Loans to California officials

There are state laws in California regulating loans made to government officials. These legal provisions are contained in the Government Code, Title 9, Chapter 7, Article 4.6, which contains sections 87460 to 87462. Article 4.6 is titled “Loans to Public Officials” and was added to the Government Code in 1997 .

Section 87460(a) applies to an elected official of a state or local government agency from the date the elected official is elected until the date the elected official leaves its functions. Section 87460 prohibits a state or local official from receiving a personal loan from any officer, employee, member, or consultant of the state or local government agency in which the elected official holds office or on which the agency of the elected has direction and control.

In addition, Section 87460(b) prohibits a public official who is required to file an economic interest statement, or who is exempt from the state civil service system, from receiving a personal loan from any executive , employee, member, or consultant of the state or local government agency in which the public official performs duties or over which the public official’s agency exercises direction and control.

This prohibition on personal loans does not apply to loans granted to a public official whose duties are solely secretarial, clerical or manual.

Section 87460(c) applies to an elected official of a state or local government agency from the date of the elected official’s election until the date the elected official vacates its functions. It prohibits such elected officials from receiving a personal loan from anyone who has a contract with the state or local government agency for which that elected official was elected or over which that elected official’s agency has direction and control.

This prohibition does not apply to loans made by banks or other financial institutions or to any debt created in connection with a retail payment or credit card transaction.

Section 87460(d) prohibits a public official who is required to file a declaration of economic interest, or who is exempt from the state civil service system, from receiving a personal loan from any person who has a contract with the state or local government agency to which such elected officer has been elected or over which such elected officer’s agency has direction and control.

This prohibition does not apply to loans made by banks or other financial institutions or to any debt created in connection with a retail payment or credit card transaction. It also does not apply to loans granted to a public official whose functions are solely secretarial, clerical or manual.

Section 87460(e) excludes from the above prohibitions:

  • Loans granted to the campaign committee of an elected official or a candidate for elected office.
  • Loans made by spouse, child, parent, grandparent, grandchild, brother, sister, parent-in-law, brother-in-law, sister-in-law, nephew, niece, the aunt, uncle or first cousin of a public official, or the spouse of any of these persons, provided that the person granting the loan is not acting as an agent or intermediary for a person who is not otherwise exempted under this section.
  • Loans from one person that, in total, do not exceed $250 at any given time.

Section 87461 prohibits an elected official of a state or local government agency from receiving a personal loan of $500 or more, except when the loan is in writing and clearly sets out the terms of the loan, including the parties to the loan. loan agreement, the date of the loan, the amount of the loan, the term of the loan, the date or dates on which payments will be due on the loan and the amount of the payments, as well as the interest rate paid on the loan . This section does not apply to the loan types specified.

Section 87462 provides that a personal loan becomes a gift to the debtor in the following circumstances:

  • If the loan has a set date or dates for repayment, when the statute of limitations for bringing a default action has expired.
  • If the loan has no set date or dates for repayment, when one year has passed since a specified event.

However, Section 87462 does not apply to the following types of loans:

  • Loan granted to the campaign committee of an elected official or a candidate for an elective mandate.
  • A loan that otherwise would not be a gift.
  • A loan that would otherwise be a grant, but for which the creditor has taken reasonable steps to collect the balance owing.
  • A loan that would otherwise be a gift, but on which the creditor, based on reasonable business considerations, has not taken collection action.
  • A loan made to a debtor who has declared bankruptcy and the loan is eventually released from bankruptcy.

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