Article 2. General of California Financial Code >> Division 7. >> Chapter 8. >> Article 2.
A premium finance agency desiring the full authority which
may be conferred by this division, shall, in respect to any lending
operations other than insurance premium financing, be required to
amend its articles of incorporation and meet the requirements of this
division as if it were making an original application for authority
to organize under this division.
The articles of incorporation of any corporation organized
under this division as a premium finance agency shall include
reference to that fact.
Capital stock of any premium finance agency shall not be
less than seventy-five thousand dollars ($75,000) and need not exceed
that sum regardless of the number of branch offices or business
locations which may be authorized under the provisions of this
Before a premium finance agency commences business or opens
a branch office or place of business, there must be paid in cash, for
the benefit of the agency, 100 percent of the amount of the minimum
capital stock required under this chapter.
An insurance premium finance agreement, as defined in
Section 18564, may be prepared in the office of an insurance producer
licensed by the Department of Insurance, and mailed or otherwise
delivered to a premium finance agency for acceptance without the
office of the producer thereby being constituted a place of business
of the company. A producer at whose office a premium finance
agreement is so prepared shall not be considered to be a broker of
the company as that term is used in this division.
In the event of any conflict in the provisions of this
chapter with the provisions of any other chapter in this division,
the provisions of this chapter shall control with regard to a premium
finance agency or to insurance premium financing.
The provisions of Sections 18023, 18024, 18120, 18205,
18268, 18269, 18271, 18272, 18274, and 18455 shall not apply to a
premium finance agency.
The provisions of Sections 18607, 18625, and 18626 shall not
apply to any bona fide loan with a principal amount of two thousand
five hundred dollars ($2,500) or more or to a premium finance agency
in connection with such loans if the provisions of this section are
not used for the purpose of evading this division.
Unless the insured has notice of the assignment of a premium
finance agreement, payment thereunder by him to the last known
assignee of the agreement shall be binding upon all subsequent
Assignment of the premium finance agreement shall not cut off any
defenses which the insured would have against the company or an
assignee of the agreement arising from obligations imposed by this
The obligations and rights of a premium finance agency, under this
chapter, shall also apply to the assignee of a premium finance
At any time during the term of the premium finance
agreement, but not later than one year after the last payment
thereunder, the company shall upon written request of the insured,
give or mail to him a written statement of the dates and amounts of
payment, and the total amount, if any, unpaid thereunder. Such a
statement shall be supplied once each year without charge; if any
additional statement is requested, the company shall supply such
statement at a charge not exceeding one dollar ($1) for each
additional statement so supplied.
Upon payment of a loan in full the company upon request
shall return the premium finance agreement marked "Paid" to the
No filing of the premium finance agreement shall be
necessary to perfect the validity of such agreement as a secured
transaction as against creditors, subsequent purchasers, pledgees,
encumbrances, successors or assigns of the insured.
Any downpayment which is made and which is received by the
company from the insured, or from the insurance producer on behalf of
the insured, shall be held by the company in trust for and in
transit to the insurer, and shall be paid to the insurer, together
with the balance of the premium payable pursuant to the terms of the
premium finance agreement within 30 days from the effective date of
the policy, or within 30 days after the receipt of a proper premium
finance agreement by the company, or within 15 days after the company
has mailed to the insured notice of a revised finance agreement
pursuant to Section 18606, whichever is later. In the event that the
premium is paid to the insurance agent or broker of record, such
agent or broker of record shall not be deemed the agent of the
company by reason of such payment.
Upon request of the commissioner, the company shall furnish an
authorization for disclosure to the commissioner of financial records
of such trust accounts pursuant to Section 7473 of the Government
The downpayments received by the company under the
provisions of Section 18592, may be held by the company in trust in a
separate bank account or depository, or in lieu thereof, the company
may maintain a time deposit with a bank, savings and loan
association, or comparable institution, or obtain a certificate or
certificates of deposit or a clean and irrevocable letter or letters
of credit from a bank, in an amount at least equal to the average
amount of such downpayments being held at any given time by the
company as ascertained by the commissioner, and which are payable to
the insurer pursuant to the terms of the premium finance agreement.
Such deposits, certificates, or a clean and irrevocable letter or
letters of credit shall be held in trust for the benefit of the
insureds, as their relative interests in such downpayments may exist
at any given time, and in the event of the insolvency of a company,
such funds on deposit under the provisions of this section or as
represented by a certificate or certificates of deposit or a clean
and irrevocable letter or letters of credit shall be first applied to
remitting the amount of the downpayment to the insureds on all
premium finance agreements upon which the company has not then
forwarded in full the downpayments collected from and then being held
for insureds, and, if insufficient to pay all such amounts in full,
then such funds shall be applied for such purposes pro rata.
Any corporation organized as an industrial loan company
other than a premium finance agency shall conduct any insurance
premium financing business under the authority of this chapter and it
shall be subject to all of the provisions of this chapter in respect
to such business, as if it were a premium finance agency.
A premium finance agency shall not incorporate the words
"industrial loan company" in its corporate name, on its loan forms,
or in its advertising.
A premium finance company may issue or sell investment
certificates only (a) to its customers directly in connection with
the financing of premiums for such customers, provided that the
aggregate finance charges, including interest paid or not paid on
such investment certificates, do not exceed those charges permitted
under Section 18626 and (b) to any such institutional investors,
governmental agency or instrumentality as the Commissioner of
Corporations may designate by rule.