes (fin:18650-18654) Financial Code Section 18650-18654



18650. This chapter does not apply to any of the following transactions: (a) An acquisition of control of a California industrial loan company that requires the approval of the commissioner under Section 18138. (b) A sale or merger that requires the approval of the commissioner under Division 1.5 (commencing with Section 4800).


18651. Each application filed with the commissioner for an approval under this chapter shall be in the form, shall contain the information, shall be signed in the manner, and shall, if the commissioner requires by rule or order, be verified in the manner that the commissioner may by rule or order require.


18652. The fee for filing with the commissioner an application for an approval under this chapter is four hundred dollars ($400).


18653. (a) The definitions that are set forth in or are applicable to Section 44 of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831u) apply to this section. (b) This section does not apply unless each bank involved in an interstate merger transaction (including each insured depository institution that is an affiliate of the surviving, resulting, or purchasing bank) that is organized under the laws of this state or maintains a branch office in this state, is an industrial loan company (as defined in Section 4805.10). (c) The commissioner may approve an interstate merger transaction that is subject to Section 44(b)(2)(B) and (D)(ii) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831u(b)(2)(B) and (D)(ii)) if the commissioner finds that the transaction is consistent with the public convenience and advantage in this state.


18654. The commissioner is authorized to adopt rules to implement this chapter similar to regulations adopted under similar provisions of law contained in Chapter 21.5 (commencing with Section 3750) of Division 1, and for the same or similar reasons. The authority granted to the commissioner by this section is in addition to the authority granted to the commissioner under Section 18347.


Chapter 10. Foreign (other State) Industrial Loan Companies: Agency Activities

Article 1. General Provisions

Ca Codes (fin:18660-18666) Financial Code Section 18660-18666



18660. In this chapter, unless the context otherwise requires: (a) "Authorized agency activities" means issuing investment certificates, renewing certificates of deposits, as defined in Section 18003.6, closing loans, servicing loans, and receiving payments on loans and other obligations. "Authorized agency activities" includes ministerial functions such as providing loan applications, assembling documents, providing a location for returning documents necessary for making a loan, providing loan account information, receiving payments, disbursing loan funds, evaluating loan applications, and other activities that the commissioner may specify by rule or order. However, "authorized agency activities" does not include any other activities that the commissioner may specify by rule or order. (b) "Branch business unit" means all or substantially all of the business of a branch office of an industrial loan company. (c) "California": (1) When used with respect to an industrial loan company, means a corporation of the type described in Section 18003 organized and licensed under the laws of this state. (2) When used with respect to an office of an industrial loan company, means an office which is located in this state. (3) When used with respect to a bank or an office of a bank, has the meaning set forth in subdivision (a) or (b) of Section 126.5. (d) "Core business" means the business of issuing investment certificates, making loans, and other activities that the commissioner may specify by rule or order. (e) "Depository institution affiliate" means a depository institution affiliate within the meaning of Section 18(r) of the Federal Deposit Insurance Act (18 U.S.C. Sec. 1828(r)). (f) "Facility," when used with respect to a foreign (other state) industrial loan company, means an office in this state at which the industrial loan company engages in noncore business but at which it does not engage in core business. (g) "Foreign (other state) industrial loan company" means a corporation of the type described in Section 18003 organized under the laws of any state of the United States, as defined in Section 146.7, other than this state. (h) "Insured": (1) When used with respect to an industrial loan company, means an industrial loan company, the investment certificates of which are insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.). (2) When used with respect to an investment certificate or deposit, means an investment certificate or deposit that is insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.). (i) "Law of the domicile," when used with respect to an industrial loan company, means the law of the state of the United States, as defined in Section 146.7, under which the industrial loan company is organized. (j) "Noncore business" means all activities permissible for an industrial loan company, except core business, and except those activities prohibited by law or determined by the commissioner by rule or order not to be noncore business. (k) "Whole business unit" means all or substantially all of the business of an industrial loan company.

18661. Each application filed with the commissioner under this chapter or under any rule or order issued under this chapter shall be in the form, shall contain the information, shall be signed in the manner, and shall (if the commissioner requires by rule or order) be verified in the manner that the commissioner may by rule or order require.


18662. (a) Each foreign (other state) industrial loan company that maintains a facility or a California branch office shall file with the commissioner such reports as and when the commissioner may by rule or order require. (b) Each report filed with the commissioner under this chapter or under any rule or order issued under this chapter shall be in the form, shall contain the information, shall be signed in the manner, and shall (if the commissioner so requires by rule or order) be verified in the manner that the commissioner may by rule or order require.


18663. Each foreign (other state) industrial loan company that maintains a facility or a California branch office shall make, keep, and preserve at the facility or branch office or at another place that the commissioner may by rule or order approve, the books, accounts, and other records relating to the business of the office, in the form, in the manner, and for the time that the commissioner may by rule or order provide.


18664. Fees shall be paid to, and collected by, the commissioner as follows: (a) Each foreign (other state) industrial loan company that on July 1 of any year maintains a California branch office shall pay, on or before December 20 of that year, the assessment levied under Section 18351. (b) Each foreign (other state) industrial loan company that on June 1 of any year maintains a facility but no California branch office shall pay, on or before the following July 1, a fee of two hundred fifty dollars ($250) for each facility. (c) If the commissioner makes an examination of a foreign (other state) industrial loan company that maintains a California branch office, the industrial loan company shall pay a fee for the examination in the sum of fifty dollars ($50) per hour for each examiner engaged in the examination plus, if in the opinion of the commissioner it is necessary for any examiner engaged in the examination to travel outside this state, the travel expenses of the examiner.

18665. (a) Any foreign (other state) industrial loan company is exempted from the restrictions of Section 1 of Article XV of the California Constitution relating to rates of interest upon the loan or forbearance of any money, goods, or things in action or on accounts after demand. (b) This section does not exempt a foreign (other state) industrial loan company or any subsidiary, as defined in Section 189 of the Corporations Code, from complying with all other laws and regulations governing the business in which the industrial loan company or subsidiary is engaged. (c) This section creates and authorizes an exempt class of persons pursuant to Section 1 of Article XV of the California Constitution.


18666. The commissioner is authorized to adopt rules to implement this chapter similar to regulations adopted by the Superintendent of Banks under similar provisions of law contained in Division 1 (commencing with Section 99), and for the same or similar reasons regulations are adopted by the Superintendent of Banks. The authority granted to the commissioner by this section is in addition to the authority granted to the commissioner under Section 18347.


Article 2. Facilities Of Insured Foreign (other State) Industrial Loan Companies

Ca Codes (fin:18670-18675) Financial Code Section 18670-18675



18670. No provision of this article applies to an insured foreign (other state) industrial loan company that maintains a California branch office.

18671. (a) No foreign (other state) industrial loan company may establish or maintain an office in this state at which it engages in noncore industrial loan company business unless the industrial loan company complies with this article and applicable provisions of Article 1 (commencing with Section 18660). (b) (1) No person may establish or maintain an office in this state as representative of an insured foreign (other state) industrial loan company unless the industrial loan company complies with this article and applicable provisions of Article 1 (commencing with Section 18660). (2) For purposes of this article, if any person establishes or maintains an office in this state as representative of an insured foreign (other state) industrial loan company, the insured foreign (other state) industrial loan company is deemed to establish and maintain the office as a facility.


18672. Not less than 30 days before an insured foreign (other state) industrial loan company establishes a facility, it shall file with the commissioner a report and the appointment called for in Section 18673.

18673. (a) Not less than 30 days before establishing a facility, an insured foreign (other state) industrial loan company shall file with the commissioner, in the form that the commissioner may by rule or order require, an appointment irrevocably appointing the commissioner and the commissioner's successor from time to time in office to be the industrial loan company's attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the industrial loan company or any of its successors that arises out of the activities in this state of the facility after the appointment has been filed, with the same force and validity as if served personally on the industrial loan company or its successors, as the case may be. (b) Any insured foreign (other state) industrial loan company that maintains a facility and that has not filed with the commissioner an appointment pursuant to subdivision (a) is deemed by the maintenance of the facility to have appointed the commissioner as its attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the industrial loan company or any of its successors that arises out of the activities in this state of the facility, with the same force and validity as if served personally on the industrial loan company or its successor, as the case may be. (c) Service may be made on an insured foreign (other state) industrial loan company that has appointed or is deemed to have appointed the commissioner as its attorney for service of process by leaving a copy of the process at any office of the commissioner. However, the service is not effective unless (1) the party making the service, who may be the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the industrial loan company served at the last address on file with the commissioner for any of the industrial loan company's offices in this state or at its head office, and (2) an affidavit of compliance with this subdivision by the party making the service is filed in the case on or before the return date, if any, or within any further time that the court, in the case of a judicial proceeding, or the administrative agency, in the case of an administrative proceeding, allows.


18674. Not less than 30 days before an insured foreign (other state) industrial loan company relocates a facility, it shall file a report with the commissioner.


18675. Not less than 30 days before an insured foreign (other state) industrial loan company closes a facility, it shall file a report with the commissioner.


Article 3. California Branch Offices

Ca Codes (fin:18680-18687) Financial Code Section 18680-18687



18680. No foreign (other state) industrial loan company may transact core business in this state except at a branch office established in accordance with federal law and the law of the domicile of the industrial loan company.


18681. Section 18680 does not prohibit: (a) Any foreign (other state) industrial loan company which does not maintain a California branch office from carrying on the activities described in subdivision (d) of Section 191 of the Corporations Code. (b) Any foreign (other state) industrial loan company which does not maintain a California branch office from making in this state loans secured by liens on real property located in this state. (c) Any foreign (other state) industrial loan company from having a California industrial loan company as its agent pursuant to Article 5 (commencing with Section 18700).


18682. No foreign (other state) industrial loan company may establish or maintain a California branch office unless it is qualified to transact intrastate business in this state under Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code.


18683. No foreign (other state) industrial loan company may establish or maintain a California branch office unless the industrial loan company is insured.

18684. (a) (1) No foreign (other state) industrial loan company may merge as the surviving corporation (Section 148) with a California industrial loan company or California bank except that an insured foreign (other state) industrial loan company may do so in accordance with federal law, the law of the domicile of the foreign (other state) industrial loan company, this chapter, and Division 1.5 (commencing with Section 4800). (2) No foreign (other state) industrial loan company may purchase the whole business unit of a California industrial loan company or California bank except that an insured foreign (other state) industrial loan company may do so in accordance with federal law, the law of the domicile of the foreign (other state) industrial loan company, this chapter and Division 1.5 (commencing with Section 4800). (3) No foreign (other state) industrial loan company that does not already maintain a California branch office may establish or maintain a California branch office except in the manner described in paragraph (1) or (2) and in accordance with federal law, the law of the domicile of the foreign (other state) industrial loan company and this chapter. (b) This section constitutes: (1) An election to permit early interstate merger transactions pursuant to Section 44(a)(3) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831u(a)(3)). (2) An express prohibition against interstate branching through the acquisition of a branch business unit located in this state of a California industrial loan company or California bank (without acquisition of the whole business unit of the California industrial loan company or California bank) pursuant to Section 44(a)(4) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831u(a)(4)). (3) An express prohibition against interstate branching through de novo establishment of California branch offices pursuant to Section 5155 of the Revised Statutes (12 U.S.C. Sec. 36) or Section 18(d) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1828(d)).


18685. (a) No foreign (other state) industrial loan company that does not already maintain a California branch office may: (1) Merge as the surviving corporation (Section 148) with a California industrial loan company or California bank pursuant to paragraph (1) of subdivision (a) of Section 18684 unless the California industrial loan company or California bank has been in existence for at least five years. (2) Purchase the whole business unit, of a California industrial loan company or California bank pursuant to paragraph (2) of subdivision (a) of Section 18684 unless the California industrial loan company or California bank has been in existence for at least five years. (b) For purposes of this section, a California industrial loan company or California bank that is established solely for the purpose of, and does not open for business prior to, acquiring the whole business unit of a second California industrial loan company or California bank through a merger or purchase is deemed to have been in existence for the same period of time as the second California industrial loan company or California bank.


18687. (a) No foreign (other state) industrial loan company that maintains a California branch office may transact at the branch office any business that it is not authorized to transact or is prohibited from transacting under the law of its domicile or that industrial loan companies organized and licensed under the laws of this state are not authorized to transact or are prohibited from transacting. (b) Whenever any provision of this chapter or of any rule or order issued under this chapter which is applicable to or with respect to a foreign (other state) industrial loan company that maintains a California branch office is inconsistent with any provision of any other chapter of this division, the former provision applies, and the latter provision does not apply.


Article 4. California Industrial Loan Company As Principal

Ca Codes (fin:18690-18697) Financial Code Section 18690-18697



18690. Notwithstanding the provisions of Sections 18147 and 18165, a California industrial loan company may, with the prior approval of the commissioner and subject to any rules that the commissioner may prescribe, have an insured depository institution engage in authorized agency activities as its agent.


18691. An application by a California industrial loan company for approval to have an insured depository institution engage in authorized agency activities as its agent shall be in the form, shall contain the information, shall be signed in the manner, and shall, if the commissioner requires by rule or order, be verified in the manner that the commissioner may, by rule or order, require.


18692. An application by a California industrial loan company for approval to have an insured depository institution engage in authorized agency activities as its agent shall be accompanied by a filing fee of two hundred fifty dollars ($250).


18693. In determining whether to approve or deny an application by a California industrial loan company for approval to have an insured depository institution engage in authorized agency activities as its agent, the commissioner shall consider both of the following: (a) Whether the proposed agency arrangement is consistent with the safe and sound operation of the California industrial loan company. (b) Any other factors that the commissioner deems relevant.


18694. No California industrial loan company may have an insured depository institution conduct as its agent any activity that the California industrial loan company is prohibited from conducting itself.

18695. No office of an insured depository institution that is performing authorized agency activities as agent for a California industrial loan company in accordance with this article shall, on that account, be deemed to be an office of the California industrial loan company.


18696. If the commissioner finds that any activity performed by an insured depository institution as agent for a California industrial loan company is not an authorized agency activity or that the agency arrangement is inconsistent with safe and sound practices, the commissioner may order the California industrial loan company to terminate the agency arrangement.


18697. This article does not apply to a California industrial loan company's having an insured depository institution engage in authorized agency activities as its agent in any case other than a case where, but for Section 18695, an office of the insured depository institution affiliate would for regulatory purposes be considered to be an office of the California industrial loan company.


Article 5. California Industrial Loan Company As Agent

Ca Codes (fin:18700-18707) Financial Code Section 18700-18707



18700. Notwithstanding the provisions of Sections 18147 and 18165, a California industrial loan company may, with the prior approval of the commissioner and subject to any rules that the commissioner may prescribe, engage in authorized agency activities as agent for an insured depository institution.

18701. An application by a California industrial loan company for approval to engage in authorized agency activities as agent for an insured depository institution shall be in the form, shall contain the information, shall be signed in the manner, and shall, if the commissioner requires by rule or order, be verified in the manner that the commissioner may, by rule or order, require.


18702. An application by a California industrial loan company for approval to engage in authorized agency activities as agent for an insured depository institution shall be accompanied by a filing fee of two hundred fifty dollars ($250).

18703. In determining whether to approve or deny an application by a California industrial loan company for approval to engage in authorized agency activities as agent for an insured depository institution, the commissioner shall consider both of the following factors: (a) Whether the proposed agency arrangement is consistent with the safe and sound operation of the California industrial loan company. (b) Any other factors that the commissioner deems relevant.


18704. No California industrial loan company may conduct any activity as an agent for an insured depository institution that the California industrial loan company would be prohibited from conducting as a principal.


18705. (a) No office of a California industrial loan company that conducts authorized agency activities as agent for an insured depository institution in accordance with this article shall, on that account, be deemed to be an office of the insured depository institution. (b) For purposes of this division, no insured depository institution that has a California industrial loan company engaged in authorized agency activities as its agent shall on that account be deemed to be transacting business in this state.


18706. If the commissioner finds that any activities performed by a California industrial loan company as agent for an insured depository institution are not authorized agency activities or that the agency arrangement is inconsistent with safe and sound practices, the commissioner may order the California industrial loan company to terminate the agency arrangement.


18707. This article does not apply to a California industrial loan company's engaging in authorized agency activities as agent for an insured depository institution in any case other than a case where, but for Section 18705, an office of the California industrial loan company would for regulatory purposes be considered to be an office of the insured depository institution.


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