Section 8261 - Demand Procedures for Guarantees(a) The lender may make a demand upon the department or its contractor for repayment of the unpaid loan principal and interest pursuant to the terms of the guaranty by delivering a demand letter requesting immediate payment of the guarantied portion of loan interest and principal to the department or its contractor. The demand letter shall include proof that the borrower is in default and that the lender has delivered to both the borrower and the department or its contractor the following written notices:(1) In the case of a monetary default, a minimum of two (2) notices subsequent to the delinquency upon which the default is based, at least thirty (30) days apart, explaining the consequences of failure to remedy the delinquency; or(2) In the case of a non-monetary breach of the loan documents, a minimum of two (2) notices of the breach, at least thirty (30) days apart, explaining the consequences of failure to remedy the breach; and(3) Notwithstanding the above provisions of this subsection, the lender shall not be required to deliver any notice of a monetary default or non-monetary breach subsequent to a borrower's filing for bankruptcy.(b) Within five (5) working days of receipt of a demand letter, the department or its contractor shall contract with the Department of Financial Institutions or an independent auditor to conduct an investigation to determine whether the lender has complied with the terms of the guaranty, and to issue a report to the department and its contractor, if any. The investigation shall address each of the following questions or topics: (1) Is the loan agreement between the borrower and the lender consistent with the terms and conditions of the guaranty?(2) Has a security interest in all collateral for the loan and guaranty been perfected and maintained? Is all collateral available for assignment to the department or its contractor in the event that payment is made upon the demand? Is any collateral not available as a result of lender's negligence, breach of contract, foreclosure or other cause? Fully describe the circumstances and reasons that any collateral is unavailable due to any of these causes.(3) If the guaranty is a collection guaranty, has the lender complied with the collection requirements for collection guaranties set forth in section 8262 ?(4) What is the borrower's current outstanding principal balance and accrued interest?(5) Has the lender complied with the procedures for making a demand set forth in this section?(6) In a section entitled "Loan Information," the report shall include the following information obtained solely from a review of lender files: a description of the borrower's business, a description of the collateral for the loan, and a discussion as to whether the lender files contain any reference to matters material to borrower's compliance with any child care laws or regulations.(7) In a section entitled "Loan History," the report shall include a summary of the borrower's loan history, including the lender receipt of notice date as referenced in section 8263(d), and the dates of the notices to the borrower referenced in section 8261(a).(c) Within fifteen (15) calendar days from the date the department or its contractor receives a complete report from the Department of Financial Institutions or an independent auditor, the department or its contractor shall do one of the following: (1) Deliver or cause to be delivered to the lender a check in an amount not to exceed the amount contained in the demand letter, made payable to the lender; or(2) Deliver or cause to be delivered to the lender a denial of the request for payment based upon fraud or gross negligence on the part of the lender known to the department or its contractor.(d) The amount paid to the lender pursuant to a demand letter shall be less than the amount contained in the demand letter only under the following circumstances: (1) The demand contains an incorrect calculation of the amount owing; or(2) The amount owing on the loan has been reduced by subsequent payments from the borrower or lender; or(3) The lender has engaged in fraudulent activities pertaining to the loan.(e) Prior to or simultaneously with the delivery of a check to a lender, the department or its contractor shall obtain an assignment by the lender of the lender's interest in the loan. The assignment shall include the loan promissory note, loan agreement (if any), and all collateral, except as provided in the Collection Requirements for Collection Guaranties section (section 8262).(f) Demand must be made upon the department or its contractor no later than noon on the thirty-first (31st) calendar day following the date on which the guaranty terminates; provided, however, that if the thirty-first (31st) day is not a day upon which the department or its contractor is open for business, the last day for making a demand shall occur on the next succeeding day upon which the department or its contractor is open for business.Cal. Code Regs. Tit. 25, § 8261
1. New section filed 4-16-99 as an emergency; operative 4-16-99 (Register 99, No. 16). A Certificate of Compliance must be transmitted to OAL by 10-13-99 pursuant to Education Code section 8277.6 or emergency language will be repealed by operation of law on the following day.
2. New section refiled 10-1-99 as an emergency; operative 10-13-99 (Register 99, No. 40). A Certificate of Compliance must be transmitted to OAL by 2-10-2000 or emergency language will be repealed by operation of law on the following day.
3. Repealed by operation of Government Code section 11346.1(g) (Register 2000, No. 9).
4. New section filed 2-2-2001; operative 2-2-2001 pursuant to Government Code section 11343.4(c) (Register 2001, No. 5). Note: Authority cited: Section 8277.6(g), Education Code. Reference: Sections 8277.5(d), 8277.6(b) and (g), Education Code.
1. New section filed 4-16-99 as an emergency; operative 4-16-99 (Register 99, No. 16). A Certificate of Compliance must be transmitted to OAL by 10-13-99 pursuant to Education Code section 8277.6 or emergency language will be repealed by operation of law on the following day.
2. New section refiled 10-1-99 as an emergency; operative 10-13-99 (Register 99, No. 40). A Certificate of Compliance must be transmitted to OAL by 2-10-2000 or emergency language will be repealed by operation of law on the following day.
3. Repealed by operation of Government Code section 11346.1(g) (Register 2000, No. 9).
4. New section filed 2-2-2001; operative 2-2-2001 pursuant to Government Code section 11343.4(c) (Register 2001, No. 5).