Q: California Finance Lenders Licensing (CFLL) Requirement
Our business model is marketing equipment loan/lease solutions to vendors and their customers. We provide budgetary loan/lease proposal terms to borrowers, collect credit information, and submit that information to lenders for review. The lessor/lender independently reviews the credit, issues documents to the customer & funds the vendor. The lender pays us a commission if they fund the transaction.
Question –
• The law reads*, that we may be prohibited from collecting commissions from banks that do not have a CFLL (because they are not required to have a license). Is there a license outside of the CFLL that is required to allow us to collect commissions from banks?
*The license does not provide the broker with the authority to broker loans to and collect brokerage commissions from other types of lenders such as credit unions and banks. Therefore, a broker who seeks to broker loans to other types of lenders must ensure that the broker holds the necessary license.
A:
In California, the CFLL is specifically designed for non-bank lenders. If you are brokering loans to banks, which are generally exempt from CFLL licensing, you may need a different type of license. The exact license depends on the nature of the transactions and the institutions involved.
For transactions involving banks, credit unions, and other financial institutions that are exempt from CFLL licensing, you may consider obtaining a broker's license under the California Department of Real Estate (DRE) if the transactions involve secured loans. The DRE license covers a broader range of brokering activities, including those involving loans secured by real estate.
However, if the transactions are unsecured or don't involve real estate, you should review the specific requirements of the California Department of Business Oversight or consult with a legal professional. They can provide tailored advice based on the details of your business model and the type of financial institutions you're dealing with.
Remember, each financial transaction type may have different regulatory requirements, so it’s important to clearly understand the nature of your transactions to determine the appropriate licensing. Compliance with state regulations is crucial to operate legally and avoid potential legal issues.
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