Yesterday, the California DFPI issued an invitation for stakeholders to provide input on rulemaking to implement the recently-effective California Consumer Financial Protection Law (CCFPL). Comments are due by March 8, 2021.
As the invitation notes, pursuant to Cal. Fin. Code. Sec. 90001, the DFPI has broad authority to establish rules to implement the CCFPL. Although the DFPI invited input on any potential areas for rulemaking, it identified certain areas where rulemaking may be “appropriate, desirable or necessary at some point.” The invitation then identified specific areas and provided examples of the types of issues that comments might address:
- Definitions – Whether definitions in addition to those in the CCFPL are needed; whether and how any CCFPL definitions are unclear; and whether any definition results in ambiguity as to the CCFPL’s coverage.
- Exemptions – Whether regulations should be issued to clarify the scope of exemptions.
- Registration Requirements – What industries should be prioritized for registration, and why; what rules should be established to facilitate oversight of such industries, including record keeping requirements, requirements to ensure that covered persons are legitimate, and what data should be required for registrant annual reports and why.
- Complaint Handling – What procedures should be established to ensure that businesses provide timely responses to consumer complaints and inquiries; what timelines should be established and whether timelines should vary based on type of business or product; what requirements should be established to ensure a reasonable investigation and corrective steps by a business in response to a complaint or inquiry; whether businesses should be required to establish specific mailing or email addresses, or internet portals, for the submission of inquiries and complaints; and whether the DFPI should interpret or clarify through regulation any CCFPL provisions regarding complaints, such as the provision under Fin. Code Sec. 90008(d)(2)(D) permitting businesses not to disclose “nonpublic or confidential information, including confidential supervisory information.”
- Unlawful, Unfair, Deceptive and Abusive Acts and Practices (Consumer) – Whether there are specific acts or practices that are unlawful, unfair, deceptive or abusive, and a description of such act or practice and an explanation of why it is unlawful, unfair, deceptive or abusive; whether such acts or practices should be identified as unlawful, unfair, deceptive or abusive through regulation, and a description of the harm the act or practice causes, its frequency, information concerning its potential causes, and what requirements should be adopted to prevent it. (The CFPB has historically shied away from rulemaking to define UDAAP, but this could be an indication that the DFPI might move in a different direction.)
- Unfair, Deceptive and Abusive Acts and Practices (Commercial) – Whether there are specific acts or practices in the market for financial products or services to small business recipients, nonprofits, and family farms that are unfair, deceptive or abusive; a description of any such act or practice; an explanation of why it is unfair, deceptive, or abusive; and whether a regulation should be adopted to define it as unfair, deceptive, or abusive. (We view the vigorous application of UDAAP to small business lending by the DFPI as a significant possibility, which will mark a sea change for this type of credit product.)
- Data Collection and Reporting for Commercial Financing – Whether providers of commercial financing and other financial products and services to small business recipients, nonprofits, and family farms should be required to collect and report data to the DFPI, and If so, what data should the DFPI require to be collected and why. (We wonder whether the DFPI is considering a data collection rule like the one the CFPB is working on under § 1071 of Dodd-Frank.)
- Disclosures – Whether rules should be prescribed to ensure that the features of a product or service are fully, accurately, and effectively disclosed in a way that permits consumers to understand the costs, benefits, and risks of the product or service; for any such product or service, its description, what disclosures should be required, and why those disclosures will help.
- Clarifying the Applicability of California Credit Cost Provisions – Whether the DFPI should issue regulations clarifying the applicability of state credit cost limitations, including rate and fee caps, to consumer financial products and services offered by covered persons, and if so, how should the regulations clarify the applicability of those limitations.
The invitation also states that, for any recommendation relating to rulemaking, stakeholders may provide a description of the economic impact (if known) of the recommendation for California businesses and consumers.
Given the CCFPL’s significance for the consumer financial services industry, we will soon be launching the California Consumer Financial Protection Law Resource Center on Consumer Finance Monitor. The attorneys in Ballard Spahr’s Consumer Financial Services Group, including attorneys in the firm’s Los Angeles, California office, are closely monitoring all regulatory, supervisory, and enforcement developments relating to the DFPI’s implementation and exercise of its new jurisdiction and authorities. The resource center will provide one location where members of the consumer financial services industry can access information about these developments.