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Article 5. Open-end Loan Programs of California Financial Code >> Division 9. >> Chapter 2. >> Article 5.
As used in this division, "open-end credit program" means a
licensee's plan for making open-end loans pursuant to a loan
agreement that sets forth the terms and conditions governing the use
of the open-end credit program, expressly states that the loan is
made pursuant to this article, and provides that:
(a) The borrower may use the open-end credit program to obtain money, goods, labor, or services on credit. The licensee makes open-end loans to the borrower for the purpose of paying money to or at the direction of the borrower or paying obligations that the borrower creates through use of the open-end credit program.
(b) The amount of each advance and the charges and other permitted costs are debited to an account.
(c) The charges are computed from time to time on the unpaid balances of the borrower's account, excluding from the computation any unpaid charges other than permitted fees, costs, and expenses.
(d) The borrower has the privilege of paying the account in full at any time.
(a) The borrower may use the open-end credit program to obtain money, goods, labor, or services on credit. The licensee makes open-end loans to the borrower for the purpose of paying money to or at the direction of the borrower or paying obligations that the borrower creates through use of the open-end credit program.
(b) The amount of each advance and the charges and other permitted costs are debited to an account.
(c) The charges are computed from time to time on the unpaid balances of the borrower's account, excluding from the computation any unpaid charges other than permitted fees, costs, and expenses.
(d) The borrower has the privilege of paying the account in full at any time.
If an open-end credit program is not primarily for the
purpose of purchasing or leasing goods or services from the licensee,
then all credit extended through use of the program, including
transactions that involve the purchase or lease of goods or services
from the licensee, shall be subject to this division.
Subject to the written approval of the commissioner of the
licensee's plan of business for making open-end loans as not being
misleading or deceptive and subject to regulations the commissioner
may adopt with respect to open-end loans under Section 22150, a
licensee may make open-end loans pursuant to this article and may
contract for and receive thereon charges as set forth in Sections
22303, 22304, and 22308. These charges may be calculated on an amount
not exceeding the greater of:
(a) The actual daily unpaid balances of the open-end account in the billing cycle for which the charge is made, in which case one-thirtieth of the monthly rate may be charged for each day the unpaid balance is outstanding.
(b) The average daily unpaid balance of the open-end account in the billing cycle for which the charge is made, which is the sum of the amount unpaid each day during that cycle divided by the number of days in that cycle. The amount unpaid on a day is determined by adding to any balance unpaid as of the beginning of that day all advances and other debits and deducting all payments and other credits made or received as of that day. The billing cycle shall be monthly. A billing cycle is monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from the regular date. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
(a) The actual daily unpaid balances of the open-end account in the billing cycle for which the charge is made, in which case one-thirtieth of the monthly rate may be charged for each day the unpaid balance is outstanding.
(b) The average daily unpaid balance of the open-end account in the billing cycle for which the charge is made, which is the sum of the amount unpaid each day during that cycle divided by the number of days in that cycle. The amount unpaid on a day is determined by adding to any balance unpaid as of the beginning of that day all advances and other debits and deducting all payments and other credits made or received as of that day. The billing cycle shall be monthly. A billing cycle is monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from the regular date. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
The minimum monthly payment shall be determined by any of
the following:
(a) The amount calculated by multiplying the unpaid principal balance, after an advance and including the advance, by a percent agreed upon by the borrower and the licensee, which shall be no less than 2 1/2 percent. The minimum payment shall continue at the amount determined pursuant to this paragraph until a subsequent loan advance is made.
(b) The amount calculated by multiplying the unpaid balance at the end of each billing cycle by a percent agreed upon by the borrower and the licensee, which shall be no less than 5 percent.
(c) Any other bona fide amount agreed upon by the borrower and the licensee which would be sufficient to pay all charges and some principal, originally scheduled to be due by the borrower as of each scheduled due date. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
(a) The amount calculated by multiplying the unpaid principal balance, after an advance and including the advance, by a percent agreed upon by the borrower and the licensee, which shall be no less than 2 1/2 percent. The minimum payment shall continue at the amount determined pursuant to this paragraph until a subsequent loan advance is made.
(b) The amount calculated by multiplying the unpaid balance at the end of each billing cycle by a percent agreed upon by the borrower and the licensee, which shall be no less than 5 percent.
(c) Any other bona fide amount agreed upon by the borrower and the licensee which would be sufficient to pay all charges and some principal, originally scheduled to be due by the borrower as of each scheduled due date. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
On open-end loans, the licensee may contract for and receive
the fees, costs, and expenses permitted on other loans, including
those permitted by subdivisions (a), (b), (c), and (d) of Section
22313 and subdivision (d) of Section 22314, except that the charge
for credit insurance under Section 22314 shall be on a monthly basis
and shall be actuarially consistent with the premium rate for the
same coverage.
This section does not apply to any open-end loan of a bona fide
principal amount of five thousand dollars ($5,000) or more as
determined in accordance with Section 22467.
(a) In lieu of subdivisions (b), (c), (d), (e), and (f) of
Section 22314, with respect to open-end loans, a licensee may provide
credit insurance with the borrower's consent, in a form to be
approved by the Insurance Commissioner, in an amount not in excess of
the amount of the indebtedness. For credit life or disability
insurance, the licensee may collect from the borrower an amount
established pursuant to Section 779.36 of the Insurance Code.
(b) If life insurance is provided, and if the insured borrower dies during the term of the loan contract, the insurance shall be sufficient to pay the total amount due on the loan outstanding on the date of his or her death, without any exception, reservation, or limitation.
(c) If disability insurance is provided, and if the insured borrower becomes disabled during the term of the loan contract, the insurance shall be sufficient to pay all amounts attributable to the loan balance at the time of commencement of disability that subsequently become due on the loan thereafter during the period of disability, in accordance with subdivision (d) of Section 22315, without any exception, reservation, or limitation.
(d) If loss-of-income insurance is provided, and if the insured borrower becomes unemployed during the term of the loan contract, the insurance shall be sufficient to pay all amounts attributable to the loan balance at the time of commencement of unemployment in accordance with subdivision (d) of Section 22321 without any exception, reservation, or limitation.
(e) Any credit insurance that is provided shall be in force as soon as the loan is made or coverage is agreed upon, whichever is later. No credit insurance written in connection with an open-end loan shall be canceled by the lender because of delinquency of the borrower in the making of the minimum payments thereon unless one or more of the payments is past due for a period of 90 days or more, and the lender shall advance to the insurer the amounts required to keep the insurance in force during that period, which amounts may be debited to the borrower's account. This section does not apply to any open-end loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22467.
(b) If life insurance is provided, and if the insured borrower dies during the term of the loan contract, the insurance shall be sufficient to pay the total amount due on the loan outstanding on the date of his or her death, without any exception, reservation, or limitation.
(c) If disability insurance is provided, and if the insured borrower becomes disabled during the term of the loan contract, the insurance shall be sufficient to pay all amounts attributable to the loan balance at the time of commencement of disability that subsequently become due on the loan thereafter during the period of disability, in accordance with subdivision (d) of Section 22315, without any exception, reservation, or limitation.
(d) If loss-of-income insurance is provided, and if the insured borrower becomes unemployed during the term of the loan contract, the insurance shall be sufficient to pay all amounts attributable to the loan balance at the time of commencement of unemployment in accordance with subdivision (d) of Section 22321 without any exception, reservation, or limitation.
(e) Any credit insurance that is provided shall be in force as soon as the loan is made or coverage is agreed upon, whichever is later. No credit insurance written in connection with an open-end loan shall be canceled by the lender because of delinquency of the borrower in the making of the minimum payments thereon unless one or more of the payments is past due for a period of 90 days or more, and the lender shall advance to the insurer the amounts required to keep the insurance in force during that period, which amounts may be debited to the borrower's account. This section does not apply to any open-end loan of a bona fide principal amount of ten thousand dollars ($10,000) or more as determined in accordance with Section 22467.
Section 22309 shall apply to open-end loans with the
following variations:
(a) To comply with Section 22309, in the case of open-end loan advances directly to the borrower, the licensee shall deliver to the borrower, at the time of each loan advance, an amount equal to the face value of the advance.
(b) To comply with Section 22309, in the case of an open-end loan advance in the form of a payment by the licensee to a person from whom a borrower obtained money, goods, labor, or services, the licensee shall deliver to that person the amounts necessary to fulfill the borrower's obligation to that person under the transaction. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
(a) To comply with Section 22309, in the case of open-end loan advances directly to the borrower, the licensee shall deliver to the borrower, at the time of each loan advance, an amount equal to the face value of the advance.
(b) To comply with Section 22309, in the case of an open-end loan advance in the form of a payment by the licensee to a person from whom a borrower obtained money, goods, labor, or services, the licensee shall deliver to that person the amounts necessary to fulfill the borrower's obligation to that person under the transaction. This section does not apply to any open-end loan of a bona fide principal amount of five thousand dollars ($5,000) or more as determined in accordance with Section 22467.
In lieu of Section 22332, the open-end loan agreement shall
contain the name, address, and license number of the finance lender
and shall disclose the nature of the security taken, the method of
determining the minimum payments that will be required to repay the
initial advance and any subsequent advances on the loan, and the
agreed rate of charge.
In lieu of subdivision (a) of Section 22337, with respect to
open-end loans, except in the case of an account that the licensee
deems to be uncollectible, or for which delinquency collection
procedures have been instituted, the licensee shall deliver or cause
to be delivered to the borrower, or any one thereof, for each billing
cycle at the end of which there is an outstanding balance in the
account, or to which a finance charge is imposed, a statement setting
forth the outstanding balance in the account at the beginning of the
billing cycle, the date and amount of any subsequent loan advance
during the period, the amounts and dates of crediting to the account
during the billing cycle that payments are credited, the amount of
any finance charge debited to the account during the billing cycle,
the annual percentage rate of finance charge determined under
Regulation Z promulgated by the Board of Governors of the Federal
Reserve System (12 C.F.R. 226), the balance on which the finance
charge was computed, the closing date of the billing cycle, the
outstanding balance on that date, and the minimum monthly payment
required in the absence of any additional advance. If there has been
any change in the nature of the security for the loan since the next
preceding advance, the statement shall contain or be accompanied by a
statement of the nature of the security for the loan after that
change.
Subdivision (e) of Section 22337 shall not apply to an
open-end loan that has no balance outstanding if the open-end loan
agreement continues in effect.
Section 22333 shall not apply to a change in terms of an
open-end loan if notice is given to the borrower in accordance with
subsection (c) of Section 226.9 of Regulation Z promulgated by the
Board of Governors of the Federal Reserve System (12 C.F.R. 226).
Subdivision (a) of Section 22151, Sections 22154 and 22325,
and subdivision (b) of Section 22337 shall not apply to a licensee
with respect to advances made through an open-end credit program.
The payment of fees for participation in an open-end credit
program, the acceptance by a borrower of the form of the licensee's
program, and the borrower's agreement to the licensee's program shall
not be deemed to be a collateral sale, purchase, or agreement within
the terms of Section 22201, 22311, or 22312.
Nothing in this article limits the authority of the
commissioner to disapprove advertising with respect to open-end loans
pursuant to Section 22165.
This section does not apply to any open-end loan of a bona fide
principal amount of five thousand dollars ($5,000) or more as
determined in accordance with Section 22467.
This article does not apply to loans other than open-end
loans.
This section does not apply to any open-end loan of a bona fide
principal amount of five thousand dollars ($5,000) or more as
determined in accordance with Section 22467.
Section 22400 does not apply to open-end loans.
An open-end loan is in compliance with Section 22330 if it
is an open-end loan of a bona fide principal amount of five thousand
dollars ($5,000) or more as determined in accordance with Section
22467.
(a) Any section that refers to this section or that is
subject to Section 22251 does not apply to any open-end loan of the
bona fide principal amount specified in the regulatory ceiling
provision of that section or more, or to a duly licensed finance
lender in connection with any such loan if that provision is not used
for the purpose of evading this division.
(b) In determining whether an open-end loan is an open-end loan of a bona fide principal amount specified in any section in this division or more and whether the regulatory ceiling provision of that section is used for the purpose of evading this division, the open-end loan shall be deemed to be for that amount or more if both the following criteria are met:
(1) The line of credit is equal to or more than the bona fide principal amount of the specified amount.
(2) The initial advance was equal to or more than the bona fide principal amount of the specified amount.
(c) A subsequent advance of money of less than the specified amount pursuant to the open-end loan agreement between a borrower and a licensed finance lender shall be deemed to be a loan of a bona fide principal amount of the specified amount if the criteria of paragraphs (1) and (2) of subdivision (b) have been met, even though the actual unpaid balance after the advance or at any other time is less than the bona fide principal amount of the specified amount.
(d) Notwithstanding subdivisions (b) and (c), the amount of the line of credit of an unsecured open-end loan shall be the criterion to determine whether an unsecured open-end loan is of a bona fide principal amount or more specified in any section in this division.
(e) For the purposes of determining whether the loan amount exceeds a regulatory ceiling, the provisions of subdivision (c) of Section 22251 shall apply to open-end loans.
(b) In determining whether an open-end loan is an open-end loan of a bona fide principal amount specified in any section in this division or more and whether the regulatory ceiling provision of that section is used for the purpose of evading this division, the open-end loan shall be deemed to be for that amount or more if both the following criteria are met:
(1) The line of credit is equal to or more than the bona fide principal amount of the specified amount.
(2) The initial advance was equal to or more than the bona fide principal amount of the specified amount.
(c) A subsequent advance of money of less than the specified amount pursuant to the open-end loan agreement between a borrower and a licensed finance lender shall be deemed to be a loan of a bona fide principal amount of the specified amount if the criteria of paragraphs (1) and (2) of subdivision (b) have been met, even though the actual unpaid balance after the advance or at any other time is less than the bona fide principal amount of the specified amount.
(d) Notwithstanding subdivisions (b) and (c), the amount of the line of credit of an unsecured open-end loan shall be the criterion to determine whether an unsecured open-end loan is of a bona fide principal amount or more specified in any section in this division.
(e) For the purposes of determining whether the loan amount exceeds a regulatory ceiling, the provisions of subdivision (c) of Section 22251 shall apply to open-end loans.
