Page 36 Summer 2019 Points of Interest Assembly Bill – continued from page 35 The term “confidential data” does not include name, phone number, address, email address, desired loan amount, stated purpose of the loan, borrower’s self-reported estimated credit score or income, and other information that is knowingly made publicly available by a prospective borrower. Compensation While existing law prohibits a finance lender, broker, or mortgage loan originator licensee from paying any fee or other compensation to an individual for undertaking an activity related to a loan that requires a license, the new law expands that prohibition. The new bill would now prohibit a finance lender from compensating a person for any of the acts listed above unless the compensation is in connection to a referral of a borrower when specific conditions are met. Namely, the law would prohibit an unlicensed person who receives compensation from collecting a prospectiveborrower’sprivateinformation, unless that person first obtains express consent, and would require that person to provide written disclosure information to a prospective borrower before making a referral. The disclosure must show the method of compensation to the licensed broker, even if it is presented by an unlicensed affiliate. Of more concern, is that the bill would require any broker who compensates an unlicensed individual to create, maintain, and implement policies and procedures to ensure that individual does not engage in activity which violates the California Financial Code, had those acts been committed by a licensee. These responsibilities partially include:  Thelicenseeisresponsibleforensuring anunlicensedpersondoesnotcollect confidential data from a prospective borrower unless specified disclosure is provided and the unlicensed personobtainstheborrower’sexpress consent.  The licensee is required to post the policy and procedures in specified locations.  Prohibits a licensee from engaging in business with a person who demonstrates repeated, uncorrected failures to adhere to the policies and procedures.  Requires a licensee who compensates an unlicensed person for referrals to maintain books and records documenting the identities of all persons that the broker compensates and all unlicensed persons that the broker severs a relationship with due tothatindividual’sfailuretoadhereto the broker’s policies and procedures. It does provide an exemption of sorts, in that a licensed broker will not be considered in violation of the California Financial Code solely based on working with an unlicensed person who the brokercompensated,whereinthatperson commits isolated acts in violation of the California Financial Code. Providing Disclosures The bill clarifies existing disclosure law to include requiring a licensed finance lender to obtain a signed statement from the borrower of a consumer loan, which detailsspecifiedinformationrelatingtothe arrangement in a “clear and conspicuous manner,” including information about fees, rates, and any prepayment penalties or policies. The bill would require a licensed broker, before making a referral to a finance lender in connection with a consumer loan, to provide the prospective borrower astatementthatincludesinformationasto thearrangementsbetweenthebrokerand finance lender, in a clear and conspicuous manner, and then obtain the borrower’s expressconsentwithregardstothoseacts. Compliance Existinglawauthorizesthecommissionerto examinespecifiedrecordsofeveryperson engagedinthebusinessofbeingafinance lender, broker, or program administrator of consumer finance, for the purposes of violations of the California Financial Code orsecuringinformationotherwiserequired in the administration and enforcement of the California Financial Code. AB 642 requires the commissioner to examine the affairs of each finance lender licensee for compliance with California Financial Code and related regulationsonceevery48months. Thebill authorizes the commissioner to conduct the examination under oath. continued on page 37