05-1
05-1
January 5, 2005
Re: Opinion Request
Dear Mr. _____:
Thank you for your letter of January 4, 2005.
In your letter, you asked whether your client, a Michigan banking corporation, is required to register or obtain a license to provide consumer loans to California residents in conjunction with healthcare facilities. You described the facts as follows:
Our client has contractual relationships with hospitals located in the state of California. The contract provides that when a patient is unable to pay the costs of their hospital visits they will be offered the option of financing amounts owed for their care, through our client. Loan applications and brochures will be made available at the hospital and prepared by the patients. The application will then be forwarded to our client for underwriting and approval. Upon approval our client will provide the patient with a loan to assist with their hospital bills.
After the first loan payment is received by our client, the client will pay the hospital the full amount of the borrower’s outstanding payments. Per the terms of the contract, as an inducement for this offer the hospitals agree to purchase the loan should there be a default by the borrower.
Under the stated facts, we do not believe that the hospitals with whom your client has contracted would be considered a “facility” as defined by Financial Code Section 3800. In addition, we do not believe that the activity occurring at the hospitals rises to the level that would require regulation by the Department of Financial Institutions.
I trust this has been responsive to your request. If you have any questions regarding this matter, please feel free to contact me.
Very truly yours,
JENNIFER L.W. RUMBERGER
Staff Counsel
JLWR:acp
January 4, 2005
Sent Via e-mail: pcarroll@dbo.ca.gov
Mr. Patrick Carroll
Mr. Ken Sayer Peterson
California Department of Financial Institutions
Re: Request for legal opinion
Dear Gentlemen:
As Mr. Carroll discussed with my associate Jeffrey Horowitz our firm represents a Michigan banking corporation. Our client will be providing consumer loans to residents of the state of California in conjunction with healthcare facilities.
Our client has contractual relationships with hospitals located in the state of California. The contract provides that when a patient is unable to pay the costs of their hospital visits they will be offered the option of financing amounts owed for their care, through our client. Loan applications and brochures will be made available at the hospital and prepared by the patients. The application will then be forwarded to our client for underwriting and approval. Upon approval our client will provide the patient with a loan to assist with their hospital bills.
After the first loan payment is received by our client, the client will pay the hospital the full amount of the borrower’s outstanding payments. Per the terms of the contract, as an inducement for this offer the hospitals agree to purchase the loan should there be a default by the borrower.
We have reviewed the relevant California banking and finance laws and as discussed with Mr. Carroll, the only issue related to the definition of facility contained in Chapter 22, Article 1 and the requirements of registering foreign (out of state) banking facilities contained Chapter 22, Article 3. Specifically we reviewed the following sections:
West’s Ann.Cal.Fin.Code § 3800
“Facility,” when used with respect to a foreign (other state) bank, means an office in this state at which the bank engages in noncore banking business but at which it does not engage in core banking business.
“Noncore banking business” means all activities permissible for commercial banks, industrial banks, or trust companies, except core banking business, and except those activities prohibited by law or determined by the commissioner by regulation or order not to be noncore banking business.
“Core banking business” means the business of receiving deposits, paying checks, making loans, and other activities that the commissioner may specify by order or regulation. “Core banking business,” when used to describe the trust business, includes receiving fiduciary assets and administering fiduciary accounts.
West’s Ann.Cal.Fin.Code § 3841
Not less than 30 days before an insured foreign (other state) bank establishes a facility, it shall file with the commissioner a report and the appointment called for in Section 3843.
Mr. Carroll stated that while he believes the hospitals would not be considered a facility, he stated that we should submit a written request for a formal opinion on this issue. It is our opinion that merely making loan applications and brochures available for its patients does not create a banking facility. The hospitals have no other involvement and all credit related decisions and inquiries will be made by through our client in Michigan. Our client will be exporting interest rates and the contracts will be governed by the laws of Michigan. Based on this information and our research it is our opinion that there are no notification, registration or licensing requirements with your office for our client to engage in this lending activity.
After review please verify our opinion. Should you have any other question or need any other information necessary to make this determination please feel free to contact myself or my associate Jeffrey Horowitz at the number listed above. We look forward to hearing from you.
Sincerely,