The California Financing Law currently requires the licensing of "finance lenders" and "brokers".   Cal. Fin. Code § 22100.  A "finance lender" is defined to include "any person who is engaged in the business of making consumer loans or making commercial loans".  Cal. Fin. Code § 22009.  A "broker" is defined as "any person who is engaged in the business of negotiating or performing any act as broker in connection with loans made by a finance lender."   Cal. Fin. Code § 22004 (emphasis added).   Notably, the Commissioner of Business Oversight has taken the position that a person must be licensed as a broker even if the person does not perform acts as a broker for loans made by a licensed finance lender.  In the Matter of the Desist and Refrain Order Against: Financial Services Enterprises, Dba Pioneer Capital, Respondent, 2016 WL 7840137, at *11 (rejecting the decision by the administrative law judge cited below).  My own view is that this was an untenable position for the Commissioner to have taken because it puts the Commissioner in the bizarre position of requiring a "licensure for activities in which a licensed person would not be allowed to engage".  In the Matter of the Desist and Refrain Order Against: Financial Services Enterprises, Dba Pioneer Capital, Respondent, 2016 WL 7840136, at *8.  The Commissioner's decision is not listed on the DFPI's website as a precedential decision.  See Cal. Gov't Code § 11425.60.

Recently, a California legislator has introduced a bill, SB 869 (Glazer), that would greatly expand the CFL's licensing requirement to include all manner of "commercial brokers".  These are defined as any person who is involved in commercial financing and engaged in the business of performing any of the following acts in connection with commercial loans made by a commercial finance lender, unless that person is otherwise exempt from this section:

• Transmitting confidential data about a prospective borrower to a commercial finance lender with the expectation of compensation, in connection with making a referral.

• Making a referral to a commercial finance lender under an agreement with the commercial finance lender that a prospective borrower referred by the person to the commercial finance lender meets certain criteria involving confidential data.

• Participating in any loan negotiation between a commercial finance lender and prospective borrower.

• Counseling, advising, or making recommendations to a prospective borrower about a loan based on the prospective borrower’s confidential data.

• Participating in the preparation of any loan documents, including loan applications, other than providing a prospective borrower blank copies of loan documents. Transmitting information that is not confidential data to a commercial finance lender at the request of a prospective borrower shall not, by itself, constitute participation in the preparation of loan documents within the meaning of this paragraph.

• Communicating to a prospective borrower a commercial finance lender’s loan approval decisions.

• Charging a fee to a prospective borrower for any services related to a prospective borrower’s application for a loan from a commercial finance lender.

“Commercial financing” means an accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, commercial open-end credit plan, or lease financing transaction intended by the recipient for use primarily for other than personal, family, or household purposes.   A "commercial lender" is defined as "an entity whose business operates . . . to provide commercial financing, including, but not limited to, providing a borrower with a commercial loan or a commercial open-end credit plan".   If enacted, this bill would require persons who act as brokers in connection with loans made by lenders not licensed under the CFL.  It would also impose a fiduciary duty on commercial brokers to exercise the utmost honesty, absolute candor, integrity, and unselfishness toward the borrower.