Article 2. General Provisions of California Financial Code >> Division 7. >> Chapter 1. >> Article 2.
An industrial loan company shall not appoint or continue in
office any officer, director or management personnel who do not have
the qualifications required by Section 18117 (d).
(a) An industrial loan company shall not deposit its funds
except with a bank, trust company, or savings association authorized
to do business in this state, except as provided in subdivision (b).
(b) An industrial loan company which is insured, as that term is
defined in Section 18003.5, may also deposit its funds in an
out-of-state financial institution, the accounts of which are insured
by the Federal Deposit Insurance Corporation.
(c) Funds deposited in an out-of-state financial institution shall
not in any case exceed the applicable amount of federal deposit
(d) The depository shall be approved by a majority vote of the
board of directors or the executive committee, exclusive of the vote
of any director who is an officer, director, trustee, or shareholder
of the depository so designated. An out-of-state savings association
subject to the Management Consignment Program of the Office of Thrift
Supervision shall not be used as a depository.
(e) An industrial loan company shall furnish an authorization for
disclosure to the commissioner of the financial records of deposits
pursuant to Section 7473 of the Government Code. No deposit shall be
made in an out-of-state financial institution unless that institution
agrees in writing to disclose financial records of the industrial
loan company to the commissioner.
No industrial loan company shall invest any of its funds,
except as authorized in this division. Industrial loan companies may
invest their funds in investments that are legal investments for
commercial banks, including the capital stock, obligations, or other
securities of one or more corporations, subject to rules and orders
prescribed by the commissioner. Companies may also invest their funds
in the choses in action issued by any other industrial loan company.
An industrial loan company may organize, sponsor, operate,
control, or render investment advice to, an investment company, or
underwrite, distribute, or sell securities of any investment company
which has qualified to sell its securities in this state pursuant to
Part 2 (commencing with Section 25100) of Division 1, Title 4 of the
Corporations Code, if the officers and employees of the industrial
loan company who sell these securities meet such standards with
respect to training experience, and sales practices as established by
the Secretary of Business, Consumer Services, and Housing or the
secretary's designee. For the purpose of this section, "investment
company" means an investment company as defined in the Investment
Company Act of 1940 (15 U.S.C., Sec. 80a-1 et seq.).
If an industrial loan company has investment or thrift
certificates outstanding, then such company shall not borrow, except
by the sale of investment or thrift certificates, in an amount in
excess of 300 percent of the amount represented by its outstanding
capital stock, surplus and undivided profits, without the written
consent of the commissioner. All sums so borrowed in excess of 150
percent of outstanding capital stock, surplus and undivided profits
shall be unsecured borrowings or, if secured, approved in writing by
the commissioner in advance of the borrowings, and be included as
investment or thrift certificates for purposes of computing the ratio
allowed under Sections 18319 and 18320.
In addition to the borrowings under Section 18023, an
industrial loan company may borrow funds from the Federal Home Loan
Bank, the Federal Deposit Insurance Corporation, or a Federal Reserve
Bank, which borrowed funds shall not be included in the borrowing
limitations contained in Section 18023.
An industrial loan company shall not transact business or
make any loan provided for by this division under any other name than
that set forth in the articles of incorporation as filed with the
No person shall use a holding company or any other device
for the purpose of evading or avoiding any of the provisions of this
division. This section shall not affect the right of a holding
company to issue preferred stock or debentures when permitted to do
so under the Corporate Securities Law of 1968. "Holding company"
means any company which directly or through one or more intervening
subsidiaries, whether or not wholly owned, controls or has the power
to control a majority of the shares of an industrial loan company.
Corporations subject to this division are not subject to the
provisions or regulations of the Personal Property Brokers Law,
Division 9 (commencing with Section 22000), the Consumer Finance
Lenders Law, Division 10 (commencing with Section 24000), or the
Commercial Finance Lenders Law, Division 11 (commencing with Section
All corporations formed under the provisions of this
division are taxed in the same manner and at the same rates as other
corporations are taxed pursuant to Section 27 of Article XIII of the
Constitution of this state.
Each industrial loan company shall keep and use in its
business, books, accounts, and records which will enable the
commissioner to determine if the company is complying with the
provisions of this division and with the rules and regulations made
by the commissioner.
Each industrial loan company shall preserve the books,
accounts, and records, including cards used in the card system, if
any, for a least two years after making the final entry on any loan
or purchased obligation recorded therein.