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Complying with California’s Finance Lender’s Licensing and Reporting Requirements
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Complying with California’s Finance Lender’s Licensing and Reporting Requirements

Getting the license is the easy part

To survive and thrive in the lending industry, finance lenders and brokers must comply with strict regulations imposed by state and federal law. In California, lenders who are not excepted from the rule by virtue of other licensing requirements must apply for a license under California’s finance lending law.

To apply for a license, a lender must prepare and submit an application, along with financial statements and a surety bond for at least $25,000. Applicants must have a net worth of at least $25,000, and all executive officers, board members, 10 percent shareholders and persons responsible for the applicant’s lending activities must provide fingerprints. Those providing fingerprints must complete a questionnaire and cannot have a criminal history or a history of noncompliance with governmental regulations.

Maintaining a license requires annual reporting and more

Annual reporting

Each licensee must file an annual report with the state Department of Corporations on or before March 15th every year. The annual report requirement applies even if no business was conducted relative to the license in the prior year.  Failure to file an annual report results in summary revocation of the license by the state pursuant to California Financial Code section 22159.

Change of address

A licensee must notify the Department or Corporations of a change in address at least ten days prior to the move.  Failure to do so may subject the licensee to a civil penalty up to $500 pursuant to California Financial Code section 22153.

Annual assessment

Licensees must pay an annual fee of at least $250 per licensed location. In September of each year, the state Department of Corporations notifies licensees of the amounts due according to the previous year’s loan volume. Payments are due by October 31.

Surety bond requirements

Each licensee is required to maintain a surety bond in a minimum amount of $25,000 at all times and must cover every mortgage loan originator employed by the licensee. The state commissioner may require a higher bond amount for a licensee who employs one or more mortgage loan originators and who makes or arranges residential mortgage loans, based on the dollar amount of residential mortgage loans originated and any mortgage loan originators employed.

Net worth requirements

Licensees must maintain a net worth of at least $25,000 at all times.  A licensed finance lender and broker who employs one or more mortgage loan originators and who makes residential mortgage loans must maintain a minimum net worth of at least $250,000.  A licensed finance broker who employs one or more mortgage loan originators and who arranges, but does not make, residential mortgage loans shall continuously maintain a minimum net worth of at least $50,000.

Regulatory examination

Each licensee is subject to a regulatory examination by the state Department of Corporations at any time. Licensees are responsible for the actual cost of regulatory examinations, whether or not licensees conducted any business related to the license in the previous year.

Record-keeping

Licensees must maintain proper books and records on any loan for three years after the last payment on the loan.

Advertising

Before publishing any advertisements, licensees must seek approval from the state. The advertisements may not be false, misleading or deceptive. Licensees should maintain a copy of the advertisement for at least 90 days after publication.

At Glass & Goldberg, we strive to stay abreast of changes in the law and governmental procedures that may affect our clients.  Our attorneys provide high quality and cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law.  Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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