Loans

Loans to California Public Officials

Loans to California Public Officials
Written by Publishing Team

There are state laws in California that regulate loans to public officials. These legal provisions are contained in Government Act Title 9, Chapter 7, Section 4.6, which contains Sections 87460 to 87462. Section 4.6 is the title of “Loans to Public Officials” and was added to the Government Act in 1997.

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

In addition, Section 87460(b) prohibits a public official who is required to file a statement of economic interests, or who is exempt from the state civil service system, from receiving a personal loan from any employee, employee, member, or advisor of the state or local government agency in which the public servant is position or for which the agency of the public official has direction and control.

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

Section 87460(c) applies to an elected official of a state or local government agency from the date the elected employee is elected to office until the date the elected employee vacates office. These elected officers are prohibited from taking a personal loan from anyone who has a contract with the state or local government agency for which that elected official was elected or for which that elected officer’s agency has direction and control.

This prohibition does not apply to loans from banks or other financial institutions or to any indebtedness arising as part of a retail installment or credit card transaction.

Section 87460(d) prohibits a public official who is required to file a statement 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 in which that elected official has been elected or whose agency that employee owns Elect guidance and control.

This prohibition does not apply to loans from banks or other financial institutions or to any indebtedness arising as part of a retail installment or credit card transaction. Nor does it apply to loans granted to a public official whose duties are only secretarial, clerical, or manual.

Section 87460(e) excludes from the above prohibitions:

  • Loans made to the campaign committee by an elected employee or candidate for an elective office.
  • Loans made by a spouse, child, parent, grandparent, grandchild, brother, sister, father-in-law, brother-in-law, sister-in-law, nephew, niece, aunt, uncle, first cousin, or the wife of any such persons, provided that they do not act A person providing the loan as an agent or intermediary to any person who is not exempted under this section.
  • Loans from a person totaling no more than $250 at any one time.

Section 87461 prohibits an elected official of a state or local government agency from taking a personal loan of $500 or more, except when the loan is in writing and clearly states the terms of the loan, including the parties to the loan agreement, loan date, loan amount, and loan term, The date or dates on which payments are due on the loan, the amount of payments, and the percentage of interest paid on the loan. This section does not apply to specific types of loans.

Article 87462 states that a personal loan becomes a gift to the debtor in the following cases:

  • If the loan has a fixed date or dates for repayment, then the limitation period for filing an action for default ends.
  • If the loan does not have a fixed date or dates for repayment, at the expiration of one year from the specified occurrence.

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

  • A loan to the campaign committee from an elected employee or candidate for an elective office.
  • A loan that would not otherwise be a gift.
  • A loan may be considered a gift, but the creditor has taken reasonable action on it to collect the balance owed.
  • A loan would be a gift, but the creditor, on reasonable business considerations, had not taken a collection action.
  • A loan given to a debtor who has filed for bankruptcy and the loan is eventually discharged in the event of bankruptcy.
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