About California Financing Law
The California Financing Law (Fin. Code, § 22000 et seq.) requires the licensing and regulation of finance lenders and brokers making and brokering consumer and commercial loans, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with making and brokering of loans; and provides administrative, civil (injunction and ancillary relief) and criminal remedies for violations of the law. The regulations under the California Financing Law begin with section 1404 of title 10 of the California Code of Regulations (Cal. Code Regs., tit. 10, § 1404 et seq.). A finance lender is defined in the law as “any person who is engaged in the business of making consumer loans or making commercial loans.”
A finance lenders license provides the licensee with an exemption from the usury provision of the California Constitution. There are a number of “non-loan” transactions, such as bona fide leases, automobile sales finance contracts (Rees-Levering Motor Vehicle Sales and Finance Act) and retail installment sales (Unruh Act), that are not subject to the provisions of the California Financing Law. In addition to requiring a license for certain lending activity, the California Financing Law requires a license for certain brokering activity.
A “broker” is defined in the law as “any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender.” A broker license authorizes brokering of loans to licensed finance lenders; it does not authorize brokering of loans to those who are not licensed finance lenders. The requirements for a license are set forth in Financial Code section 22100 et seq. The law requires applicants to have and maintain a minimum net worth of at least $25,000 and to obtain and maintain a $25,000 surety bond. In general, principals of the company may not have a criminal history or a history of non-compliance with regulatory requirements.
Who is Required to Obtain a Finance Lenders License?
In general, any person engaging in the business of a finance lender or finance broker in California is required to obtain a license under the California Financing Law. The California Financing Law contains a number of exemptions for persons licensed by other regulatory agencies.
- “Finance lender” includes any person engaged in the business of making consumer loans or making commercial loans.
- “Finance broker” includes any person engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender. A broker license authorizes brokering of loans to licensed finance lenders; it does not authorize brokering of loans to those who are not licensed finance lenders.
If you are applying for a new license under the California Financing Law, apply through NMLS by selecting “Getting Started” on the NMLS Resource Center page. Follow the California Financing Law Checklist for the requirements specific to new applicants under the California Financing Law.
Do I need to authorize my branch office(s) through NMLS?
In addition to the main office identified on the California Financing Law license, a license is required for each branch location that conducts business with California consumers.
- All branches of companies must obtain a license through NMLS.
Who does not need a branch license?
Any physical location of a licensee not engaged in lending or brokering activities for California residents does not require a branch license.
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