AB2116 - Commercial financing.

Enrolled August 24, 2026 Passed IN Senate August 19, 2026 Passed IN Assembly August 20, 2026 Amended IN Senate August 13, 2026 Amended IN Senate July 02, 2026 Amended IN Senate June 22, 2026 Amended IN Senate June 04, 2026 Amended IN Assembly April 16, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2116 Introduced by Assembly Member Schiavo February 18, 2026 An act to amend Sections 22001, 22002, 22007, 22010, 22101, 22101.5, 22102, 22103, 22104, 22105, 22106, 22107, 22109, 22112, 22151, 22153, 22156, 22157, 22157.1, 22159, 22161, 22162, 22164, 22168, 22169, 22700, 22701, 22712, and 22714 of, to amend, renumber, and add Section 22807 of, to add Sections 22021, 22022, 22100.6, and 22167.1 to, and to add Chapter 3.1 (commencing with Section 22655) to Division 9 of, the Financial Code, relating to financial institutions. LEGISLATIVE COUNSEL'S DIGEST AB 2116, Schiavo. Commercial financing. The California Financing Law (CFL) provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Financial Protection and Innovation, including by regulating the provision of commercial loans, as defined. A willful violation of the CFL is a crime, except as specified. This bill would, beginning January 1, 2028, generally provide for the regulation under the CFL of commercial financing, which the bill would define to mean an accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, commercial open-end credit plan, or lease financing, intended by the recipient for use primarily for a purpose other than a personal, family, or household purpose, as specified. Beginning July 1, 2028, the bill would prohibit a person from engaging in the business of a commercial financing provider, as defined, or a commercial financing broker, as defined, without obtaining a license from the commissioner, except as specified. The bill would impose various duties on commercial financing providers and commercial financing brokers, including, among other things, prohibiting the taking of a confession of judgment or power of attorney at any time before a default, as specified. The bill would make various conforming changes to the CFL. Existing law requires a provider of commercial financing to disclose certain information, as specified. Existing law deems certain violations of these provisions to be a violation of the CFL, as specified. The CFL authorizes the commissioner to require that rates of charge, if stated by a licensee, be stated fully and clearly in the manner that the commissioner deems necessary to prevent misunderstanding by prospective borrowers or property owners. This bill would authorize the commissioner to require that rates of charge be stated fully and clearly in the manner that the commissioner deems necessary to prevent misunderstanding by prospective borrowers or recipients. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill Text The people of the State of California do enact as follows: SECTION 1. Section 22001 of the Financial Code is amended to read: 22001. (a) This division shall be liberally construed and applied to promote its underlying purposes and policies, which are: (1) To ensure an adequate supply of credit to borrowers in this state. (2) To simplify, clarify, and modernize the law governing loans made by finance lenders. (3) To foster competition among finance lenders. (4) To protect borrowers against unfair practices by some lenders, having due regard for the interests of legitimate and scrupulous lenders. (5) To permit and encourage the development of fair and economically sound lending practices. (6) To encourage and foster a sound economic climate in this state. (7) To protect property owners from deceptive and misleading practices that threaten the efficacy and viability of property assessed clean energy financing programs. (8) To protect small businesses against unfair practices by some commercial financing providers, having due regard for the interest of legitimate and scrupulous commercial financing providers. (b) Consumer loans, as defined in Sections 22203 and 22204, are subject to this chapter, Chapter 2 (commencing with Section 22200), Article 1 (commencing with Section 22700) of Chapter 4, and Article 2 (commencing with Section 22750) of Chapter 4. (c) Commercial loans, as defined in Section 22502, are subject to this chapter, Chapter 3 (commencing with Section 22500), Article 1 (commencing with Section 22700) of Chapter 4, and Article 3 (commencing with Section 22780) of Chapter 4. (d) A program administrator, as defined in Section 22018, is subject to this chapter, Chapter 3.5 (commencing with Section 22680), and Article 1 (commencing with Section 22700) of Chapter 4. (e) Commercial financing, as defined in Section 22655, is subject to this chapter, Chapter 3.1 (commencing with Section 22655), and Article 1 (commencing with Section 22700) and Article 3 (commencing with Section 22780) of Chapter 4. (f) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2028. SEC. 2. Section 22002 of the Financial Code is amended to read: 22002. (a) To accomplish its underlying purposes and policies, this division creates a class of exempt persons pursuant to Section 1 of Article XV of the California Constitution. The class of exempt persons includes any person licensed under this division. (b) (1) It is the intent of the Legislature to preserve existing exemptions under Section 1 of Article XV of the California Constitution and statutory law for all of the following: (A) Personal property brokers formerly regulated by the Personal Property Brokers Law. (B) Lenders formerly regulated by the Consumer Finance Lenders Law. (C) Lenders formerly regulated by the Commercial Finance Lenders Law. (2) No finding that any provision of this division is invalid with respect to a particular lender or class of lenders shall affect the enforceability of this division with respect to any of the classifications of lenders described in paragraph (1), which shall in all events continue to be exempted by this division. SEC. 3. Section 22007 of the Financial Code is amended to read: 22007. (a) “Licensee” means any finance lender, broker, commercial financing provider, commercial financing broker, or program administrator who receives a license in accordance with this division. (b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2028. SEC. 4. Section 22010 of the Financial Code is amended to read: 22010. (a) “Finance lender,” “broker,” “commercial financing provider,” “commercial financing broker,” and “program administrator” do not include employees regularly employed at the location specified in the license of the finance lender, broker, commercial financing provider, commercial financing broker, or program administrator, except that an employee, when acting within the scope of the employee’s employment, shall be exempt from any other law from which the employee’s employer is exempt. (b) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2028. SEC. 5. Section 22021 is added to the Financial Code, to read: 22021. (a) Except in Sections 22064 and 22687, “recipient” has the same meaning as defined in Section 22655. (b) This section shall become operative on January 1, 2028. SEC. 6. Section 22022 is added to the Financial Code, to read: 22022. (a) “Commercial financing” and “commercial financing provider” have the same meanings as defined in Section 22655. (b) This section shall become operative on January 1, 2028. SEC. 7. Section 22100.6 is added to the Financial Code, to read: 22100.6. (a) A person shall not engage in the business of a commercial financing provider or a commercial financing broker without obtaining a license from the commissioner. (b) Notwithstanding subdivision (a), a person may engage in the business of a commercial financing provider or a commercial financing broker if the person submits a complete application on or before July 1, 2028, and is awaiting approval or denial of the application. (c) This section shall become operative on July 1, 2028. SEC. 8. Section 22101 of the Financial Code is amended to read: 22101. (a) An application for a license as a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator under this division shall be in the form and contain the information that the commissioner may by rule or order require and shall be filed upon payment of the fee specified in Section 22103. (b) Notwithstanding any other law, an applicant who does not currently hold a license as a finance lender, broker, commercial financing provider, commercial financing broker, or program administrator under this division shall furnish, with their application, a full set of fingerprints and related information for purposes of the commissioner conducting a criminal history record check. The commissioner shall obtain and receive criminal history information from the Department of Justice and the Federal Bureau of Investigation pursuant to Section 22101.5. (c) This section does not prevent a licensee from engaging in the business of a finance lender or program administrator through a subsidiary corporation if the subsidiary corporation is licensed pursuant to this division. (d) For purposes of this section, “subsidiary corporation” means a corporation that is wholly owned by a licensee. (e) A new application shall not be required for a change in the address of an existing location previously licensed under this division. However, the licensee shall comply with the requirements of Section 22153. (f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require an application to be made through the Nationwide Mortgage Licensing System and Registry, and may require fees, fingerprints, financial statements, supporting documents, changes of address, and any other information, and amendments or modifications thereto, to be submitted in the same manner. (g) Notwithstanding any other law, the commissioner may by rule or order prescribe circumstances under which to accept electronic records or electronic signatures. This section does not require the commissioner to accept electronic records or electronic signatures. (h) For purposes of this section, the following terms have the following meanings: (1) “Electronic record” means an initial license application, or material modification of that license application, and any other record created, generated, sent, communicated, received, or stored by electronic means. “Electronic records” also includes, but is not limited to, all of the following: (A) An application, amendment, supplement, and exhibit, filed for any license, consent, or other authority. (B) A financial statement, a report, or advertising. (C) An order, license, consent, or other authority. (D) A notice of public hearing, accusation, and statement of issues in connection with any application, license, consent, or other authority. (E) A proposed decision of a hearing officer and a decision of the commissioner. (F) The transcripts of a hearing and correspondence between a party and the commissioner directly relating to the record. (G) A release, newsletter, interpretive opinion, determination, or specific ruling. (H) Correspondence between a party and the commissioner directly relating to any document listed in subparagraphs (A) to (G), inclusive. (2) “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (i) The Legislature finds and declares that the Department of Financial Protection and Innovation has continuously implemented methods to accept records filed electronically, and is encouraged to continue to expand its use of electronic filings to the extent feasible, as budget, resources, and equipment are made available to accomplish that goal. (j) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2028. SEC. 9. Section 22101.5 of the Financial Code is amended to read: 22101.5. (a) The commissioner shall submit to the Department of Justice fingerprint images and related information required by the Department of Justice of all finance lender, broker, commercial financing provider, commercial financing broker, or program administrator license candidates, as defined by subdivision (a) of Section 22101, for 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 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 the person’s own recognizance pending trial or appeal. (b) When received, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received 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. (c) The Department of Justice shall provide a response to the commissioner pursuant to paragraph (1) of subdivision (p) of Section 11105 of the Penal Code. (d) The commissioner shall request from the Department of Justice subsequent arrest notification service, as provided pursuant to Section 11105.2 of the Penal Code, for license candidates described in subdivision (a). (e) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this section. (f) Notwithstanding subdivisions (a) to (e), inclusive, the commissioner may by rule require fingerprints submitted by an applicant to be submitted to the Nationwide Mortgage Licensing System and Registry in addition to the Department of Justice. (g) The amendments made to this section by the act adding this subdivision shall become operative on January 1, 2028. SEC. 10. Section 22102 of the Financial Code is amended to read: 22102. (a) A finance lender, broker, commercial financing provider, commercial financing broker, or program administrator licensee seeking to engage in business at a new location shall submit an application for a branch office license to the commissioner at least 10 days before engaging in business at a n [Text truncated for display. Full text available on Congress.gov.]