Loans to California Officials

California has state laws that regulate loans to public servants. These statutory provisions are contained in Title 9, Chapter 7, Article 4.6 of the Government Code, which contains Sections 87460 to 87462. Article 4.6 is entitled Loans to Civil Servants and was incorporated into the Government Code in 1997.

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

In addition, Section 87460(b) prohibits a public official who is required to file a declaration of beneficial interest or who is exempt from the state civil service system from receiving a personal loan from an official, employee, member or adviser of the state or local government agency in which the officer serves or over which the officer’s authority has direction and control.

This prohibition on personal loans does not apply to loans to civil servants whose duties are exclusively secretarial, clerical or labourer.

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

This prohibition does not apply to loans obtained from banks or other financial institutions, or to debts incurred as part of an installment or credit card transaction.

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

This prohibition does not apply to loans obtained from banks or other financial institutions, or to debts incurred as part of an installment or credit card transaction. It also does not apply to loans granted to a civil servant whose duties are exclusively secretarial, clerical or labourer’s.

Section 87460(e) excludes from the above prohibitions:

  • Loan to the campaign committee of an elected official or candidate for electoral office.
  • Loans from the spouse, child, parent, grandparent, grandchild, brother, sister, parent-in-law, brother-in-law, sister-in-law, nephew, niece, aunt, uncle or first cousin of a public official, or the spouse of such a person, provided that the person making the loan is not acting as agent or agent for any person not otherwise exempted under this section.
  • Loans from one person totaling no more than $250 at any time.

Section 87461 prohibits an elected official of a state or local government agency from obtaining a personal loan of $500 or more unless the loan is in writing and clearly states the terms of the loan, including the parties to the loan agreement, the date of the loan amount , loan amount, loan term, date or dates that payments are due on the loan, and the amount of payments and interest rate paid on the loan. This section does not apply to certain loan types.

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

  • If the loan has a specific date or dates for repayment, if the statute of limitations for filing a court order has expired.
  • When the loan has no specific date or repayment dates when a year has passed after a specific event.

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

  • A loan to the campaign committee of an elected official or candidate for electoral office.
  • A loan that would otherwise not be a gift.
  • A loan that would otherwise be a gift, but where the creditor has taken reasonable steps to collect the balance due.
  • A loan that would otherwise be a gift, but on which the creditor has not taken any action to collect based on sound business considerations.
  • A loan granted to a debtor who has filed for bankruptcy and the loan is ultimately paid off in bankruptcy.

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