The California Consumer Financial Protection Law (CCFPL) became effective on January 1, 2021. The CCFPL gives the California Department of Financial Protection and Innovation (DFPI) (the new name given to the state’s Department of Business Oversight) broad jurisdiction and sweeping new authorities that closely resemble those of the CFPB. As a result, the DFPI has been labeled a “mini-CFPB.”
In its January 2021 monthly bulletin, the DFPI stated that, with the CCFPL now in effect, the DFPI will begin exercising its “expanded powers to better protect consumers from unlawful, unfair, deceptive, and abusive practices.” The CCFPL gives the DFPI new rulemaking and enforcement authority over “covered persons” relating to unlawful, unfair, deceptive, or abusive acts and practices and defines the term “covered persons” expansively to include entities that previously were not subject to DBO oversight or oversight by a primary regulator, such as debt collectors, credit reporting agencies, certain fintech companies – including some who offer point-of-sale financing – and some merchants who extend credit directly to consumers. The DFPI also, as a matter of state law, can now enforce the Dodd-Frank Act’s UDAAP provisions against any person offering or providing consumer financial products or services in the state, notwithstanding the CCFPL’s applicability to such persons. (California’s newly-enacted Debt Collection Licensing Act will require by 2022 the licensure of persons who engage in the business of collecting, on behalf of themselves or others, debts arising from consumer credit transactions with consumers who reside in California. Such persons could include debt buyers, first-party and third-party collectors.)
In the bulletin, the DFPI outlines its plans to implement the CCFPL and exercise its expanded powers. Its plans include:
- “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 CCFPL requires the DFPI to establish such an office.)
- 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.”
To enable the DFPI to carry out its plans, the DFPI is expected to significantly expand its staffing this year. In our September 2020 webinar, “California Ramps Up Its Consumer Financial Protection Laws: What You Need to Know,” special guest Bret Ladine, DFPI General Counsel, indicated that 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 the CCFPL.