Chapter 3. Enforcement of California Financial Code >> Division 1.7. >> Chapter 3.
(a) Any compliance failure that was not willful or
intentional and resulted from a bona fide error, that occurred
notwithstanding the maintenance of procedures reasonably adopted to
avoid those errors, including, but not limited to, those involving
clerical, calculation, computer malfunction and programming, and
printing errors shall be corrected no later than 45 days after
receipt of the complaint or discovery of the error. A person who
originates a covered loan shall not be administratively, civilly, or
criminally liable for a bona fide error corrected pursuant to this
(b) If a person who originates covered loans makes a loan where
the person knew of and showed reckless disregard for a violation of
this division by a broker, the person and broker shall be jointly and
severally liable for all damages awarded under this division with
respect to the broker's unlawful conduct.
This section does not impose or transfer liability for a breach of
the broker's fiduciary duty.
(a) (1) Any licensed person who violates any provision of
Section 4973, 4979.6, or 4979.7 shall be deemed to have violated that
person's licensing law.
(2) After a knowing and willful violation, the licensing agency
may bring a proceeding to suspend the license of the licensed person
for not less than six months and not more than three years.
(b) After a knowing and willful violation resulting in a second or
subsequent administrative or civil action, the licensing agency may
bring a proceeding to permanently revoke the license of the licensed
person or impose any lesser licensed sanction for at least three
(c) A licensing agency may exercise any and all authority and
powers available to it under any other provisions of law, to
administer and enforce this division including, but not limited to,
investigating and examining the licensed person's books and records,
and charging and collecting the reasonable costs for these
activities. The licensing agency shall not charge a licensed person
twice for the same service. Any civil, criminal, and administrative
authority and remedies available to the licensing agency pursuant to
its licensing law may be sought and employed in any combination
deemed advisable by the licensing agency to enforce the provisions of
(d) Nothing in this section shall be construed to impair or impede
a licensing agency's authority under any other provision of law.
(a) A licensing agency may, after appropriate notice and
opportunity for hearing, by order levy administrative penalties
against a person who violates any provision of this division, and the
person shall be liable for administrative penalties of not more than
two thousand five hundred dollars ($2,500) for each violation.
Except for licensing agencies exempt from the provisions of the
Administrative Procedure Act, any hearing shall be held in accordance
with the Administrative Procedure Act (Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and the licensing agency shall have all the powers granted
under that act.
(b) Any person who willfully and knowingly violates any provision
of this division shall be liable for a civil penalty of not more than
twenty-five thousand dollars ($25,000) for each violation which
shall be assessed and recovered in a civil action brought in the name
of the people of the State of California by the licensing agency in
any court of competent jurisdiction.
(c) Nothing in this section requires exhaustion of administrative
remedies prior to an injured party bringing a civil action.
(d) If the licensing agency determines that it is in the public
interest, the licensing agency may include, in any action for
penalties authorized by subdivision (b), a claim for relief in
addition to the penalties, including a claim for restitution or
disgorgement, and the court shall have jurisdiction to award the
(e) Nothing in this section shall be construed to impair or impede
the Attorney General from representing a licensing agency in
bringing an action to enforce this division at the request and on
behalf of the licensing agency.
(f) In any action brought by the licensing agency, or the Attorney
General acting at the request and on behalf of the licensing agency,
under this division in which a judgment against a person is
rendered, the licensing agency or the Attorney General shall be
entitled to recover costs which, in the discretion of the court, may
include an amount representing reasonable attorney's fees and
investigative expenses for services rendered for deposit in the
appropriate fund of that licensing agency.
(g) The amounts collected under subdivisions (a) and (b) shall be
deposited in the appropriate fund of the licensing agency to be used
by that licensing agency, subject to appropriation by the
Legislature, for the purposes of education and enforcement in
connection with abusive lending practices.
(a) A person who fails to comply with the provisions of this
division is civilly liable to the consumer in an amount equal to any
actual damages suffered by the consumer, plus attorneys fees and
costs. For a willful and knowing violation of this division, the
person shall be liable to the consumer in the amount of fifteen
thousand dollars ($15,000) or the consumers actual damages, whichever
is greater, plus attorneys fees and costs.
(b) (1) If a provision in a contract in a covered loan violates
subdivision (a), (b), (c), (d), (e), or (i) of Section 4973, Section
4979.6, or Section 4979.7, that provision is unenforceable. A court
in which any action is brought by, or on behalf of, an aggrieved
consumer for relief may issue an order or injunction to reform the
terms of the covered loan to conform to the provisions of this
(2) A court may, in addition to any other remedy, award punitive
damages to the consumer upon a finding that such damages are
warranted pursuant to Section 3294 of the Civil Code.
(c) Nothing in this section is intended, nor shall be construed,
to abrogate existing common law provisions prohibiting double
recovery of damages.
A person who originates covered loans shall inform any
employee, who originates covered loans on behalf of the person, of
the administrative or civil penalties for a violation of this
Upon request, a person who originates a covered loan shall
provide the licensing agency or the consumer, at no cost,
documentation regarding his or her loan that clearly demonstrates
whether any loan is a covered loan. This documentation shall include,
but not be limited to, full disclosure of the original principal
balance, the annual percentage rate, and the total points and fees,
as defined in Section 4970.
(a) A person who provides brokerage services to a borrower
in a covered loan transaction by soliciting lenders or otherwise
negotiating a consumer loan secured by real property, is the
fiduciary of the consumer, and any violation of the person's
fiduciary duties shall be a violation of this section. A broker who
arranges a covered loan owes this fiduciary duty to the consumer
regardless of who else the broker may be acting as an agent for in
the course of the loan transaction.
(b) Except for a broker or a person who provides brokerage
services, no licensed person or subsequent assignee shall have
administrative, civil, or criminal liability for a violation of this
A person who originates a covered loan shall not make a
covered loan that finances points and fees in excess of one thousand
dollars ($1,000) or 6 percent of the original principal balance,
exclusive of points and fees, whichever is greater.
On or after July 1, 2002, a person who originates a
consumer loan shall not finance, directly or indirectly, into a
consumer loan or finance to the same borrower within 30 days of a
consumer loan any credit life, credit disability, credit property, or
credit unemployment insurance premiums, or any debt cancellation or
suspension agreement fees, provided that credit insurance premiums,
debt cancellation, or suspension fees calculated and paid on a
monthly basis shall not be considered financed by the person
originating the loan. For purposes of this section, credit insurance
does not include a contract issued by a government agency or private
mortgage insurance company to insure the lender against loss caused
by a mortgagor's default.
The provisions of this division shall not impose liability
on an assignee that is a holder in due course. The provisions of this
division shall not apply to persons chartered by Congress to engage
in secondary mortgage market transactions.