The California Department of Business Oversight (CDBO) has issued a new regulation under the California Finance Lenders Law (CFLL) that will require consumer lenders and/or brokers in nonbank operating subsidiaries or affiliates of banks to obtain a CFLL license as of September 28, 2016. Commercial lenders or brokers in nonbank operating subsidiaries or affiliates of banks are not affected by the new regulation.
The final regulation — Section 1422.3 of Title 10 of the California Code of Regulations — details the new licensing exemptions:
“A nondepository lender or broker that engages in the business of making or brokering consumer loans in this state is not exempt from licensure under subdivision (a) of section 22050 of the Financial Code unless that nondepository lender or broker is a bank, trust company, savings and loan association, insurance premium finance agency, credit union, small business investment company, community advantage lender, California business and industrial development corporation when acting under federal law or other state authority, or a licensed pawnbroker when acting under the authority of that license.”
The final regulation removes the exemption for lenders and/or brokers making consumer loans under state or federal law relating to banks. Bank subsidiaries and affiliates that are primarily engaged in commercial lending but still offer consumer loans on occasion as an accommodation to certain customers will not be able to do so without obtaining a CFLL license.
In addition, because the CFLL definition of a consumer loan also includes commercial purpose loans of less than $5,000, any bank subsidiary or affiliate that offers such loans must obtain a CFLL license by September 28, 2016.
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