Requirements After a CDDTL License Has Been Issued
DBO publishes on its website the below compliance requirements. However, compliance for California payday lenders licensed as CDDTLs, involves a lot more. All contracts and disclosures must comply with CDDTL, California, and applicable federal laws. CDDTL payday lenders are consumer lenders since the loans are made for personal, family, and household purposes. Consequently, many federal laws must be complied with. Accordingly, compliance after a CDDTL license is issued involves a lot more than just filing an annual report and maintaining a bond.
Lack of compliance may subject the CDDTL licensee entity and its owners, officers, directors, and managers to criminal, civil, and admisntrative liabilities as well as revocation of the license. All enforcement actions by DBO are published online on DBO’s website, including without limitation, Desist and Refrain Orders, Statement of Issues, Accusations, administrative hearing decisions and related procedures.
The CDDTL license application requires the CDDTL’ principal (corporate officer or LLC manager) to acknowledge on behalf of the CDDTL, that he/she read the contents of and is familiar with the CDDTL, and that it agrees to comply with the CDDTL.
Lack of compliance can be brought to the attention of DBO’s enforcement officials as a result of either a customer or competitor complaint, a DBO audit, through the annual report that must be filed by CDDTL licensees by March 15 of each year, by special reports that are specifically requested from licensees from DBO or by other means.
The DBO routinely conducts inspections of licensees and may revoke or suspend licenses for non-compliance. In case of an accusation for revocation of a finance lenders license or a desist and refrain order is filed against the licensee, the licensee should request a hearing, so it can defend itself before the administrative law judge and/or attempt to obtain a settlement with the DBO. The administrative hearing takes place at the Office of Administrative Hearings and its procedural rules are substantially similar (with some differences) to a California Superior Court’s bench trial (non-jury trial).
It is recommended that loan documents, disclosures, ancillary documents, and general CDDTL and applicable financial laws advice should be given only by a California licensed lawyer who is knowledgeable and experienced with CDDTL and general lending compliance, licensing, and enforcement actions defense. Only lawyers are authorized to provide legal advice and draft legal documents for clients. That is especially important when complex financial and lending laws are involved. A violation of that is an unauthorized practice of law (“UPL”).
Business and Professions Code – BPC
ARTICLE 7. Unlawful Practice of Law [6125 – 6133]
No person shall practice law in California unless the person is an active licensee of the State Bar.
(Amended by Stats. 2018, Ch. 659, Sec. 89. (AB 3249) Effective January 1, 2019.)
ARTICLE 7. Unlawful Practice of Law [6125 – 6133]
The California Business & Professions Code does not provide a definition of “practicing law.” But California courts have determined that it includes:
- Performing services in court cases/litigation,
- Providing legal advice and counsel, and
- Preparing legal instruments and contracts that secure legal rights—even if the matters involved don’t have anything to do with lawsuits or the courts.
People v. Merchants Protective Corp. (1922) 189 Cal.531, 535.
Per DBO’s website, as referred to above.
“Requirements After a CDDTL License Has Been Issued
The license remains in effect until surrendered, suspended or revoked.
The following reports must be submitted by all CDDTL licensees by the due date noted:
Licensees must file an annual report by March 15 of each year commencing on March 15, 2006. The licensee’s annual report shall be kept confidential. The annual report shall include the following information for the previous calendar year:
- The total number and dollar amount of deferred deposit transactions made by the licensee.
- The total number of individual customers who entered into deferred deposit transactions.
- The minimum, maximum, and average amount of deferred deposit transactions.
- The average annual percentage rate of deferred deposits.
- The average number of days of deferred deposit transactions.
- The total number and dollar amount of returned checks.
- The total number and dollar amount of checks recovered.
- The total number and dollar amount of checks charged off.
Licensees are required to notify the Department of any change in location at least 10 days prior to the move. Failure to do so may subject the licensee to a civil penalty not to exceed $500.
A license is not transferable or assignable. A licensee is required to notify the Department of any change of its officers, directors, or any persons named in the application within sixty days from the effective date of the change.
To maintain your license, a licensee is required to pay an assessment for each licensed location on an annual basis. The assessment shall be the pro rata share of all costs and expenses reasonably incurred in the administration of the CDDTL. The assessment notices shall be mailed to each licensee on or before the 20th day of May each year and must be paid within 30 days. The failure to pay the assessment by the due date may result in penalties, and/or suspension or revocation of the license.
Surety Bond Requirement
Licensee must maintain a surety bond at all times in the amount of $25,000. The bond shall be payable to the Commissioner and issued by an insurer authorized to do business in this state. For licensees with multiple licensed locations, only one surety bond in the amount of twenty-five thousand dollars ($25,000) is required. The bond shall be used for the recovery of expenses, fines, and fees levied by the Commissioner or for losses or damages incurred by consumers as the result of a licensee’s noncompliance with the requirements of the CDDTL.
Net Worth Requirement
A licensee, regardless of the number of locations, must maintain a net worth of at least $25,000 at all times.
Books and Records
Licensees are subject to statutory books and record requirements. Each licensee shall keep and use books, accounts, and records that will enable the Commissioner to determine if the licensee is complying with the provisions of the CDDTL and with the rules and regulations promulgated by the Commissioner. Each licensee shall maintain any other records as required by the Commissioner.
The Commissioner may examine the business, books and records of the licensee any time, but not less than once every two years. The Commissioner’s representatives shall have free access to the offices and places of business, books, accounts, papers, records, files, safes, and vaults of the licensee. The licensee shall pay the costs of the examination.
- An advertisement disseminated primarily in California for a deferred deposit transaction, shall disclose in the printed text of the advertisement, or the oral text in the case of a radio or television advertisement, that the licensee is licensed by the Department of Business Oversight pursuant to the California Deferred Deposit Transaction Law. Licensees are required to maintain a file of all advertising copy for a period of 90 days from the date of its use. The file shall be available to the Commissioner upon request.
- The following notices shall be clearly and conspicuously posted in the unobstructed view of the public by all licensees in each location of business in letters not less than one-half inch in height:
- The licensee cannot use the criminal process against a consumer to collect any deferred deposit transaction.
- The schedule of all charges and fees to be charged on those deferred deposit transactions with an example of all charges and fees that would be charged on at least a one-hundred-dollar($100) and a two-hundred-dollar($200) deferred deposit transaction, payable in 14 days and 30 days, respectively, giving the corresponding annual percentage rate.
- No licensee shall transact the business licensed or make any deferred deposit transactions under any other name or at any other place of business than that named in the license unless there is an order by the Commissioner authorizing the other name or other place of business.
- The license, along with any orders approving a different name, shall be conspicuously posted in the place of business authorized by the license.”