§ 14953 Credit Security Requirements

This law says that if a bank lends more money than its usual limit for unsecured loans, the extra amount must be backed by something valuable, like property or a signed note from someone else who promises to pay if the borrower can't.

Key Takeaways

•Banks can’t lend more than their unsecured limit unless the extra amount is backed by property or a signed note from someone else.
•If someone endorses your loan, the bank will check if they have enough money to cover their part.
•The total loan amount can include your limit, the endorser’s limit, and any money or shares you pledge as backup.

Example

Imagine you want to borrow $50,000 from a bank, but their usual limit for loans without backup is $30,000.

The bank can still lend you the $50,000, but the extra $20,000 must be secured. This could mean you pledge your car as backup, or a friend signs a note saying they’ll pay the $20,000 if you can’t. The bank will also check if your friend has enough money to cover that amount.

How to Calculate

Maximum loan amount = Unsecured loan limit + (Unsecured loan limit × Number of endorsers) + Value of pledged shares or certificates

Find the bank’s unsecured loan limit (let’s say it’s $30,000).
Add the unsecured loan limit for each endorser (e.g., if one friend endorses, add another $30,000).
Add the value of any shares or certificates pledged as backup (e.g., $10,000 in savings).
The total is the maximum amount the bank can lend securely.

You want a loan, and your friend agrees to be an endorser. You also pledge $10,000 from your savings.

Result: $30,000 (your limit) + $30,000 (endorser’s limit) + $10,000 (pledged savings) = $70,000 maximum loan

(a) Any extension of credit in excess of the unsecured loan limit set by the board of directors pursuant to Section 15100 shall be secured either (1) by real or personal property to the extent that the extension of credit exceeds such limit, or (2) in the manner provided in Section 14955. (b) If the security offered is an endorsed note as provided in subdivision (a) of Section 14955, a signed and dated financial statement shall be taken from each person who endorses the note and the sufficiency of the financial responsibility of every such endorser shall be verified by a majority of the credit committee. Obligations secured by the signatures of a borrower and endorser or endorsers shall not exceed the amount that may be extended to the borrower without security pursuant to Section 15100, plus an equivalent amount for each endorser; plus the amount of shares or certificates for funds pledged to secure the obligation. (Amended by Stats. 1984, Ch. 209, Sec. 12.)

Key Takeaways

•Banks can’t lend more than their unsecured limit unless the extra amount is backed by property or a signed note from someone else.
•If someone endorses your loan, the bank will check if they have enough money to cover their part.
•The total loan amount can include your limit, the endorser’s limit, and any money or shares you pledge as backup.

Example

Imagine you want to borrow $50,000 from a bank, but their usual limit for loans without backup is $30,000.

How to Calculate

Maximum loan amount = Unsecured loan limit + (Unsecured loan limit × Number of endorsers) + Value of pledged shares or certificates

Find the bank’s unsecured loan limit (let’s say it’s $30,000).
Add the unsecured loan limit for each endorser (e.g., if one friend endorses, add another $30,000).
Add the value of any shares or certificates pledged as backup (e.g., $10,000 in savings).
The total is the maximum amount the bank can lend securely.

You want a loan, and your friend agrees to be an endorser. You also pledge $10,000 from your savings.

Result: $30,000 (your limit) + $30,000 (endorser’s limit) + $10,000 (pledged savings) = $70,000 maximum loan

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 14953 Credit Security Requirements

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References