California Senate Bill SB204 Introduced / Bill

 BILL NUMBER: SB 204INTRODUCED BILL TEXT INTRODUCED BY Senators Benoit and Runner FEBRUARY 23, 2009 An act to amend Sections 17202.1, 17207, 17209, 17323, and 17405 of, and to repeal Section 17210 of, the Financial Code, relating to escrow agents. LEGISLATIVE COUNSEL'S DIGEST SB 204, as introduced, Benoit. Escrow agents. Existing law provides for the licensing and regulation of escrow agents by the Commissioner of Corporations. Existing law, until January 1, 2010, requires each escrow agent to pay an annual license fee of up to $2,800 for each office or location and authorizes the commissioner to additionally levy a special assessment for each office or location in certain circumstances. Commencing January 1, 2010, existing law instead requires each escrow agent to pay to the commissioner the agent's pro rata share of the commissioner's annual administrative costs and expenses, as specified. This bill would delay the change in these fee requirements to January 1, 2016, and would, until that date, lower the maximum amount of the annual license fee to $2,500 for each office or location. Existing law requires that escrow agents maintain a specified tangible net worth, including certain liquid assets. This bill would eliminate that requirement, and make related changes. Existing law requires the commissioner to examine an escrow agent as often as the commissioner deems necessary, based on factors designated by the commissioner by rule or order, but not less than every 48 months. Existing law also authorizes the commissioner to conduct examinations, as specified, of a new licensee within one year and within 2 years of the issuance of a license. This bill would authorize the commissioner to examine an escrow agent only for cause and would require the commissioner to conduct the examinations, as specified, of new licensees. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 17202.1 of the Financial Code is amended to read: 17202.1. An applicant for an escrow agent's license or a licensee may, in lieu of and subject to the same conditions as the bond required by Section 17202, deposit with the commissioner a cash bond in the sum specified in Section 17202. Evidence of the cash bond shall be a deposit in the amount specified in Section 17202 in a bank or investment certificates of industrial loan companies, authorized to do business in this state and insured by the Federal Deposit Insurance Corporation, or an investment certificate or share account in the amount specified in Section 17202 issued by a savings and loan association doing business in this state and insured by the Federal Savings and Loan Insurance Corporation. Those deposits, certificates, or accounts shall be assigned to and accepted and maintained by the commissioner, upon those terms as the commissioner may prescribe, until released by the commissioner  , and shall not be deemed an asset of the applicant or licensee for the purpose of complying   with Section 17210  . SEC. 2. Section 17207 of the Financial Code, as amended by Section 1 of Chapter 257 of the Statutes of 2005, is amended to read: 17207. The commissioner shall charge and collect the following fees and assessments: (a) For filing an application for an escrow agent's license, six hundred twenty-five dollars ($625) for the first office or location and four hundred twenty-five dollars ($425) for each additional office or location. (b) For filing an application for a duplicate of an escrow agent's license lost, stolen, or destroyed, or for replacement, upon a satisfactory showing of the loss, theft, destruction, or surrender of certificate for replacement, two dollars ($2). (c) For investigation services in connection with each application, one hundred dollars ($100), and for investigation services in connection with each additional office application, one hundred dollars ($100). (d) For holding a hearing in connection with the application, as set forth under Section 17209.2, the actual costs experienced in each particular instance. (e) (1) Each escrow agent shall pay to the commissioner for the support of this division for the ensuing year an annual license fee not to exceed two thousand  eight   five  hundred dollars  ($2,800)   ($2,500)  for each office or location. (2) On or before May 30 in each year, the commissioner shall notify each escrow agent by mail of the amount of the annual license fee levied against it, and that the payment of the invoice is payable by the escrow agent within 30 days after receipt of notification by the commissioner. (3) If payment is not made within 30 days, the commissioner may assess and collect a penalty, in addition to the annual license fee, of 10 percent of the fee for each month or part of a month that the payment is delayed or withheld. (4) If an escrow agent fails to pay the amount due on or before the June 30 following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the company. (5) If, after an order is made pursuant to paragraph (4), a request for a hearing is filed in writing and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a company shall not conduct business pursuant to this division, except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a certificate shall not affect the powers of the commissioner as provided in this division. (f) Fifty dollars ($50) for investigation services in connection with each application for qualification of any person under Section 17200.8, other than investigation services under subdivision (c) of this section. (g) A fee not to exceed twenty-five dollars ($25) for the filing of a notice or report required by rules adopted pursuant to subdivision (a) or Section 17203.1. (h) (1) If costs and expenses associated with the enforcement of this division, including overhead, are or will be incurred by the commissioner during the year for which the annual license fee is levied, and that will or could result in the commissioner's incurring of costs and expenses, including overhead, in excess of the costs and expenses, including overhead, budgeted for expenditure for the year in which the annual license fee is levied, then the commissioner may levy a special assessment on each escrow agent for each office or location in an amount estimated to pay for the actual costs and expenses associated with the enforcement of this division, including overhead, in an amount not to exceed five hundred dollars ($500) for each office or location. The commissioner shall notify each escrow agent by mail of the amount of the special assessment levied against it, and that payment of the special assessment is payable by the escrow agent within 30 days of receipt of notification by the commissioner. The funds received from the special assessment shall be deposited into the State Corporations Fund and shall be used only for the purposes for which the special assessment is made. (2) If payment is not made within 30 days, the commissioner may assess and collect a penalty, in addition to the special assessment, of 10 percent of the special assessment for each month or part of a month that the payment is delayed or withheld. If an escrow agent fails to pay the special assessment on or before 30 days following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the company. If an order is made under this subdivision, the provisions of paragraph (5) of subdivision (e) of this section shall apply. (3) If the amount collected pursuant to this subdivision exceeds the actual costs and expenses, including overhead, incurred in the administration and enforcement of this division and any deficit incurred, the excess shall be credited to each escrow agent on a pro rata basis. (i) This section shall remain in effect only until January 1,  2010   2016  , and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2010, deletes or extends that date. SEC. 3. Section 17207 of the Financial Code, as amended by Section 2 of Chapter 257 of the Statutes of 2005, is amended to read: 17207. The commissioner shall charge and collect the following fees and assessments: (a) For filing an application for an escrow agent's license, six hundred twenty-five dollars ($625) for the first office or location and four hundred twenty-five dollars ($425) for each additional office or location. (b) For filing an application for a duplicate of an escrow agent's license lost, stolen, or destroyed, or for replacement, upon a satisfactory showing of the loss, theft, destruction, or surrender of certificate for replacement, two dollars ($2). (c) For investigation services in connection with each application, one hundred dollars ($100), and for investigation services in connection with each additional office application, one hundred dollars ($100). (d) For holding a hearing in connection with the application, as set forth under Section 17209.2, the actual costs experienced in each particular instance. (e) (1) Each escrow agent shall pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of this division, as estimated by the commissioner for the ensuing year, and of any deficit actually incurred or anticipated in the administration of this division in the year in which the assessment is made. Commencing with the assessment for fiscal year  2010-11   2016-17  , the assessment shall not increase by more than 25 percent over the amount assessed in the prior year. The pro rata share shall be the proportion which a licensee's gross income from escrow operations bears to the aggregate gross income from escrow operations of all licensees as compiled by the commissioner. The pro rata share shall not include the costs of any examinations provided for in Section 17405.1, unless they cannot be collected from the company examined. If the pro rata assessment collected pursuant to this paragraph exceeds the actual costs and expenses incurred in the administration of this division and any deficit incurred, the excess shall be credited to each escrow agent on a pro rata basis. (2) On or before May 30 in each year, the commissioner shall notify each escrow agent by mail of the amount assessed and levied against it, and that the payment of any invoice for assessments of the commissioner is payable by the escrow agent in three installments with the first installment payable within 20 days after receipt of notification by the commissioner and the second and third installments payable within 20 days of August 31 and November 30, respectively, in each year. The first installment payment shall be 50 percent of the amount assessed, and the second and third installment payments shall each be 25 percent of the amount assessed. (A) If the first installment payment is not made within 20 days, the commissioner may assess and collect a penalty, in addition to the assessment, of 10 percent of the assessment for each month or part of a month that the payment is delayed or withheld. (B) If the second installment payment is not made within 20 days of August 31 in each year, the commissioner may assess and collect a penalty, in addition to the assessment, of 10 percent of the assessment for each month or part of a month that the payment is delayed or withheld. (C) If the third installment payment is not made within 20 days of November 30 in each year, the commissioner may assess and collect a penalty, in addition to the assessment, of 10 percent of the assessment for each month or part of a month that the payment is delayed or withheld. (3) In the levying and collection of the assessment, an escrow agent shall not be assessed for, nor be permitted to pay less than, three hundred fifty dollars ($350) per year, per location. (4) (A) If an escrow agent fails to pay the first assessment on or before the June 30 following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the company. (B) If an escrow agent fails to pay the second installment payment on or before September 30 in each year, the commissioner may by order summarily suspend or revoke the certificate issued to the company. (C) If an escrow agent fails to pay the third installment payment on or before December 31 in each year, the commissioner may by order summarily suspend or revoke the certificate issued to the company. (D) If, after this order is made, a request for a hearing is filed in writing and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a company shall not conduct business pursuant to this division, except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a certificate shall not affect the powers of the commissioner as provided in this division. (f) Fifty dollars ($50) for investigation services in connection with each application for qualification of any person under Section 17200.8, other than investigation services under subdivision (c) of this section. (g) A fee not to exceed twenty-five dollars ($25) for the filing of a notice or report required by rules adopted pursuant to subdivision (a) or Section 17203.1. (h) This section shall become operative January 1,  2010   2016  . SEC. 4. Section 17209 of the Financial Code is amended to read: 17209. An application for a license as an escrow agent shall be signed and verified by an authorized officer of the applicant, and  such   that  application shall be accompanied by a certified copy of the articles of incorporation and a copy of the bylaws of the proposed licensee. The application shall set forth: (a) The names and addresses of the incorporators, directors, and officers. (b) An itemized statement of the estimated receipts and expenditures of the proposed first year of operations. (c) An audited financial statement showing compliance with Section 17210  . (d) The name and address of the person, or persons, meeting the requirements of Section 17200.8, and a statement supporting  such   those  persons' qualifications. (e) The type of business for which the license is requested. (f) Any other matters the commissioner may require. (g) An application for a license as an escrow agent filed with the commissioner shall also include a completed statement of identity and questionnaire, as prescribed by the commissioner, for all stockholders, directors, officers, trustees, managers, and other persons participating in the escrow business directly or indirectly compensated by the escrow agent (other than usual and customary employees who file pursuant to subdivision (d) of Section 17414.1 and Section 17419) and shall also include fingerprints and related information for those persons pursuant to subdivision (h). The commissioner shall notify the applicant in writing if any of the information received pursuant to this division shows that a person's employment, participation, or ownership interest would be in violation of Section 17414.1, and the escrow agent shall deny the person the employment or interest. If the application is not satisfactorily amended to remove the deficiency within six months of the first notice of deficiency, the application shall be summarily denied. Persons required to file the employment application pursuant to Section 17419 are not required to file the statement of identity and questionnaire described in this section. (h) (1) The fingerprint images and related information shall be submitted by the commissioner to the Department of Justice, in a manner established by the Department of Justice, for the purposes of obtaining information as to the existence and content of a record of state or federal convictions, state or federal arrests, and information as to the existence of and content of a record of state or federal arrests for which the Department of Justice establishes that the person is free on bail or on his or her own recognizance pending trial or appeal. (2) Upon receipt, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received from the commissioner pursuant to this section. The Department of Justice shall review the information returned from the Federal Bureau of Investigation and compile and disseminate a response to the commissioner pursuant to subdivision (p) of Section 11105 of the Penal Code. (3) The commissioner shall request from the Department of Justice subsequent arrest notification service as provided pursuant to Section 11105.2 of the Penal Code. (4) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this subdivision. SEC. 5. Section 17210 of the Financial Code is repealed.  17210. (a) An escrow agent licensed on or after January 1, 1986, shall maintain at all times a tangible net worth of fifty thousand dollars ($50,000), including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (b) An escrow agent licensed prior to January 1, 1986, shall maintain at all times a tangible net worth according to the following schedule: (1) Ten thousand dollars ($10,000) from January 1, 1986, through June 30, 1986, including liquid assets of at least ten thousand dollars ($10,000) in excess of current liabilities. (2) Fifteen thousand dollars ($15,000) as of July 1, 1986, including liquid assets of at least fifteen thousand dollars ($15,000) in excess of current liabilities. (3) Twenty thousand dollars ($20,000) as of July 1, 1987, including liquid assets of at least twenty thousand dollars ($20,000) in excess of current liabilities. (4) Twenty-five thousand dollars ($25,000) as of July 1, 1988, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (5) Thirty thousand dollars ($30,000) as of July 1, 1989, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (6) Thirty-five thousand dollars ($35,000) as of July 1, 1990, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (7) Forty thousand dollars ($40,000) as of July 1, 1991, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (8) Forty-five thousand dollars ($45,000) as of July 1, 1992, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (9) Fifty thousand dollars ($50,000) as of July 1, 1993, and thereafter, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (c) The commissioner may determine by rule as to which assets constitute liquid assets and may also determine in an individual case by a specific written ruling whether a particular asset is a liquid asset within the meaning of this section. (d) In the case of a licensed branch office, a tangible net worth in addition to that required by subdivision (a) shall be maintained at an amount equal to 50 percent of the tangible net worth required by subdivision (a), except that licensees operating or applying for more than one branch office shall maintain an additional tangible net worth of at least 25 percent of the amount required by subdivision (a) for each branch office licensed after the first branch office location.  SEC. 6. Section 17323 of the Financial Code is amended to read: 17323. (a)  In the event   If  any member fails to pay an assessment when due, Fidelity Corporation shall by written demand addressed to the member request the payment of the assessment within 30 days of the demand letter. If the member fails to pay an assessment, the commissioner may issue an order pursuant to subdivision (b). (b) If a member fails to pay the assessment, or any applicable late fee, the commissioner may by order summarily suspend the license issued to the company. If after the order is made, a request for a hearing is filed in writing and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its license is suspended, a company shall not conduct business pursuant to this division, except as may be permitted by order of the commissioner. However, the suspension of a license shall not affect the powers of the commissioner as provided in this division. (c) Fidelity Corporation may bring an action at law or in equity against the member to recover any assessment or fees. (d) Fidelity Corporation may be awarded costs and reasonable attorney's fees, if it prevails in any action against a member, or against a third party, except the commissioner, to enforce a claim against the bond or other security posted by the member pursuant to Section 17202, or in any action against a member pursuant to subdivision (c). Those costs and attorney's fees may be awarded as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, provided that the payment of the costs and attorney' s fees will not cause the member to be in violation of Section 17202  ,   or  17202.1  , or 17210  . SEC. 7. Section 17405 of the Financial Code is amended to read: 17405. (a) The business, accounts and records of every person performing as an escrow agent, whether required to be licensed under this division or not, are subject to inspection and examination by the commissioner at any time without prior notice. The provisions of this section shall not apply to persons specified in Section 17006. (b) Any person subject to this division shall, upon request, exhibit and allow inspection and copying of any books and records by the commissioner or his or her authorized representative. (c) (1) The commissioner  shall   may  conduct an examination of each licensed escrow agent as described in subdivision (a)  as often as the commissioner deems necessary and appropriate, but not less than once every 48 months   only for cause  . (2) The examination shall be conducted for the 12-month period immediately preceding the date that the examination is commenced unless the commissioner finds, based on information uncovered in the examination or in the most recent independent audit report, that the examination should be extended beyond the 12-month period. (3) In determining  how often   whether  an examination shall be conducted  for cause  , the commissioner may consider each licensed escrow agent's compliance with the requirements set forth in this division and other factors the commissioner may by rule or order designate. (4) This subdivision shall apply only to examinations commenced after the effective date established by the rule or order of the commissioner for the factors described in paragraph (3). (d) Notwithstanding subdivision (c), the commissioner  may   shall  conduct an indoctrination or preliminary examination, or both, under this section of any new licensee within one year of the issuance of the license under this division, and an examination described in subdivision (a) within two years of the issuance of the license under this division.