The California Department of Financial Protection and Innovation (DFPI) has issued proposed amendments to its regulations implementing the Pilot Program for Increased Access to Responsible Small Dollar Loans (Pilot Program). Initially effective from 2014 to2018, the Pilot Program’s sunset date was extended to January 1, 2028. The Pilot Program operates under the California Financing Law (CFL) and is administered by the DFPI.
CFL licensees approved by the DFPI to participate in the Pilot Program are permitted to charge specified alternative interest rates and charges, including an administrative fee and delinquency fees, on small dollar loans, subject to certain requirements. Licensees participating in the program are also permitted to use the services of a finder as defined in Section 22371 of the CA Financial Code.
The proposal would amend the DFPI’s Pilot Program regulations to make the following key changes:
- The Pilot Program currently allows loans with a minimum principal balance of $300 and a maximum principal balance of $2,500. The proposal would increase the upper limit to a maximum principal balance of $7,500.
- The Pilot Program currently only allows finders to distribute informational materials about a CFL licensee’s loans, take credit applications, and act as a communication intermediary between the lender and borrower. The proposal would allow finders to also disburse funds on behalf of lenders, collect loan payments from borrowers, and issue notices and disclosures to borrowers. It would also remove an existing provision prohibiting finders from discussing marketing materials or loan documents with a borrower.