Commissioner’s Release – Finance Lender Law: 60 FS


Date: July 16, 2006

Preston DuFauchard, Commissioner

This release addresses whether certain public utilities that make commercial loans, as specified under financing programs for energy efficiency purposes as approved by the California Public Utilities Commission (“CPUC”), must comply with the California Finance Lenders Law (“CFLL”).

Financial Code Section 22100 of the CFLL provides that no person shall “engage in the business” of a Finance lender or broker without obtaining a License from the California Corporations Commissioner (“Commissioner”). The Commissioner has received questions from public utilities as to whether they are “engaged in the business” within the meaning of Section 22100 when they make certain commercial loans pursuant to financing programs approved by the Public Utilities Commission to achieve energy efficiency in California. The Commissioner finds that public utilities are not engaged in the business under the CFLL, under the limited circumstances described below.

By way of background, the CPUC regulates public utilities including electrical and gas corporations, and administers cost-effective energy efficiency programs. See, for example, Public Utilities Code Section 399(e)(3). To aJuly 16, 2006 ress capital constraints that have caused in part California’s energy efficiency problems, the CPUC directed public utilities to implement financing programs. These financing programs are designed to benefit Californians by increasing the use of energy efficient equipment and equipment which promotes energy efficiency by managing energy demand or reducing energy usage (Energy Efficient Equipment). The CPUC allows each public utility to develop the specific details of its financing program. As examples, the Southern California Gas Company and the San Diego Gas & Electric Company developed and implemented financing programs with the following limitations on lenders, borrowers, and loans with respect to the programs.

  1. The Lenders:
    • Include only public utilities including electrical and gas corporations.
    • Operate under the California Public Utilities Code, subject to CPUC regulation.
    • Make loans in accordance with financing programs approved by the CPUC.
    • Administer financing programs in a manner that is merely ancillary to their business of providing energy.
    • Comply with all applicable federal and state laws with respect to any loans made under the financing programs.
  2. The Borrowers:
    • Include only commercial, non-residential customers of the public utility, including government agencies and owners of residential multi-family units who do not live on the premises.
    • Must be customers in good credit standing with the public utility, as determined by eligibility criteria set forth in the financing programs of public utilities.
    • Complete loan applications and sign loan contracts pursuant to the financing programs.
    • Accept responsibility for purchasing and installing Energy Efficient Equipment.
  3. The Loans:
    • Must be made to the borrowers solely for the purpose of purchasing and/or installing Energy Efficient Equipment.
    • Fall within the definition of commercial loan in Financial Code Section 22502 and are therefore not used for personal, family or household purposes.
    • Impose no costs on the borrower because the loans are provided free of any interest, fees, late payment penalties, and other charges.

When this group of public utilities, including but not limited to those specifically named above, make commercial loans under financing programs under the conditions described above, the Commissioner finds that these public utilities are not “engaged in the business” of a Finance lender or broker under Financial Code Section 22100 of the CFLL. Therefore, they are not required to obtain a Finance lender or broker License under the CFLL when engaged in these financing activities for energy efficiency purposes.

This release includes findings of the Commissioner pursuant to Financial Code Section 22150.

Timothy L. Le Bas
Deputy Commissioner and General Counsel
Office of Law and Legislation