California Payday Loan Laws & Licensing
PAYDAY LOAN FREQUENTLY ASKED QUESTIONS
DO I NEED TO BE LICENSED TO OFFER DEFERRED DEPOSITS [PDL’s]?
Yes, if you are a person that offers, originates or makes a California payday loan called a deferred deposit transaction, arranges a deferred deposit for a deferred deposit originator, acts as an agent for a deferred deposit originator, or assists a deferred deposit originator in the origination of a deferred deposit is required to obtain a license from the Department of Business Oversight, person located in California, who plans to engage in the business of making Deferred Deposit transactions over the internet only to residents in other states, or person located outside of California who plans to engage in the business of making Deferred Deposit Transactions over the internet only to residents in California and to residents in other states.
HOW DO I APPLY FOR A CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW (CDDTL) LICENSE?
Persons that are licensed under the CDDTL California payday loan model may be an individual, corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization, a government entity, or a political subdivision of a government entity. An application must be submitted for each location that the applicant intends to engage in the business of deferred deposit transactions. A licensee with one or more licensed locations may file a short form license application established by the Commissioner. Applications are processed in the order they are received.
The requirements for obtaining a California payday loan license are as follows:
For each California payday loan location, submit an application with the appropriate exhibits, an application fee of $200, and an investigation fee of $100. Fees are non-refundable. An application on a short form established by the Commissioner may be submitted for each additional location that the applicant intends to engage in the business of deferred deposit transactions. Short form applications for each additional location, including mobile units, must include an application fee of $200, and an investigation fee of $100.
Maintain a surety bond in the amount of $25,000 which must be in effect prior to the issuance of a license.
Submit financial statements prepared in accordance with Generally Accepted Accounting Principles that demonstrates that the applicant has a net worth of at least $25,000. After licensure, the licensee shall be required to maintain a net worth of at least $25,000 at all times.
The California payday loan application must include fingerprint information submitted by live scan and the cost of fingerprint processing for the following: The applicant; The general partners, officers, directors and persons owning or controlling, directly or indirectly, 10% or more of the outstanding equity interests of the applicant; and
Other key persons involved, such as managers/members, trustees, any other officers with direct responsibility for the conduct of applicant’s deferred deposit activity, and the persons who will be in charge of the place of business.
An application may be denied if any officer, director, general partner, or person owning or controlling, directly or indirectly, 10% or more of the outstanding interests or equity securities of the applicant has, within the last 10 years (A) been convicted of or pleaded nolo contendere to a crime, or (B) committed any act involving dishonesty, fraud, or deceit, if the crime or act is substantially related to the qualifications, functions, or duties of a person engaged in the business of deferred deposit transactions.
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California payday loan Application Forms and Notices
I AM PLANNING TO ENGAGE IN THE BUSINESS OF A DEFERED DEPOSIT ORIGINATOR. I CURRENTLY DO NOT HAVE ANY LICENSE OR PERMIT. WHERE DO I OBTAIN THE PERMITS OR LICENSES TO ENGAGE IN THE BUSINESS?
If you wish to engage in the business of deferred deposit California payday loan transactions you will need to have a license from the Department of Business Oversight.
WHAT ARE THE REQUIREMENTS TO OBTAIN A LICENSE TO ENGAGE IN THE BUSINESS OF DEFERRED DEPOSIT FROM THE DEPARTMENT OF BUSINESS OVERSIGHT?
You can view requirements and download forms here.
WHERE DO I OBTAIN AN APPLICATION FOR A LICENSE UNDER THE CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW?
You may download the application forms through the Department’s website, visitng any of the Department’s office locations or by calling the Department’s Consumer Services Office at (866) 275-2677.
WHERE DO I OBTAIN FINGERPRINT LIVE SCAN FORMS?
The fingerprint live scan forms are available through the Department’s website at Request for Live Scan Service – Applicant Submission.
WHEN CAN THE CDDTL SHORT FORM APPLICATION FOR LICENSURE BE FILED?
A person applying for a license must first file the Department of Business Oversight’ “Application for A License Under the California Deferred Deposit Transaction Law.” Thereafter, the Short Form License Application may be filed by the same person seeking a license for additional locations.
WHERE DO I SEND THE COMPLETED LICENSE APPLICATION, INCLUDING FEES?
All application information should be submitted to the Department’s Los Angeles Office
Department of Corporation
320 West 4th Street, Suite 750
Los Angeles, CA 90013-2344
ARE THE LICENSEEES SUBJECT TO EXAMINATION BY THE DEPARTMENT OF BUSINESS OVERSIGHT?
Yes. The California Deferred Deposit Transaction Law provides that the Department may at any time, but not less than once every two years, investigate the business of deferred deposits, and examine the books, accounts, records and files of every licensee. The purpose of the regulatory examination is to determine compliance with the CDDTL and the rules and regulations established by the Commissioner. The licensee is required to allow the Department’s representatives to have free access to the offices and places of business, along with books, accounts, records, files, safes and vaults. Each licensee is required to pay for the costs of the regulatory examination.
ARE LICENSEEES ALLOWED TO STORE AND MAINTAIN THE BOOKS, RECORDS AND ACCOUNTS IN ELECTRONIC FORMAT?
Yes. The books, records and accounts may be retained and provided to the Commissioner in electronic format provided that the electronic records are maintained and provided in a format that allows the Commissioner complete access to all of the books, accounts and records. The electronic records must be maintained in a media that ensures reliable, credible, accurate and auditable records. The electronic records must be provided to the Commissioner in a software format that is acceptable to the Commissioner and allows Commissioner to download and print any or all of the records that are stored and maintained electronically. The licensee shall provide any and all records maintained in electronic format in printed form if the electronic records are not in a format that enables the Commissioner to determine if the licensee is complying with the CDDTL or rules there under.
DO I NEED TO NOTIFY THE DEPARTMENT OF BUSINESS OVERSIGHT IF I CHANGE THE ADDRESS OF A LICENSED LOCATION?
Yes. A licensee is required to notify the Department at least ten days prior to the change of an address for a licensed location. The Department will approve the change in location by issuing an amended license with the new address.
IS A LICENSEEE REQUIRED TO NOTIFY THE DEPARTMENT OF BUSINESS OVERSIGHT IF THERE ARE CHANGES IN THE APPLICATION AFTER THE LICENSE IS ISSUED?
Yes. The license issued under the CDDTL is not transferable or assignable. Generally, if there is a change in entity type, a new long form license application and new short form license applications for any additional locations would have to be filed for the new entity. A license issued to a partnership or limited partnership is not transferred or assigned by the death, withdrawal or admission of a partner, general partner or limited partner, unless the death, withdrawal, or admission dissolves the partnership to which the license was issued. If the change dissolves the partnership, a new long form license application and new short form license applications for any additional locations would have to be filed for the new partnership. 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 date of the change. The amendment to the original license application reflecting the change shall include the effective date of the change and the names of the persons involved in the change. The new persons are required, at a minimum, to submit Statement of Identity and Questionnaires and fingerprint information with the notification of the change.
HOW OFTEN DO I NEED TO RENEW THE LICENSE ISSUED BY THE DEPARTMENT OF BUSINESS OVERSIGHT FOR A DEFERRED DEPOSIT ORIGINATOR?
You do not need to renew the license issued to a Deferred Deposit Originator. The license shall remain in effect until surrendered, suspended or revoked.
HOW DO I SURRENDER MY LICENSE IF I AM PLANNING TO CEASE ENGAGING IN DEFERRED DEPOSIT TRANSACATION BUSINESS?
A licensee may apply to surrender a license by delivering to the Commissioner written notice of the intent to surrender the license. The application to surrender the license must be signed by an authorized representative of the licensee and include the original license.
WHAT IS THE AVERAGE TIME FOR PROCESSING A CDDTL LICENSE?
The average processing time for CDDTL license applications is: 46 days for the first license applied for (Long Form License Application) and 20 days to process applications for additional licensed locations (short form license application).
Transacting Business as a Payday Lender
Yes. Each mobile unit conducting deferred deposit transactions must submit an application with the appropriate fees.
ARE THERE LIMITATIONS ON A DEFERRED DEPOSIT TRANSACTION?
Yes. The face amount of the customer’s personal check or the electronic equivalent of the customer’s personal check may not exceed $300 and the fee charged may not be more than 15% of the face amount of the check, except loans made to a military member (regular, reserve, member’s spouse and their dependents) should not exceed 36% APR.
ARE THERE LIMITATIONS ON THE FEES THAT MAY BE CHARGED IN RELATION TO A DEFERRED DEPOSIT TRANSACTION?
Yes. The fee may not exceed 15% of the face amount of the check. A single fee not to exceed $15 may be charged for a returned check. No additional fees may be added for late payments or returned checks, except loans made to a military member (regular, reserve, member’s spouse and their dependents) should not exceed 36% APR.
ARE THERE LIMITATIONS ON THE NUMBER OF DEFERRED DEPOSIT TRANSACTIONS A LICENSEE MAY MAKE TO A CUSTOMER IN A 12-MONTH PERIOD?
No. There are no limits on the number of deferred deposit transactions a licensee may make to a customer in a 12-month period. A licensee cannot make a new deferred deposit transaction during the period an earlier deferred deposit transaction is in effect for the same customer and the proceeds of a new deferred deposit transaction may not be used to pay off an existing deferred deposit transaction from the same licensee.
IS A LICENSEE ALLOWED TO MAKE A DEFERRED DEPOSIT TRANSACTION TO A CUSTOMER WITH AN EARLIER DEFFERED DEPOSIT TRANSACTION THAT IS IN EFFECT IF THE TOTAL OF THE EXISTING DEFERRED DEPOSIT TRANSACTION AND THE NEW DEFERRED DEPOSIT TRANSACTION IS LESS THAN THE MAXIMUM ALLOWED OF $300?
No. A licensee cannot enter into a deferred deposit transaction with a customer during the period an earlier deferred deposit transaction is in effect for the same customer, including transactions where the existing deferred deposit transaction and the new deferred deposit transaction does not exceed the maximum amount allowed of $300.
IS A LICENSEE ALLOWED TO MAKE A NEW DEFERRED DEPOSIT TRANSACTION TO A CUSTOMER THAT HAS AN EARLIER DEFERRED DEPOSIT TRANSACTION THAT IS IN EFFECT FROM ANOTHER LOCATION OF THE SAME LICENSEE?
No. licensees with multiple locations cannot enter into a deferred deposit transaction with a customer during the period an earlier deferred deposit transaction is in effect for the same customer at any of the licensee’s locations.
CAN A LICENSEE USE A CUSTOMER’S PERSONAL CHECK OR THE CUSTOMER’S ELECTRONIC EQUIVALENT OF A PERSONAL CHECK RECEIVED FROM A PREVIOUS DEFERRED DEPOSIT TRANSACTION FOR A NEW DEFERRED DEPOSIT TRANSACTION?
No. A licensee is not permitted to accept or use a customer’s personal check or a customer’s electronic equivalent of a personal check received from a previous deferred deposit transaction for a new deferred deposit transaction.
CAN A LICENSEE ACCEPT COLLATERAL IN CONJUNCTION WITH A DEFERRED DEPOSIT TRANSACTION?
IS A LICENSEEE ALLOWED TO MAKE THE DEFERRED DEPOSIT TRANSACTION CONTINGENT ON THE PURCHASE OF OTHER SERVICES OR PRODUCTS?
ARE THERE ANY SPECIAL REQUIREMENTS FOR A LICENSEEE THAT MAKES A DEFERRED DEPOSIT TRANSACTION TO A NON-ENGLISH SPEAKING PERSON?
Yes. The written agreement must be written in the same language principally used in the oral discussions or negotiations leading to the execution of the deferred deposit agreement and must be in at least 10-point bold type.
IS A LICENSEEE ALLOWED TO EXTEND THE DUE DATE OF AN OUTSTANDING DEFERRED DEPOSIT TRANSACTION OR ALLOW THE CUSTOMER TO MAKE PAYMENTS ON AN OUTSTANDING DEFERRED DEPOSIT TRANSACTION?
Yes, though the licensee is not required to extend the due date or enter into an agreement to allow the customer to make payments on an outstanding deferred deposit transaction.
WHAT ARE THE FEES A LICENSEEE MAY CHARGE IN CONNECTION WITH EXTENSIONS AND PAYMENT PLANS GRANTED FOR REPAYMENT OF OUTSTANDING DEFERRED DEPOSIT TRANSACTIONS?
A licensee may allow an extension of time to repay an outstanding deferred deposit transaction or a payment plan, but may not charge any additional fees or charges of any kind in conjunction with the extension or payment plan.
IS A LICENSEEE PERMITTED TO DEBIT A BORROWER’S BANK ACCOUNT ELECTRONICALLY USING ACH TRANSFERS ON MULTIPLE DAYS FOR VARYING AMOUNTS TO COLLECT A DELINQUENT ACCOUNT WITHOUT THE BORROWER’S AUTHORIZATION
No. The agreement or an addendum to the agreement must specify the days and amounts the licensee is authorized to debit the borrower’s bank account electronically using ACH transfers to collect delinquent accounts. Any addendums to the agreement authorizing the licensee to debit the borrower’s bank account electronically to collect overdue accounts must be in writing signed by the borrower, by fax with the borrower’s signature or electronically authorized by the borrower over the Internet. The written agreement should cover the manner in which a customer’s check will be deposited and the specific date of deposit. For example, when the licensee elects to deposit a personal check by electronic means, the written agreement should specify that the licensee electronically deposits the customer’s check and the specific date. If the licensee wishes to deposit the check either manually or electronically when there are insufficient funds in the customer’s account, the written agreement should also specify the method and date of depositing the check under those circumstances. The written agreement should cover the manner in which a customer’s check will be deposited and the specific date of deposit. For example, when the licensee elects to deposit a personal check by electronic means, the written agreement should specify that the licensee electronically deposits the customer’s check and the specific date. If the licensee wishes to deposit the check either manually or electronically when there are insufficient funds in the customer’s account, the written agreement should also specify the method and date of depositing the check under those circumstances.
CAN A CUSTOMER BE CRIMINALLY PROSECUTED FOR FAILING TO REPAY A DEFERRED DEPOSIT TRANSACTION?
No. A customer cannot be criminally prosecuted or threatened with criminal prosecution to collect a delinquent deferred deposit transaction.
CAN A CUSTOMER BE REQUIRED TO PAY TREBLE DAMAGES IF THE CHECK DOES NOT CLEAR?
No. A check that is being negotiated as part of a deferred deposit transaction is not subject to the provisions of Section 1719 of the Civil Code. No person shall be required to pay treble damages if the check does not clear.
IS A CUSTOMER REQUIRED TO PAY COURT COSTS AND FILING FEES FOR A SMALL CLAIMS COURT ACTION TAKEN BY A LICENSEEE TO COLLECT A DELINQUENT DEFERRED DEPOSIT TRANSACTION ACCOUNT?
The Small Claims Court Judge hearing the case will determine if court costs and filing fees will be awarded to the licensee. The Deferred Deposit Transaction Agreement may not contain any provisions that require the customer to pay court costs or filing fees in conjunction with an action taken by the licensee to collect a delinquent account.
WHO DO I CONTACT WITH QUESTIONS?
Questions are to be directed to the Department at 1-866-275-2677.
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