California Legislative Update

California Legislative Update

The California legislature recently amended the Finance Lender Law (the “Law”) and California laws governing deficiency judgments, mortgages, foreclosure notices, and title companies.  All the legislation is effective January 1, 2014.





The Law does not apply to any person who makes 5 or fewer commercial loans (previously no more than one) in a 12-month period and loans that are incidental to the business of the person relying upon such exemption.



A person subject to the Law must not:

  • Commit an unconscionable act in a transaction involving real property;
  • Engage in unfair competition;
  • Knowingly misrepresent, circumvent, or conceal, through subterfuge or device, any material aspect or information regarding a transaction to which the person is a party; or
  • Commit an act that constitutes fraud or a dishonest dealing.


If, upon inspection, examination, or investigation, the Commissioner of Corporations (the “Commissioner”) has cause to believe that a licensee under the Law or other person is violating any provision of the Law or any rule or order under the Law, the Commissioner or his or her designee, may issue a citation to the licensee or person in writing, describing with particularity the basis of the citation.



Each citation may contain an order to correct the violation or violations identified and provide a reasonable time period or periods by which the violation or violations must be corrected.  Each citation may assess an administrative fine not to exceed $2,500 that will be deposited in the State Corporations Fund.



In assessing a fine, the Commissioner will give consideration to the appropriateness of the amount of the fine with respect to factors including the gravity of the violation, the good faith of the person or licensees cited, and the history of previous violations.  A citation issued or a fine assessed, while being punishment for a violation of law, will replace other administrative discipline by the Commissioner for the offense or offenses cited, and the citation and fine payment by a licensee will not be reported as disciplinary action taken by the Commissioner.



The Commissioner may issue an order to desist and refrain from engaging in a specific business or activity or activities, or an order to suspend all business operations to a person or licensee who is engaged in or who has engaged in continued or repeated violations of the Law.  In any of these circumstances, the sanctions will be separate from, and in addition to, all other administrative, civil, or criminal remedies.



If, within 30 days from the receipt of the citation, the licensee or person cited fails to notify the Department of Corporations that he or she intends to request a hearing, the citation will be final.


After the exhaustion of the review procedures provided above, the Commissioner may apply to the appropriate superior court for a judgment in the amount of the administrative fine and an order compelling the cited licensee or person to comply with the order of the Commissioner.



The application, which must include a certified copy of the final order of the Commissioner, is a sufficient showing to warrant the issuance of the judgment and order.



If, after an investigation, the Commissioner has reasonable grounds to believe that a person is conducting business in an unsafe or injurious manner, the Commissioner will, by written order addressed to that person, direct the discontinuance of the unsafe or injurious practices.





The fact that a deficiency must not be collected does not affect the liability that a guarantor, pledgor, or other surety might have with respect to a deficiency, or that might be satisfied in whole or in part from other collateral pledged to secure the obligation that is the subject of the deficiency.




Unless acting in the capacity of a trustee, a licensed title company or underwritten title company will not be liable for a violation if it records or causes to record a notice of default or notice of sale at the request of a trustee, substitute trustee, or beneficiary, in good faith and in the normal course of its business activities.  This provision is effective until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date.  This provision must not be construed to affect the liability of a trustee, substitute trustee, or beneficiary that requests a licensed title company or underwritten title company to record a notice of default or notice of sale.