2010 California Code
Financial Code
Article 1. General

18339.  As of the operative date of this section:
   (a) There is established an Industrial Loan Account in the
Financial Institutions Fund in the State Treasury.
   (b) All money on deposit with the Treasurer in the State
Corporations Fund that has been received or collected by the
Commissioner of Corporations under this division or any other law
relating to industrial loan companies or the industrial loan
business, all other assets of the State Corporations Fund that have
been acquired by the Commissioner of Corporations under this division
or any other law relating to industrial loan companies or the
industrial loan business, and all liabilities of the State
Corporations Fund that have been incurred under this division or any
other law relating to industrial loan companies or the industrial
loan business shall be transferred to the Industrial Loan Account.



18340.  All money received or collected by the commissioner under
this division or any other law relating to industrial loan companies
or the industrial loan business shall be deposited in the State
Treasury to the credit of the Industrial Loan Account of the
Financial Institutions Fund.



18340.5.  All expenses of the department in administering this
division and other laws relating to industrial loan companies or the
industrial loan business shall be paid out of the Industrial Loan
Account; and, except as otherwise provided in Section 276 or 277, the
Industrial Loan Account shall be used only for such purposes.




18342.  Industrial loan companies have the powers specified in this
division. In addition, industrial loan companies have the general
powers conferred upon corporations by the General Corporation Law.
The powers granted, including those granted by the General
Corporation Law, are subject to the supervision and control of, and
the conditions imposed by, the commissioner.



18343.  The commissioner may require an industrial loan company to
establish and maintain reasonable reserves for loans made, and
contracts or other obligations purchased or discounted in accordance
with sound business practices. The commissioner may by rule or order:
   (a) Establish reasonable standards for the classification of loans
and contracts or other obligations as to their delinquency or
currency.
   (b) Prescribe the conditions requiring the writing off of
delinquent loans and contracts or other obligations and the
conditions under which they may be restored as part of corporate
assets.
   (c) Establish the basis upon which reasonable and adequate
reserves shall be created and maintained.



18344.  An industrial loan company shall not conduct the business of
making loans under this division, within any office, room, or place
of business in which any other business is solicited or engaged in,
or in association or conjunction therewith, except as is authorized
in writing by the commissioner upon the commissioner's finding that
the character of the other business is such that the granting of the
authority would not facilitate evasions of this division or of the
rules and regulations made pursuant to this division.



18345.  An industrial loan company shall notify the commissioner of
every change in the officers, directors and management personnel of
the company and of each branch of the company within 15 days of such
change. Such report shall include a complete identification of each
person assuming any such office or duties and such other information
as the commissioner shall prescribe. The commissioner may by rule or
order prescribe the positions or duties which will be deemed to be
management personnel within the meaning of this section.



18346.  The commissioner may require each industrial loan company to
file with the commissioner a fidelity bond indemnifying the
industrial loan company against loss of money or property by act of
any officer, director or employee of such company, having access to
assets owned by or pledged with the company. The fidelity bond shall
contain a rider which provides that the coverage of the bond extends
to all officers, directors and employees of the insured who are
compensated by the insured. The commissioner may require that the
fidelity bond contain a rider which provides that coverage of the
bond extends to all officers and directors who are not compensated by
the insured. The fidelity bond may be either a primary commercial
blanket bond, a blanket position bond, or a banker's blanket bond,
but shall be written by an admitted surety insurer. The commissioner
shall by regulation prescribe the amount of fidelity coverage to be
required. The sufficiency of the sureties on the bond are at all
times subject to the approval of the commissioner.



18346.1.  (a) In lieu of providing a bond required pursuant to
Section 18346, a licensee may deposit with the commissioner security
in an amount as the commissioner may determine, for the protection of
the public against loss suffered through theft or mysterious
disappearance. Such security may only be in the form of cash, lawful
money of the United States, bearer bonds issued by the United States
or the State of California or evidence of deposit in banks or
investment certificates issued by insured savings and loan
associations authorized or licensed to do business in the State of
California.
   (b) Security deposited with the commissioner pursuant to
subdivision (a) shall not be deemed an asset of the licensee for the
purpose of complying with Article 3 of Chapter 2 of this division.



18347.  The commissioner may establish rules and regulations which
are reasonable and necessary to carry out the purposes and provisions
of this division, including rules and regulations concerning the
terms, form, offer, and sale of investment certificates.



18349.  The commissioner may, upon reasonable notice and opportunity
to be heard, suspend or revoke the license of an industrial loan
company if the commissioner finds that the industrial loan company
has violated any provision of this division or any rule or regulation
of the commissioner made pursuant to this division, or if any factor
or condition exists which, if it had existed at the time of the
original application for a license, reasonably would have warranted
the commissioner in refusing originally to issue such license.



18349.5.  (a) For the purposes of this section, the following
definitions are applicable:
   (1) "Account holder" includes, in the case of an investment
certificate account, an investment certificate holder; in the case of
a trust account, each trustor and beneficiary of the trust account;
and, in the case of any other fiduciary account, each person who
occupies, with respect to the account, a position which is similar to
the position that a trustor or beneficiary occupies with respect to
a trust account.
   (2) "Industrial loan company" means any corporation which falls
within the definitions of Sections 18003 and 18003.5.
   (3) "Order" means any approval, consent, authorization, permit,
exemption, denial, prohibition, or requirement applicable to a
specific case issued by the commissioner, including without
limitation, any condition thereof. "Order" does not include any
certificate of authority or license issued by the commissioner, but
does include any condition of a license and any written agreement
made by any person with the commissioner under this division.
   (4) "Subject person of an industrial loan company" means any
director, officer, or employee of the industrial loan company, or any
person who participates in the conduct of the business of the
industrial loan company. However, "subject person of an industrial
loan company" does not include an individual who is a director,
officer, or employee of a controlling person of an industrial loan
company unless the individual is a director, officer, or employee of
the industrial loan company or participates in the conduct of the
industrial loan company.
   (5) "Controlling person" means a person who, directly or
indirectly, controls an industrial loan company.
   (6) "Violation" includes, without limitation, any act done, alone
or with one or more persons, for or toward causing, bringing about,
participation in, counseling, aiding or abetting a violation.
   (b) If, after notice and opportunity for hearing, the commissioner
finds the following, the commissioner may issue an order suspending
or removing a subject person of an industrial loan company from his
or her office with the industrial loan company and prohibiting the
subject person from further participating in any manner in the
conduct of the business of the industrial loan company, except with
the prior consent of the commissioner:
   (1) (A) That the subject person has violated any provision of this
division or of any regulation or order issued under this division,
or any provision of any other applicable law relating to the business
of the industrial loan company; or
   (B) That the subject person has engaged or participated in any
unsafe or unsound act with respect to the business of the industrial
loan company; or
   (C) That the subject person has committed or engaged in any act
which constitutes a breach of his or her fiduciary duty as a subject
person; and
   (2) (A) That the industrial loan company has suffered or will
probably suffer substantial financial loss or other damage by reason
of that violation, act, or breach of fiduciary duty; or
   (B) That the interests of the industrial loan company's
accountholders have been or are likely to be seriously prejudiced by
reason of the violation, act, or breach of fiduciary duty; or
   (C) That the subject person has received financial gain by reason
of that violation, act, or breach of fiduciary duty; and
   (3) That the violation, act, or breach of fiduciary duty is one
involving personal dishonesty on the part of the subject person, or
one which demonstrates a willful or continuing disregard for the
safety or soundness of the industrial loan company.
   (c) If, after notice and opportunity for hearing, the commissioner
finds the following, the commissioner may issue an order suspending
or removing a subject person of an industrial loan company from his
or her office with the industrial loan company and prohibiting the
subject person from further participating in any manner in the
conduct of the business of the industrial loan company, except with
the prior consent of the commissioner:
   (1) That the subject person's conduct or practice with respect to
another industrial loan company or business institution has resulted
in substantial financial loss or other damage; and
   (2) That the conduct or practice has evidenced personal dishonesty
or willful or continuing disregard for the safety and soundness of
the other industrial loan company or business institution; and
   (3) That the conduct or practice is relevant in that it
demonstrates unfitness to continue as a subject person of the
industrial loan company.
   (d) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
an industrial loan company from his or her office with the
industrial loan company and prohibiting the subject person from
further participating in any manner in the conduct of the business of
the industrial loan company, except with the prior consent of the
commissioner:
   (1) That it is necessary for the protection of the industrial loan
company or the interests of the industrial loan company's account
holders that the commissioner issue the order immediately, and
   (2) (A) That any of the factors set forth in paragraphs (1) and
(2) of subdivision (b) and any of the factors set forth in paragraph
(3) of subdivision (c) are true with respect to the subject person;
or
   (B) That any of the factors set forth in paragraphs (1), (2), and
(3) of subdivision (c), and the factor set forth in paragraph (3) of
subdivision (c) are true with respect to the subject person.
   (e) (1) If the commissioner finds the following, the commissioner
may immediately issue an order suspending or removing a subject
person of an industrial loan company from his or her office with the
industrial loan company and prohibiting the subject person from
further participating in any manner in the conduct of the business of
the industrial loan company, except with the prior consent of the
commissioner.
   (A) That the subject person has been charged in an indictment
issued by a grand jury or in an information, complaint, or similar
pleading issued by a United States attorney, district attorney, or
other governmental official or agency authorized to prosecute crimes,
with a crime which is punishable by imprisonment for a term
exceeding one year and which involves dishonesty or breach of trust;
and
   (B) That the person's continuing to serve as a subject person of
the industrial loan company may pose a material threat to the
interest of the industrial loan company's account holders or may
threaten to materially impair public confidence in the industrial
loan company. In case the criminal proceedings are terminated other
than by a judgment of conviction the order shall be deemed rescinded.
   (2) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
an industrial loan company or a former subject of an industrial loan
company, from his or her office, if any, with the industrial loan
company and prohibiting the person from further participating in any
manner in the conduct of the business of the industrial loan company,
except with the prior consent of the industrial loan company:
   (A) That the person has been finally convicted of a crime which is
punishable by imprisonment for a term exceeding one year and which
involves dishonesty or breach of trust; and
   (B) That the person's continuing to serve or resumption of service
as a subject person of the industrial loan company may pose a
material threat to the interests of the industrial loan company's
account holders or may threaten to materially impair public
confidence in the industrial loan company.
   (3) The fact that any subject person of an industrial loan company
charged with a crime involving dishonesty or breach of trust is not
finally convicted of that crime shall not preclude the commissioner
from issuing an order regarding the subject person pursuant to other
provisions of this division.
   (f) Within 30 days after an order is issued pursuant to
subdivision (d) or (e), the person to whom the order is issued may
file an application for a hearing.
   (g) Any person to whom an order is issued under subdivision (b),
(c), (d), or (e) may apply to the commissioner to modify or rescind
that order. The commissioner shall not grant that application unless
the commissioner finds that it is in the public interest to do so and
that it is reasonable to believe that the person will, if and when
he or she becomes a subject person of an industrial loan company,
comply with all applicable provisions of this division and of any
regulation or order issued thereunder.
   (h) A hearing held pursuant to this section shall be private
unless the commissioner, in his or her discretion, after fully
considering the views of the parties, determines that a public
hearing is necessary to protect the public interest.
   (i) (1) It is unlawful for any subject person of an industrial
loan company or former subject person of an industrial loan company
to whom an order is issued under subdivision (b), (c), (d), or (e) to
do any of the following, except with the prior consent of the
commissioner, so long as the order is effective:
   (A) To serve or act as a director, officer, employee, or agent of
any industrial loan company.
   (B) To vote any shares or other securities of an industrial loan
company having voting rights, for the election of any person as a
director of an industrial loan company.
   (C) Directly or indirectly, to solicit, procure, or transfer or
attempt to transfer, or vote any proxy, consent, or authorization
with respect to any shares or other securities of any industrial loan
company having voting rights.
   (D) Otherwise to participate in any manner in the conduct of the
business of any industrial loan company.
   (2) Any person who violates paragraph (1) shall, upon conviction,
be punished by a fine of not more than ten thousand dollars ($10,000)
or imprisoned in the state prison, or in a county jail not to exceed
one year, or by both such fine and imprisonment.
   (3) If the commissioner believes that any person has violated
paragraph (1), the commissioner may bring an action in a court of
competent jurisdiction petitioning the court to assess that person a
civil penalty in an amount as the commissioner may specify; provided,
however, that the amount of the civil penalty shall not exceed two
thousand five hundred dollars ($2,500) for each violation or, in the
case of a continuing violation, two thousand five hundred dollars
($2,500) for each day for which the violation continues.
   In determining the amount of a civil penalty to be assessed under
this paragraph, the court shall consider the financial resources and
good faith of the person charged, the gravity of the violation, the
history of previous violations by the person, and such other factors
as in the opinion of the court may be relevant.



18350.  Each industrial loan company shall pay to the commissioner
its pro rata share of all costs and expenses of the department in
administering this division and other laws relating to industrial
loan companies or the industrial loan business, as estimated by the
commissioner for the ensuing year and of any deficit actually
incurred or anticipated in the year in which the assessment is made.
The pro rata share shall be the proportion which a company's assets
bear to the aggregate assets of all companies as shown by the latest
annual reports of the companies to the commissioner. The pro rata
share shall not include the costs of any examinations provided for in
Section 18392, unless they cannot be collected from the company
examined.



18351.  On or before the 30th day of November in each year, the
commissioner shall notify each industrial loan company by mail of the
amount assessed and levied against it and that amount shall be paid
within 20 days thereafter. If payment is not made within 20 days, the
commissioner shall assess and collect a penalty in addition to the
assessment, of 1 percent of the assessment for each month or part of
a month that the payment is delayed or withheld.



18352.  In the levying and collection of an assessment pursuant to
Section 18350, an industrial loan company shall not be assessed for
nor be permitted to pay less than two hundred fifty dollars ($250)
per year, or not less than twenty-five dollars ($25) per month or
fraction of a month for the unexpired year ending December 31st
following its incorporation.



18353.  If an industrial loan company fails to pay the assessment
provided in Section 18350 on or before the 30th day of December
following the day upon which payment is due, the commissioner may by
order summarily suspend or revoke the certificate issued to that
company. If, after such an order is made, a request for hearing is
filed in writing within 15 days from the date of service of the order
and a hearing is not held within 60 days thereafter, the order is
deemed rescinded as of its effective date. During any period when its
certificate is revoked or suspended, a company shall not issue
thrift certificates or make loans or otherwise conduct business
pursuant to this division except as may be permitted by order of the
commissioner; provided, however, that neither the revocation,
suspension or surrender of a certificate shall affect the powers of
the commissioner as provided in this division.
   This section shall become operative January 1, 1969. For the
purpose of making its provisions operative, the commissioner shall
issue to all industrial loan companies authorized to conduct business
under this division on said date a certificate of authorization to
conduct business pursuant to this division in such form as the
commissioner may prescribe and as provided in Section 18101 and
thereafter all such companies shall be conclusively presumed to be
conducting business under this division pursuant to such certificate
of authorization.



18354.  The commissioner may require the attendance of witnesses and
examine under oath all persons whose testimony he requires relative
to the affairs of an industrial loan company or to the subject matter
of any examination, investigation, or hearing.



18355.  Whenever, after an examination, investigation or hearing
under this division, the commissioner deems it of public interest or
advantage, he may certify a record to the proper prosecuting official
of the county or city in which the act complained of, examined, or
investigated, occurred.


18356.  The commissioner may order any industrial loan company to
desist from any conduct which the commissioner finds in violation of
this division or any rule or order of the commissioner made pursuant
to this division.


18357.  (a) If it appears to the commissioner that an industrial
loan company has violated or failed to comply with the provisions of
its articles of incorporation, or with any law of this state, the
commissioner may by written order addressed to the company, direct
that company to discontinue the violation and to comply with the law.
   (b) Whenever it appears from the report of an industrial loan
company or the commissioner has reason to conclude, that the capital
stock of an industrial loan company is impaired or reduced below the
amount required by this division, the commissioner shall by written
order addressed to the company, direct that company to make good the
alleged deficiency or impairment of capital. If the company fails to
make good the alleged deficiency or impairment of capital, the
commissioner may forthwith take possession of the property and
business of the industrial loan company pursuant to Section 18415. If
the company fails to make good the alleged deficiency or impairment
of capital within 60 days of the date of the order, the commissioner
shall take possession of the industrial loan company pursuant to
Section 18415. The capital of an industrial loan company is impaired
when the minimum amount of capital required by Sections 18130 and
18131 is reduced by a net deficit balance in the company's surplus
account.


18358.  If it appears to the commissioner that an industrial loan
company is conducting business in an unsafe, unsound, or injurious
manner, the commissioner may, by written order, direct the
discontinuance of any such unsafe or injurious practices.




18359.  Whenever the commissioner is authorized to issue an order
pursuant to Section 18357 or Section 18358 of this division, the
commissioner may issue an order directing an industrial loan company
to discontinue or limit the sale of its investment certificates or to
impound the proceeds from the sale of its investment certificates in
such manner as the commissioner may specify in such order.



18360.  The company named in any order issued pursuant to this
division for which no express hearing right is provided, including
Sections 18356, 18357, 18358, 18359, 18363, and 18415.3 may, within
15 days after receipt thereof, file with the commissioner its written
request for hearing. The filing of that request shall not operate to
postpone or suspend the effectiveness of any order issued by the
commissioner unless otherwise directed by the commissioner. The order
may be amended or set aside by the commissioner at any time. The
commissioner shall, within 30 business days after the receipt of that
written request or at a later time as may be mutually agreed with
the company, cause that matter to be heard.


18361.  After any order is made final, the industrial loan company
shall have 10 days in which suit may be commenced to restrain
enforcement of such order and unless such action is commenced and
enforcement of the final order is enjoined within 10 days by the
court in which such suit is brought, the company shall comply with
the final order.



18362.  (a) If the commissioner believes that an industrial loan
company or its directors, officers, agents, or employees have
violated or are about to violate any of the provisions of this
division, or any provision of an order, license, permit, decision,
demand, or requirement of the commissioner, the commissioner may
bring an action against such persons to enjoin those persons from
continuing the violation or the attempt to violate this division, or
doing any act in furtherance thereof. The commissioner shall bring
such action in the name of the people in the superior court, and the
court may enter an order or judgment awarding a preliminary or final
injunction as is proper.
   (b) If the commissioner determines it is in the public interest,
the commissioner may include in any action authorized by subdivision
(a) a claim for ancillary relief, including, but not limited to, a
claim for restitution or disgorgement or damages on behalf of the
persons injured by the act or practice constituting the subject
matter of the action, and the court shall have jurisdiction to award
the additional relief.
   (c) Any person who violates any provision of this division, or who
violates any rule or order adopted pursuant to this division, shall
be liable for a civil penalty not to exceed two thousand five hundred
dollars ($2,500) 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 commissioner in any court of competent
jurisdiction.
   (d) As applied to civil and criminal penalties for acts in
violation of this division, the remedies provided by this section and
by other sections of this division are not exclusive, and may be
sought and employed in any combination to enforce the provisions of
this division.


18363.  The commissioner may order an industrial loan company to
suspend the redemption of investment certificates or the payment of
the liabilities of the company or limit the payment of the
liabilities in such manner as he prescribes, if it appears to the
commissioner that such action is necessary for the protection of the
company, its investors or creditors, or in the public interest. The
order is effective upon receipt of notice by the company and
continues in effect until rescinded or modified by the commissioner
in a writing delivered to the manager or executive officer of the
company. Nothing in this section shall affect the right of any
company to pay its current operating expenses and liabilities
incurred during the period of suspension or limitation.



18364.  After an order of suspending or limiting the payment of
liabilities is effective and until that order is rescinded, the
industrial loan company shall make no assignment or hypothecation of
any indebtedness due to it from an investor without first crediting
thereon the investment liability of the company to such
investor-borrower.



18365.  The authority granted to the commissioner by Section 18363,
may be exercised by him in conjunction with all other powers granted
by this chapter, or independently from them.



18366.  Every order, decision, license, or other official act of the
commissioner is subject to review in accordance with law. Upon
review, the burden of proof lies upon the appellant, and the court
shall receive and consider any pertinent evidence which was
introduced in the formal hearing before the commissioner, whether
oral or documentary, concerning the action of the commissioner under
review. The review is limited to a consideration and determination of
the question of whether there has been an abuse of discretion on the
part of the commissioner in making such order, decision, finding,
requirement, or rule.


18367.  (a) If at any time the commissioner is of the opinion that
the further sale of investment certificates by an industrial loan
company would be unfair, unjust or inequitable to the purchasers of
its investment certificates, the commissioner may, notwithstanding
any other provision of this division, order the company to desist and
refrain from the further sale of its investment certificates.
   (b) The company named in any order issued pursuant to subdivision
(a) of this section may, within 15 days after receipt thereof, file
with the commissioner its written request for hearing. The filing of
such request shall not operate to postpone or suspend the
effectiveness of any order issued by the commissioner unless
otherwise directed by the commissioner. The commissioner shall,
within 15 days after the receipt of such written request or at such
later time as may be mutually agreed with the company, cause such
matter to be heard and shall thereafter issue his final decision.
Such decision may be amended or set aside by the commissioner at any
time.
   (c) Every order or decision of the commissioner made pursuant to
this section is subject to judicial review in accordance with law.



18368.  (a) The commissioner may make the agreements that he or she
deems necessary or appropriate in exercising his or her powers.
   (b) (1) The agreements authorized under subdivision (a) may
include, but are not limited to, agreements with agencies of this
state, of other states of the United States, or of the United States
that regulate financial institutions, relating to examinations of
industrial loan companies and other matters.
   (2) Any agreement with a government agency that regulates
financial institutions is exempt from the advertising and competitive
bidding requirements of the Public Contract Code.