Cogdill Loan Fraud Bill Clears Senate Committee

Cogdill Bill Will Increase Safeguards to Prevent Loan Fraud, Clears Key Senate Committee

Assembly Bill 502 requires lenders to undergo criminal background check.

A measure by Assemblyman Dave Cogdill (R-Modesto) to increase consumer safeguards on the financial lending industry unanimously cleared the Senate Banking, Commerce, and International Trade Committee on a vote of 10 to 0. Assembly Bill 502 would require new applicants for a California Finance Lenders (CFL) license to submit a set of fingerprints for purposes of conducting a criminal background check. Amendments approved by the Committee will extend this requirement to current CFL license holders, should the licensee seek to open a new subsidiary of the existing company.

AB 502 is a common-sense measure that will help protect consumers,” stated Cogdill. “Californians work very hard for their money and we ought to help them protect it. By requiring lenders to undergo a simple background check, we can prevent a few bad actors in the industry from committing devastating financial fraud.”

Current law requires others within the financial industry, including residential mortgage lenders, real estate appraisers, and escrow agents, to submit to a criminal background check before their applications can be approved. Finance lenders are the only professionals within the industry who are not subject to this requirement.

Cogdill authored the bill after a recent scandal in Modesto involving a lending firm called DreamLife Financial brought the current law’s shortcomings to his attention. Cogdill hopes that AB 502 will prevent similar situations in the future by preventing financial companies who have a history of fraud in other types of lending from obtaining a California Finance Lenders license in order to continue their predatory practices.

Clearly criminals can exploit this dangerous loophole in state law,” commented Cogdill. “The DreamLife debacle is just one example of why we need increased safeguards in the lending industry. Californians entrust finance lenders with their money and with their private financial information. They deserve to know if a lender has a criminal history.”

AB 502 will now move to the Senate Appropriations Committee for a hearing. A date has not yet been set. For more information, or for bill text, please visit www.leginfo.ca.gov.