[BigIz]

I have some California deals come my way since the beginning of the year and wanted to find out what Funders are still doing California without requiring a broker to be licensed under CFL?

[ksmo1309]

If you need a licensed broker in CA, shoot me a message. Can work something out together.

[Everest]

we can fund deals in Ca.

[cashman770]

So whats the story now? Do we need a license to broker a cali deal? Or is this only for the direct lenders only?

[BigIz]

So whats the story now? Do we need a license to broker a cali deal? Or is this only for the direct lenders only?

The new law actually allows CFL Lenders to now pay referral fees to un-licensed brokers. It was illegal before the law. Actually the new law does not apply to Cash Advance Funders because they are not doing loans and are not required to get a CFL License. So the new law actually relaxed the rules BUT since Loan Me started communicating with everyone that the new law REQUIRES (NOT TRUE) brokers to be licensed, a whole bunch of Funders freaked out and are now requiring licensing. As I have stated in a previous post, it was Loan Me's own internal decision to require brokers to be licensed because the new law does make the Lender liable for all of the un-licensed brokers actions.Loan Me is a CFL Lender in California not a Cash Advance Funder.

[cashman770]

Thanks for the clarification

[Sean Cash]

The new law actually allows CFL Lenders to now pay referral fees to un-licensed brokers. It was illegal before the law. Actually the new law does not apply to Cash Advance Funders because they are not doing loans and are not required to get a CFL License. So the new law actually relaxed the rules BUT since Loan Me started communicating with everyone that the new law REQUIRES (NOT TRUE) brokers to be licensed, a whole bunch of Funders freaked out and are now requiring licensing. As I have stated in a previous post, it was Loan Me's own internal decision to require brokers to be licensed because the new law does make the Lender liable for all of the un-licensed brokers actions.Loan Me is a CFL Lender in California not a Cash Advance Funder.

The only thing I would add is that it's not uncommon for a merchant cash advance company to be a licensed lender in California. Plenty are, look it up: http://www.dbo.ca.gov/fsd/licensees/. Even if they are doing cash advances in 49 other states, some are specifically making loans in California. Here's what you need to look out for:
---

First, is the funder licensed to Lend in California? check here: http://www.dbo.ca.gov/fsd/licensees/

Second, (if they are) are they making loans or advances? Review the contract they give to merchants to determine this.

If they are indeed structuring their contracts as loans there (even if they are doing advances in the other 49 states), the broker needs to be licensed to refer them business.

If they are structuring their contracts as purchases of receivables, the broker may not need to be licensed even if the funding company itself is a licensed lender. Weird right?

---
Lenders that rely on a bank charter like OnDeck are exempt from this law. If they are not a licensed lender and not exempt under a bank charter and are still making loans, you probably shouldn't broker anything to them. But if the funding company is truly doing advances, you should be okay regardless of whether or not the funder is a licensed lender.

Consult a lawyer before doing anything one way or the other.

[BigIz]

The only thing I would add is that it's not uncommon for a merchant cash advance company to be a licensed lender in California. Plenty are, look it up: http://www.dbo.ca.gov/fsd/licensees/. Even if they are doing cash advances in 49 other states, some are specifically making loans in California. Here's what you need to look out for:
---

First, is the funder licensed to Lend in California? check here: http://www.dbo.ca.gov/fsd/licensees/

Second, (if they are) are they making loans or advances? Review the contract they give to merchants to determine this.

If they are indeed structuring their contracts as loans there (even if they are doing advances in the other 49 states), the broker needs to be licensed to refer them business.

If they are structuring their contracts as purchases of receivables, the broker may not need to be licensed even if the funding company itself is a licensed lender. Weird right?

---
Lenders that rely on a bank charter like OnDeck are exempt from this law. If they are not a licensed lender and not exempt under a bank charter and are still making loans, you probably shouldn't broker anything to them. But if the funding company is truly doing advances, you should be okay regardless of whether or not the funder is a licensed lender.

Consult a lawyer before doing anything one way or the other.

Hello Sean, in my own humble opinion, I do not believe that it matters if the lender is structuring the product as a loan or a cash advance. If they are a licensed CFL lender the new law allows them to pay a referral to unlicensed brokers under very specific circumstances. The two most important, the referring party can only hook up the contact, merchant to lender and do nothing else on the deal and the APR must be 36% and under. Most of the advances are above that, so at that point it would be an issue with both Lender and un-licensed broker.

The whole point of the law was to loosen the rules in order to allow CFL Lenders to pay referrals to unlicensed brokers. Specifically, the law was passed to allow non-profit micro-lenders in California to compete with cash advance funders. The main sponsors of the bill were the biggest micro-lenders/associations in California, Opportunity Fund and CAMEO (California Association for Micro Enterprise Opportunity). They had been lobbying the California legislature. They kept on complaining that most small business owners had never heard about their loans, which are more affordable than cash advances, because they were not allowed to pay ISOs (un-licensed brokers).

Either way, like Sean said, consult an attorney and if you cannot afford one, the court will appoint one for you when they throw your ass in jail!

[ericgunther]

Hi Everyone,

I have been doing some research and have some opinions (they may or may not be correct.)

If a funder is located outside of California (various states) but decided to become a licensed lender in CA to offer a "loan" then the broker would need to be licensed as well.

However, some firm are in states that allow their licenses to be exported (I believe that to be the term) or have usage of another national bank charter by parking their fundings there first for a very short term. In these cases I believe the broker would not need to be licensed in CA (unless possibly located personal as a broker in CA.)

Lastly, lets say a licensed CA lender does a deal with a license CA broker, what if another broker/consultant gave the deal to the broker, would that daisy chain of introducers need to be licensed? I don't see anything that says a broker cannot pay a commission to an introducer. Could the funders open their own brokerage to basically allow "double brokering" to avoid this.

I am doing some more calls and research, but maybe the broker community can put the need for licensing back on the funder to use the national bank charter model to avoid this or license through a state with easy export. Just a thought .....

[anonymous]

I strongly suggest consulting with an attorney, rather than a message board on this matter. That said, I'm excited to see some of the responses to this post, should get interesting.