Editor’s Note: This article originally appeared in Leasing News and is reprinted with permission.

In short, bad things. The DFPI is very rigid about annual reports, and very tough on licensees who fail to file on time. They do not grant extensions.

California Financial Code §22159 and California Code of Regulations Title 10, §1062 require that most licensees, with extremely limited exceptions, file an annual report on or before March 15 of each year. Recently, the DFPI made it mandatory to file the report through the department’s Docqnet website. Licensee are provided with designated email addresses in connection with their license applications. These email addresses can be used to sign in to the Docqnet site (link below):

The consequences of failing to file a report on time can be dire. If the DFPI provides a licensee with notice of the deadline, as they routinely, and the licensee does not file a report within 10 days, the DFPI will summarily revoke the license. The Department interprets Government Code Section 11522 as requiring a one-year waiting period before a licensee can have its license reinstated! That means the licensee must cease making commercial finance transactions in California for up to a year or more. This can be devastating!

In addition, the monetary penalties are very steep. Pursuant to Financial Code §22715(b), the amount may be as much as $100/day for the first five business days that the report is overdue, and as much as $500/day thereafter, not to exceed $25,000!

If this ever happens to you, you should immediately file the late report and a Request for Hearing. If a Request for Hearing is filed in writing within 30 days of the revocation and a hearing is not held within 60 days after the Request, the revocation order is deemed rescinded.

The issues and strategies involved in the hearing process are beyond the scope of this article. Suffice it to say you should do everything within your power to avoid that perilous situation.

CA Fin. Code §22159: https://codes.findlaw.com/ca/financial-code/fin-sect-22159/

CCR Title 10, §1062: https://www.law.cornell.edu/regulations/california/10-CCR-1062               

CA Gov. Code §11522: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=11522.&lawCode=GOV

DOCQNET:      https://docqnet.dfpi.ca.gov/

ANNUAL REPORT FAQ: https://dfpi.ca.gov/wp-content/uploads/sites/337/2022/12/2022_CFL-Annual-Report_FAQs.pdf?emrc=b6840e

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