California Regulator Hits Navitas With $4 Million Penalty Over Unlicensed Lending

Key Takeaways

• Licensing Review Uncovered Violations: The DFPI discovered the conduct while reviewing Navitas’ 2023 application for a California Financing Law license.
• $4 Million Enforcement Penalty: Navitas agreed to pay a $4 million penalty, one of the larger recent state-level licensing enforcement actions involving a nonbank lender.
• Consumer Refunds Required: Borrowers who paid interest above California’s statutory limits on certain loans may be eligible for refunds.
• Multiple Compliance Failures Identified: Regulators found evidence of unlicensed lending, payments to unlicensed brokers, and unlawful interest charges.

Deep Dive

A Florida-based commercial lender has agreed to pay a $4 million penalty and provide refunds to California borrowers after state regulators found the company engaged in lending activities without the required license, according to an enforcement action announced Monday by the California Department of Financial Protection and Innovation (DFPI).

The action targets Navitas Credit, a Florida company that originates equipment loans and leases for businesses. The DFPI said it uncovered the violations while reviewing Navitas’ application for a California Financing Law (CFL) license in 2023.

The agencies review found that Navitas had engaged in lending activities in California without a license, compensated unlicensed and nonexempt brokers for loan solicitations, and charged unlawful interest on certain loans. The conduct violated provisions of California’s financing laws and regulations governing licensed lenders and brokers.

“The DFPI is dedicated to keeping the lending marketplace fair and open. Our diligent oversight helps to level the playing field for businesses and protects consumers,” DFPI Commissioner KC Mohseni said in a statement. “We expect institutions like Navitas to follow our licensing laws or face stiff penalties.”

The violations came to light after Navitas submitted applications for a CFL license through the Nationwide Multistate Licensing System in May 2023. During the licensing review, regulators determined that the company had originated loans in California before obtaining the required authorization. Some of those loans were under $5,000 and therefore qualified as consumer loans under California law.

Under the terms of a consent order, Navitas must cease and refrain from further violations of the California Financing Law and pay the $4 million penalty within 10 days of the order becoming effective. The company must also pay $78,000 to cover the state’s investigative costs.

The settlement includes consumer restitution requirements for borrowers who were charged excessive interest on certain loans. Navitas must identify loans originated between March 27, 2018, and the effective date of the order that qualify as consumer loans and where interest payments exceeded California’s statutory limits. The company is required to refund any interest paid above those limits and provide the DFPI with a compliance report within 90 days.

Eligible borrowers will receive notice by mail and email before refunds are issued. Refund checks must be mailed within 70 days of the order’s effective date, and the company must provide detailed reporting to regulators documenting each refund payment.

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