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All Things FinReg

LATEST REGULATORY DEVELOPMENTS IMPACTING
THE FINANCIAL SERVICES INDUSTRY

The California Department of Financial Protection and Innovation (DFPI) announced in its January 2021 monthly bulletin that it will begin exercising its enhanced powers under the California Consumer Financial Protection Law (CCFPL) that came into effect January 1.

As we reported in September and covered in a webinar in December, the CCFPL, in addition to renaming the former California Department of Business Oversight (DBO) as the DFPI, expanded the scope of the renamed agency’s powers by (1) giving the DFPI the option of regulating nonbank small business lenders, many of which are fintech companies; (2) authorizing the DFPI to bring enforcement actions for unlawful, unfair, deceptive, or abusive acts or practices (UDAAPs) by any person offering or providing consumer financial products or services in the state; and (3) giving the DFPI rulemaking and enforcement authority relating to UDAAP by “covered persons,” which is defined broadly to include entities not subject to oversight previously by the DBO, including debt collectors and credit reporting agencies.

The January bulletin puts businesses with connections to California consumers on notice that the DFPI will begin exercising its “expanded powers to better protect consumers from unlawful, unfair, deceptive, and abusive practices.” In addition to plans to beef up the agency’s staffing by approximately 90 additional employees (roughly 13%) over the next three years (including approximately 10 enforcement attorneys), the DFPI noted the following key elements of its plan to exercise its expanded powers:

  • “Beginning immediately, the DFPI will review and investigate consumer complaints against previously unregulated financial products and services, including debt collectors, credit repair and consumer credit reporting agencies, debt relief companies, rent to own contractors, private school financing, and more.”
  • The DFPI is “preparing to open a new Office of Financial Technology Innovation that will engage with new industries and consumer advocates to encourage consumer friendly innovation and job creation in California. This expansion will allow department representatives to work proactively with entrepreneurs and create a regulatory framework for responsible, emerging financial products.”
  • The DFPI is “in the process of standing up a new Division of Consumer Financial Protection that will feature a market monitoring and research arm to keep up with emerging financial products. Consumer outreach to target vulnerable populations, such as students, new Californians, military servicemembers and senior citizens will be expanded.”