Points of Interest Summer 2019 Page 35 T he California legislature introduced Assembly Bill No. 642 on Feb. 15, whichwouldmakesweepingchanges to how both licensed and unlicensed finance lenders operate in the state. California Financial Code provides for the licensing and regulation of finance lenders, brokers, and administrators by the Commissioner of Business Oversight. The California Financial Code prohibits engaginginthebusinessofafinancelender or broker without first obtaining a license. Presently, the Financial Code defines a broker as anyone who is engaged in the business of negotiating or performing any act of a licensed broker in connection with loans made by a finance lender. AB 642 would make significant changes to this definition. This new bill would change the definition of a broker to include anyone who is in the business of performing “specific acts” in connection with loans made by a finance lender. These specific acts include: 1. Any person who is transferring confidential data about a borrower or prospective borrower to a finance lender with the expectation of receiving compensation. by Dennis Baranowski Garaci LLP New California Assembly Bill Adds Challenges for California Lenders 2. Any person making a referral of a loan prospect under an agreement with a finance lender that meets specific requirements with the expectation of compensationcontingentonwhether the finance lender enters into an agreement with the borrower. 3. Any person who participates in the preparation of loan documents, counseling prospective borrowers, advising, making recommendations about a specific loan product based on the borrower’s private data, communicating lending decisions or inquiries to a borrower, or charging a fee to any borrower in relation to taking an application for a loan from a finance lender. Collecting Application Data The bill would also prohibit a licensed broker from performing any specific act that falls within the new definition of a broker, without the express consent of the borrower. This rule is likely to include transmitting what is considered confidential data, such as finances, credit reports, bank statements, and other personal information to a financial lender for the purpose of obtaining a loan. Again, these new rules should be especially concerning for those preparing or gathering loan documents. The bill provides exemptions for persons performing these specified acts five or fewer times in a calendar year, and those performing administrative or clerical tasks in support of a licensed lender or broker. Theamountofinformationregulatedunder the new bill is quite substantial. Section 22337.5 defines “confidential data” as meaning the following:  Bank account number  Bank statement  Credit or debit card number  Credit score or report  Social security number (including partial number)  Personal or business financial information  Government issued ID numbers  Personal employment data or history  Date of birth  Mother’s maiden name  Medical information  Health insurance information  Insurance policy number  Taxpayer ID continued on page 36