ANNOUNCEMENT: Geraci LLP Opposes Proposed Changes to the California DBO’s CFLL Application

December 5, 2019 by Geraci LLP

The DBO is proposing changes to the existing CFLL application and how it is submitted for approval. Geraci is objecting to these proposed regulations for two reasons: (1) they lack specificity, and (2) they reflect an overreach by the Department of Business Oversight.

The proposed regulations to the California Department of Business Oversight (“DBO”)’s California Finance Lenders License (“CFLL”) application would require applications to be submitted through the NMLS online portal. Currently, the application is submitted by mail to the DBO. Many pieces of the current application must be mailed as original signatures and notarized signatures are required. From our previous experience, we have learned that the NMLS portal is not user friendly – especially for attorneys filing on behalf of clients.

Issue #1: Lack of Specificity

As previously stated, the proposed regulations lack specificity as to which documents can and cannot be submitted through NMLS. We are concerned that this lack of specificity may lead to clients missing deadlines and incurring penalties. Moreover, the proposed regulations state that if an applicant is unable to file through NMLS then they may mail in the paper application. The regulation is unclear as to what constitutes as “unable to file through NMLS” and there is no specificity regarding whether this applies to the entire application or just parts of the application. We are also concerned that this lack of clarity will lead to clients missing deadlines and incurring penalties.

Issue #2: Overreach/Invasion of Privacy

The updated CFLL Application now requires that any person or entity listed on the organizational chart (Exhibit M) disclose (1) whether they have been convicted of or pleaded nolo contendere to a crime or committed an act involving dishonesty, fraud, or deceit in the last 10 years and (2) whether they have, at any time, violated the California Financing Law regulations, or any similar regulatory scheme of California or a foreign jurisdiction. We object to this change as we believe it is an overreach by the DBO and an invasion of privacy. Typically, passive investors are listed on the organizational chart, and it is an invasion of privacy to require someone who has not taken an active role in any entity on the chart to have to disclose such pieces of information. Furthermore, it will take a great deal of time, and thus money, to find all of this information for organizational charts that involve multiple entities and individuals. We are concerned this will create a barrier to entry.

Geraci LLP will be sending our comment detailing these objections to the DBO on Monday and look forward to their response.

You may also submit your own comment letter opposing these regulations by sending an email to regulations@dbo.ca.gov and copying colleen.monahan@dbo.ca.gov. These comments must be submitted by December 9, 2019 in order to be considered by the DBO. Be sure to include in the email or in the subject line that your letter is in reference to “NMLS Transition for California Financing Law Applicants and Licensees, and Requirements for PACE Program Administrators”.

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