Department of Business Oversight - Monthly Bulletin

Monthly Bulletin – May 2020

Volume 7, Number 10

Coronavirus

California Provides Expansion of Student Loan Relief

On April 23, Governor Gavin Newsom announced that most private student loan servicers have agreed to provide payment and other relief to borrowers, including more than 1.1 million Californians with privately held student loans.

Under the new initiative negotiated by California and other states, students with commercially owned Federal Family Education Loan or privately held student loans who are struggling to make payments due to the COVID-19 pandemic may be eligible for expanded relief. Such borrowers should immediately contact their student loan servicer to identify options appropriate to their circumstances. The DBO also has posted a list of frequently asked questions.

In addition, the U.S. Department of Education has a webpage with coronavirus and loan forbearance information for students, borrowers and parents.

fraud image Fraud and Other Alerts

The DBO encourages businesses and consumers to be extra vigilant of fraud, scams, and unlawful activities seeking to exploit the pandemic and associated financial uncertainties. The following consumer alerts detail situations to be aware of and how to protect yourself:

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Mortgage Forbearance, Foreclosure, Rent Relief

Governor Gavin Newsom earlier issued Executive Order N28-20 directing the Department of Business Oversight (DBO) to work with financial institutions to identify ways to provide Californians relief from the threat of residential foreclosure and displacement, and to promote housing security and stability. The executive order also asked financial institutions to implement an immediate moratorium on foreclosures arising from causes related to COVID-19.

In furtherance of the Governor’s executive order, Business, Consumer Services and Housing Agency Secretary Lourdes M. Castro Ramírez and DBO Commissioner Manuel P. Alvarez issued guidance to escrow agents, finance lenders and servicers, student loan servicers licensed under the Student Loan Servicing Act, and residential mortgage lenders and servicers licensed under the California Financing Law (CFL) and California Residential Mortgage Lending Act (CRMLA).

Other BCSH, DBO Guidance

coronavirus

The DBO has prepared, issued and posted other guidance to licensees urging them to extend whatever latitude they can to consumers and relaxing deadlines and other regulatory provisions, where possible, to allow licensees to adjust operations and protect their employees during the COVID-19 outbreak. Spanish language translations of the guidance documents are available at the DBO website https://dbo.ca.gov/2020/03/25/covid19.

The most recent document is a set of guidance for California Financing Law (CFL) licensees, payday lenders and Property Assessed Clean Energy (PACE) program administrators.

Point-of-Sale Lenders Subject to DBO Oversight

passing money from hand to hand

On April 22, the DBO announced a settlement with point-of-sale lender QuadPay in which the company agreed to stop making illegal loans, refund $685,000 to California consumers and pay $69,000 in penalties. The refunds represent all the fees QuadPay has collected from more than 45,000 California consumers in transactions the DBO concluded were illegal loans.

After an inquiry launched last year, the DBO concluded QuadPay had engaged in the business of a finance lender without obtaining a required license. Under the settlement, QuadPay will only make future loans or extensions of credit to California residents under a California Financing Law (CFL) license.

This is the third in series of similar enforcement actions that will deliver nearly $2 million in refunds to California consumers. The DBO reached similar settlements in January and March with two other point-of-sale lenders, Sezzle and Afterpay. Sezzle agreed to pay more than $300,000 in refunds and penalties. Afterpay agreed to pay $900,000 in refunds and $90,000 in administrative fees. In both cases, the DBO concluded purported credit sales made by the lenders’ merchant partners were not bona fide but, rather, were structured to evade otherwise applicable consumer protections.

Greater Census Response Urged

Census logoAfter the launch of the U.S. Census on April 1, 57.5 percent of California’s households have completed their Census questionnaire. This puts the state just slightly ahead of the national self-response rate of 56.3 percent as of May 4 (https://2020census.gov/en/response-rates.html). However, with COVID-19 affecting the state’s Census outreach efforts, California is still well below its 2010 Census self-response rate of 68.2 percent.

Starting this month and continuing until the extended Oct. 31 deadline, the Census Bureau will send out enumerators to knock on the doors of households that have not completed their questionnaire. Responses to the Census are required by law, helping to ensure accurate population counts and determine national representation through the number of congressional seats and Electoral College votes allotted to each state. In the upcoming census, California risks losing a Congressional seat if accurate counts are not reported.

If you have not completed your Census questionnaire, you can easily submit your information at https://my2020census.gov. To learn more about the 2020 Census in California and why it matters, visit https://californiacensus.org/

Escrow Annual Report Reminder

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Each escrow agent licensee is required to submit to the Commissioner of Business Oversight an annual report prepared by an independent certified public accountant (CPA) or an independent public accountant (Financial Code section 17406) within 105 days after the close of the escrow agent’s fiscal year. The annual report includes audited financial statements and required supplemental information.

If your fiscal year ends on January 31, 2020, your annual report is due May 15, 2020.  Please have your CPA email your annual report to ESCAnnualReportFiling@dbo.ca.gov by May 15, using a secured encrypted delivery system. The use of a secured dropbox is also acceptable. If your CPA is unable to submit the annual report electronically, your CPA may submit via mail to Sultanna Wan, Specialist, Escrow Law, Department of Business Oversight, 320 West Fourth Street, Suite 750, Los Angeles, CA 90013.

Penalties for failure to file the annual report by the due date, or failure to include any information required in the report, are $100 per day for the first five days the report is late and $500 per day thereafter (Financial Code section 17408). Failure to file the report or failure to include any information required in the report may also result in the suspension or revocation of an escrow agent’s license and/or prompt an immediate examination (Financial Code section 17602.5).

For questions on the annual report forms, call Sultanna Wan at (213) 576-7647.

May 19 Deadline to Comment on Public Bank Regs

Public bank logo

The DBO is seeking comment by May 19 on proposed regulations to implement the new public banking law. Governor Newsom signed AB 857 (Chapter 442, Statutes of 2019) last year to enable local agencies to apply for a public bank charter from the DBO.

To expedite the rulemaking process, the Commissioner intends to issue regulations in phases. The first phase will focus on general definitions and application requirements. This will enable the Commissioner to provide guidance on those areas most immediately relevant to stakeholders and enable implementation of the new law as quickly as possible.

Subsequent rulemaking phases will address areas specific to licensees, including examination and reporting requirements and collateralization of local agency deposits.

The Invitation for Comments may be accessed here. Comments may be submitted to regulations@dbo.ca.gov by May 19 (extended from the original April 4 deadline).

Risk Management for Cloud Computing Services

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On April 30, the Federal Financial Institutions Examination Council (FFIEC) issued a statement to address the use of cloud computing services and security risk management principles in the financial services sector. The statement encourages financial institution management to engage in effective risk management for the safe and sound use of cloud computing services. Security breaches involving cloud computing services underscore the importance of sound security controls and management’s understanding of the shared responsibilities between cloud service providers and their financial institution clients.

The FFIEC statement does not contain new regulatory expectations but highlights examples of risk management practices for a financial institution’s safe and sound use of cloud computing services and safeguards to protect customers’ sensitive information from risks that pose potential consumer harm.

Financial institutions should refer to FFIEC member guidance referenced in the “Additional Resources” section of the statement for information regarding supervisory perspectives on effective information technology risk management practices.

LICENSEE ACTIVITY

Commercial Bank Activity

Merger

Opus Bank, Irvine, to merge with and into Pacific Premier Bank, Irvine
Approved: 4/2/20

Acquisition of Control

Francis P. Kavanaugh, to acquire control of Friendly Hills Bank
Filed: 4/24/20

Sang Young Lee, Chun Young Lee, and Lee’s Gold and Diamond Imports, Inc., to acquire control of Pacific City Bank
Approved: 4/15/20

Application for Trust Powers

Pacific Premier Bank
17901 Von Karman Avenue, Irvine
Approved: 4/2/20

Money Transmitter Activity

Acquisition of Control

Christopher Sherrod to acquire control of VendEngine, Inc.
Approved: 3/12/20

 

MANUEL P. ALVAREZ • Commissioner of Business Oversight

2020 Census logo

The May 2020 Monthly Bulletin covers the month ended  April 30, 2020.

It is issued pursuant to Financial Code section 376.

The Monthly Bulletin is available at no charge via e-mail.

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Last updated: Jun 8, 2020 @ 7:46 pm