Article 2. Terms And Maximum Charges of California Financial Code >> Division 7. >> Chapter 3. >> Article 2.

Except as otherwise provided for in this division, an industrial loan company shall not make any loan or purchase or discount any other obligation that provides for a repayment of principal over more than 120 months and 30 days.

Notwithstanding any other provision of this division, an industrial loan company may make a loan or acquire an obligation that is repayable in unequal periodic payments during its term and that is secured by either real property or personal property. In order to ensure the safety and soundness of industrial loan companies and to avoid an unreasonable concentration of loans and obligations that could result in balloon payments, all these loans and obligations with a term in excess of 10 years shall be repaid in substantially equal weekly, semimonthly, monthly, or quarterly installments during the term. For purposes of this section, "real property" means real property other than home loans and other residential real property loans subject to Title VIII (Alternative Mortgage Transaction Parity Act of 1982) of the Garn-St. Germain Depository Institutions Act of 1982, as those terms are defined in Part 541 of Title 12 of the Code of Federal Regulations, as amended. For purposes of this section, the term of a nonconsumer loan or a nonconsumer obligation secured solely or primarily by personal property shall not exceed 15 years and 30 days from the date the loan is made or obligation is acquired by the industrial loan company. For purposes of this section, the term of a nonconsumer loan or a nonconsumer obligation secured primarily by real property shall be as set forth in subdivision (a) of Section 18210.

Consumer loans made and obligations acquired that are secured by a motor vehicle and repayable other than in equal periodic payments during its term shall not exceed 50 percent of all consumer loans and obligations that are secured by motor vehicles or 20 percent of assets, whichever is less. This section shall not apply to a loan made to a graduate student while attending an accredited college or university and for the purpose of actively pursuing a study program leading to a postbaccalaureate degree.

An industrial loan company may make a consumer loan that is not secured primarily by real property or other type of loan which is repayable at maturity by a single payment which includes principal and charges. In no event shall such loans have a term in excess of one year or be made for the purpose of evading or avoiding this division.

An industrial loan company may make a consumer loan in which the principal and charges are payable at any time during the loan, provided that the loan is secured at all times at least 100 percent by either investment certificates of an industrial loan company authorized to conduct business in the State of California under this division or traded securities.

An industrial loan company may make loans, purchase or discount notes, mortgages, contracts or other commercial paper insured by the Federal Housing Administrator, Veterans Administration, other federal agency or an agency of the state. Loans so insured may be made for a term up to but not to exceed the maximum permitted by such agencies.

(a) Except as provided in Sections 18205.5 and 18209 and subject to subdivisions (b) and (c), an industrial loan company shall not make any loan or purchase or discount any note secured primarily by real property unless the loan or other obligation is repayable in substantially equal weekly, semimonthly, monthly, or quarterly installments during its term, which shall not exceed 30 years and 30 days from the date the loan or other obligation is made or acquired by the company. Equal installment requirements shall not apply to adjustable or variable rate loans or obligations made or purchased by the industrial loan company in accordance with Title VIII of the Garn-St. Germaine Depository Institutions Act of 1982 and any applicable regulations, guidelines, and policies adopted thereunder. However, an industrial loan company may make loans secured by first trust deeds on real property containing single family, or one to four residential, units provided that the repayment period for each loan does not exceed 40 years and 30 days from the date the loan is made by the company. All loans with repayment periods in excess of 30 years and 30 days shall not exceed in the aggregate 5 percent of all outstanding loans and obligations of the company.
  (b) Any consumer loan or any purchase or discount of any consumer obligation having a term in excess of three years from the date the loan or other obligation is made or acquired by the company shall be secured solely by real property or solely by personal property. However, if the original principal amount of the consumer loan or obligation is twenty thousand dollars ($20,000) or more, then the loan or obligation shall be secured solely by real property or solely by personal property, or by both real property and personal property. All loans and obligations made and purchased pursuant to this subdivision shall be repayable in installments and within a term not to exceed the limitations set forth in subdivision (a), except that consumer loans or obligations secured solely by personal property shall have a term not to exceed the term provided for in Section 18205 and except as otherwise may be provided for in Sections 18207, 18208, and 18209. The equal installment requirements set forth in subdivision (a) shall not apply to loans or obligations made or purchased by the industrial loan company in accordance with Title VIII of the Garn-St. Germaine Depository Institutions Act of 1982 and any applicable regulations, guidelines, and policies adopted thereunder.
  (c) In order to ensure the safety and soundness of industrial loan companies and to avoid an unreasonable concentration of loans and obligations that could result in balloon payments, all loans and obligations with a term in excess of 15 years and 30 days shall be repaid in substantially equal weekly, semimonthly, monthly, or quarterly installments during their term.

No charge shall be collected unless a loan is made, except that an industrial loan company may charge, contract for, and receive a fee in connection with making a written commitment to make a loan, secured by real property having a face amount in excess of five thousand dollars ($5,000) whether or not the loan is consummated, or in connection with the purchase, sale, or origination of a lease as lessor and may charge, contract for, and receive an application fee for a loan having an original principal balance in excess of five thousand dollars ($5,000) or for a lease which payments are in excess of five thousand dollars ($5,000), provided, however, that a disclosure statement setting forth the amount of the fee, which may be reviewed by the commissioner as to form and content, shall be provided to each person to whom an application fee is charged. The commitment fee or the loan application fee with respect to a consumer loan shall be limited to the actual expenses incurred.

(a) The charges by an industrial loan company, broker, and all other persons on any loan, forbearance of money, credit, goods, or things in action under this division, shall not exceed in the aggregate:
  (1) Two percent per month on that part of the unpaid principal balance of any loan up to, including, but not in excess of, one thousand dollars ($1,000).
  (2) One percent per month on any remainder of such unpaid principal balance in excess of one thousand dollars ($1,000).
  (b) As an alternative to the charges authorized by subdivision (a), a company may contract for and receive charges at a rate not exceeding 1.6 percent per month on the unpaid principal balance.

As an alternative to the charges authorized by Section 18212 a licensee may contract for and receive charges at a rate not exceeding five-sixths of 1 percent per month plus a percentage per month equal to one-twelfth of the annual rate prevailing on the 25th day of the second month of the quarter preceding the quarter in which the loan is made as established by the Federal Reserve Bank of San Francisco on advances to member banks under Section 13 and 13a of the Federal Reserve Act as now in effect or hereafter from time to time amended, or if there is no such single determinable rate for advances, the closest counterpart of such rate as shall be designated by the commissioner. Charges shall be calculated on the unpaid principal balance.

In addition to the charges authorized by Section 18212 or 18212.1 an industrial loan company may contract for and receive an administrative fee, which shall be fully earned immediately upon making the loan, with respect to a loan of a principal amount of not more than two thousand five hundred dollars ($2,500) at a rate not in excess of 5 percent of the principal amount or fifty dollars ($50), whichever is lesser. No administrative fee may be contracted for or received in connection with refinancing a loan unless at least one year has elapsed since receipt of a previous administrative fee paid by the borrower.

Notwithstanding any other provision of law not within this division, industrial loan companies making loans pursuant to this division may not precompute interest on such loans.

For the purpose of computing the charges set forth in this article, a month is any period of 30 consecutive days.

An industrial loan company may contract for, collect, and receive at the time of making the loan or at any time thereafter, any of the following:
  (a) Any cost of publication as required by law.
  (b) The statutory fee paid by it to any public officer for acknowledging, filing, recording, or releasing in any public office any instrument securing the loan or executed in connection with a loan.
  (c) Premiums of the kind and to the extent described in paragraph (2) of subsection (e) of Section 226.4 of Regulation Z promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. 226.1 et seq.). These amounts are not included in computing the maximum charges which may be made under this division.

(a) Notwithstanding Section 18211, an appraisal fee may be charged to an applicant or borrower by an industrial loan company in connection with an application or request for any loan having a face amount in excess of five thousand dollars ($5,000) that is secured primarily by real property whether or not the loan is made. That fee shall not exceed the actual cost of the appraisal. The appraisal shall be rendered to the industrial loan company in writing by a qualified appraiser approved pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Public Law 101-73, and any applicable regulations, guidelines, and policies adopted thereunder. Only one fee for appraising the same real property made in connection with the same applicant or borrower may be collected unless the applicant or borrower has obtained a new or additional loan and more than one year has elapsed since the prior appraisal. The fee is not included in charges as defined in this division or in computing the maximum charges that may be made under this division.
  (b) If an appraisal fee is charged, a copy of the appraisal report shall be provided by the industrial loan company upon the request of the borrower or applicant at or before the closing of a loan transaction.

An escrow fee of a reasonable amount may be charged for any loan made which is secured primarily by real property when such services are actually performed. Such fee shall be considered reasonable when paid to a company licensed to do business under the Escrow Law, Division 6 (commencing with Section 17000), or any person exempted by the Escrow Law, provided that such fees are comparable to fees being charged by escrow companies so authorized to do business in this state. Such fee is not included in computing the maximum charges which may be made under this division.

Notwithstanding any other provision of this division, an industrial loan company, in the collection of a delinquent loan of an unpaid principal balance, may do any of the following:
  (a) Collect and receive the court costs and reasonable attorney's fees allowed by a court in a judgment against a defaulting debtor.
  (b) Contract for, collect, and receive the bona fide expenses actually incurred and paid by the industrial loan company, not exceeding 10 percent of the unpaid principal balance of the loan where no judgment at law is sought.
  (c) Contract for, collect, and receive the bona fide expenses actually incurred and paid by the industrial loan company in obtaining a certificate of compliance or certificate of noncompliance issued for a motor vehicle pursuant to Part 5 (commencing with Section 43000) of Division 26 of the Health and Safety Code and the rules and regulations of the State Air Resources Board prior to the consignment of the vehicle for sale at public auction, pursuant to Sections 24007 and 24007.5 of the Vehicle Code.

With respect to a loan under this division, a fee not to exceed fifteen dollars ($15) for return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft may be charged and collected by the licensee. The fee is not included in charges as defined in this division or in determining the applicable maximum charges which may be made under this article.

An industrial loan company shall not induce or permit any borrower to split up or divide any loan and thereby contract for or receive a higher rate of charge than would otherwise be permitted by this division.

An industrial loan company shall not induce any husband and wife jointly or severally, to become obligated, directly or contingently or both, under more than one contract of loan at the same time, with the result of obtaining a higher rate of charge than would otherwise be permitted by this division.

Nothing in this division shall prevent an industrial loan company from transacting loan contracts with different borrowers and from contracting for and receiving, up to and including the highest rate of charge permitted by this division at the time of making said loans; provided, however, that if any person is obligated to and does pay more than one loan contract outstanding at the same time, the entire amount of charges paid by such person and received by the industrial loan company on such loan contracts, shall not exceed the maximum that would be permitted by this division if all such loan contracts so paid were combined into one loan transaction.

An industrial loan company shall permit payment to be made in advance in any amount on any contract of loan at any time. The industrial loan company shall apply such payment first to all charges due up to the date of such payment and the remainder to the loan balance.