On August 6, the California Department of Financial Protection and Innovation issued a notice of proposed rulemaking to amend certain codes under the California Code of Regulations and to implement the Pilot Program for Increased Access to Responsible Small Dollar Loans. The Pilot Program is administered by DFPI and established under the California Financing Law (covered by a Buckley Special Alert here). According to DFPI, the proposed regulations implement SB 235, “which authorizes a finder, defined as an entity that brings together a licensed lender and prospective borrower to negotiate a contract, to perform additional services on behalf of a lender,” and AB 237 “which, among other things, increases the upper dollar limit for a permissible Pilot Program loan from $2,500 to $7,500 and requires participating lenders to conduct reasonable background checks on finders.” The proposal would amend regulations of DFPI’s Pilot Program by, among other things: (i) revising general information and instructions to forms; (ii) increasing the upper limit from $2,500 to $7,500 on the amount of a permissible loan; (iii) “requir[ing] Pilot Program applicants to submit the policies and procedures they must maintain to address customer complaints and respond to questions raised by loan applicants and borrowers, including questions about finders”; (iv) permitting finders to disburse funds on behalf of lenders, collecting loan payments from borrowers, and issuing notices and disclosures to borrowers or perspective borrowers; and (v) removing a provision that prohibits finders from discussing marketing materials or loan documents with a borrower or prospective borrower.
This content originally appeared in Buckley’s Infobytes blog, a collection of news and alerts covering the financial services industry. To read more or have the Infobytes weekly newsletter delivered to your inbox, please visit infobytesblog.com.