California Bill Would Establish Registration Program With Respect To Commercial Financing Or Commercial Financing Brokerage Services

Recently, I wrote about the California Office of Administrative Law's rejection of regulations proposed by the Department of Financial Protection & Innovation.  These proposed regulations were intended to "implement, interpret, and make specific registration requirements for covered persons under the California Consumer Financial Protection Law; requirements for exemption from registration for licensees under the California Financing Law, California Deferred Deposit Transaction Law, and Student Loan Servicing Act; and the regulation of certain advances under the California Financing Law".

The OAL rejected the regulations because if found that they failed to meet the "clarity" standard imposed by California's Administrative Procedure Act.   The clarity standard requires that regulations be "written or displayed so that the meaning of the regulations will be easily understood by those persons directly affected by them."  Cal. Gov't. Code § 11349(c).

Given the OAL's finding, one cannot helped being astonished that two legislators, Senators Steve Glazer and Monique Limón, would choose to copy this unclear language into a bill, SB  1482.  The bill would establish a registration, not licensing, program under the California Consumer Financial Protection Law for purposes offering "commercial financing" or "commercial financing brokerage services", in each case as defined.  

The bill's lack of clarity is perhaps best illustrated by its confusion over whether persons or products must be registered.  The first sentence of proposed Financial Code Section 90025(a) provides that "a person shall not engage in the business of offering to provide or providing subject products without first registering with the commissioner . . .".   The very next sentence, however, provides that a "person seeking to offer or provide more than one subject product shall obtain a separate registration for each subject product" (emphasis added).