This past Friday, California Governor Newsom signed into law three bills that will significantly impact consumer financial service providers in the state.  One of those bills is AB-1864 which contains the California Consumer Financial Protection Law (CCFPL).  In addition to giving a new name to the state’s Department of Business Oversight which is renamed the Department of Financial Protection and Innovation (DFPI), AB-1864 gives the renamed agency broad jurisdiction and sweeping new authorities that closely resemble those of the CFPB, leading many to label the renamed agency a “mini-CFPB.”  The two other major bills signed by Governor Newsom are SB-908, which requires debt collectors to be licensed in California, and AB-376, which establishes a Student Loan Borrower Bill of Rights.

For our webinar earlier this week, “California Ramps Up Its Consumer Financial Protection Laws: What You Need to Know,” we were joined by special guests Richard Cordray, former CFPB Director, and Bret Ladine, DFPI General Counsel.  The webinar’s overall takeaway was that in addition to the authority to undertake an aggressive regulatory and enforcement agenda, the DFPI will have the resources needed to carry out such an agenda.  According to Mr. Ladine, the DFPI is planning to add approximately 90 new staff members, including approximately 10 enforcement attorneys, to implement its new authorities and statutory obligations under AB-1864, and to make other strategic hires in areas that the DFPI considers of critical importance.  He also indicated that more new staff members, in addition to the 90 to implement AB-1864, will be added to implement SB-908 and AB-376.

Alan Kaplinsky, Practice Leader of the firm’s Consumer Financial Services Group, moderated the webinar.  Chris Willis, Practice Leader of Consumer Financial Services Litigation at Ballard Spahr, and Michael Guerrero, an associate in the Consumer Financial Services Group, discussed the key provisions of AB-1864.  Also participating in the webinar were Stefanie Jackman, a partner in the Consumer Financial Services Group, and Heather Klein, an associate in the Group, who provided, respectively, overviews of SB-908 and AB-376.

Other highlights of the webinar include:

  • Mr. Cordray, who worked with California lawmakers in drafting AB-1864, emphasized that the CCFPL’s broad coverage will result in DBO supervision of many markets and entities that are not currently subject to DBO oversight. He also indicated that other states would likely use AB-1864 as a template for creating agencies focused on consumer protection. He observed that because of the size of the California market for consumer financial services, the CCFPL is likely to have a significant nationwide impact on providers whether or not other states create similar mini-CFPBs.
  • Mr. Ladine observed that as a result of the CCFPL’s enactment, the DFPI’s jurisdiction is no longer limited to entities that are or should be licensees and now extends to a broad universe of  “covered persons” that includes unlicensed entities that are not required to be licensees.
  • Chris Willis cautioned that in addition to having broad jurisdiction and new UDAAP authority, the DFPI’s extensive resources will enable it to aggressively use its jurisdiction and authority to impact markets that have not traditionally been regulated in California.  Chris noted that a similar combination of broad jurisdiction, statutory powers, and ample resources allowed the CFPB to aggressively pursue a wide-ranging agenda.
  • Michael Guerrero outlined the DFPI’s rulemaking, oversight, and enforcement authority.  He also highlighted provisions of AB-1864 that extend the DFPI’s UDAAP authority to small business financing and permit the DFPI to enforce its UDAAP authority without first issuing regulations.

As announced during the webinar, because of the importance of these new laws, Ballard’s Consumer Financial Services Group will soon be creating a Resource Center on our blog, Consumer Finance Monitor, that will contain materials about the new laws, including the statutes and legislative analysis, proposed and final regulations, any written guidance or other materials issued by the DFPI, and information about our webinars and podcasts related to the new laws.  The new Resource Center is intended to provide a single location where comprehensive information about the new laws can be found.  We also plan to organize a team of experienced consumer financial services lawyers who will be available to answer questions about and provide other assistance in connection with the new laws.

The audio recording of the webinar is available here and the webinar slides are available here.