When Rohit Chopra left the Consumer Financial Protection Bureau earlier this year, there was considerable speculation about what he would do next. In May, Governor Gavin Newsom provided the answer: Chopra would become the inaugural Secretary of California’s newly created Business & Consumer Services Agency (BCSA).

Chopra was sworn in on July 1. Because the agency itself is new and Chopra has been on the job for only about three months, it would be premature to evaluate his California tenure by looking for a lengthy record of enforcement actions or regulations. The more revealing question at this early stage is what Chopra has done to establish the new agency and, perhaps more importantly, what he has said about where he intends to take it.

The answer should be of considerable interest to the consumer financial services industry.

Much of the information in this blog is taken from the new website of BCSA.

Building a new regulatory umbrella

BCSA is substantially broader than the CFPB. The new agency brings together dozens of boards, departments, and bureaus responsible for areas ranging from financial services and consumer affairs to real estate, cannabis, alcohol, health care, retail, and other sectors. Among the entities under the new agency is California’s Department of Financial Protection and Innovation (DFPI).

According to California, the purpose of the reorganization is to improve coordination and enforcement across these different agencies. Chopra therefore is not simply taking over an existing consumer financial regulator. He is helping to build an organizational structure that gives California a more centralized platform for pursuing consumer-protection and competition issues across multiple industries.

At the CFPB, Chopra had authority over a relatively focused federal agency. In California, he has a much broader portfolio but must work through agencies with different statutory authorities, regulatory responsibilities, and constituencies. How effectively he can coordinate those agencies will be an important measure of his success.

Chopra has quickly identified his priorities

Although his California enforcement and regulatory record is still developing, Chopra has been quite clear about the issues he intends to emphasize.

In July, he wrote that a key priority for BCSA would be addressing practices that increase costs for consumers and honest businesses. He specifically cited undisclosed fees and charges, manipulative practices, kickbacks, and other conduct that he characterized as harmful, anticompetitive, or corrupt. He also said the agency would seek to focus its audit and inspection resources on entities presenting the greatest risks rather than smaller firms presenting little risk to consumers.

The themes will sound familiar to anyone who followed Chopra’s CFPB tenure.

But there is an important difference. Chopra’s California mandate expressly extends beyond consumers. One of his early statements emphasized that BCSA will focus on helping small and independent businesses and entrepreneurs compete and grow, including by protecting them from unnecessary fees, onerous terms, and predatory practices.

That could become an interesting feature of his California tenure. At the CFPB, Chopra was principally identified with consumer protection. In California, his portfolio requires him to balance consumer protection with the state’s stated objective of fostering a competitive environment in which businesses, particularly small businesses, can operate.

California is also positioning itself as a backstop to federal regulation

The timing of Chopra’s appointment is important.

California created BCSA as the federal government has taken a substantially different approach to consumer protection and financial regulation. Governor Newsom has explicitly described California as a backstop to what he regards as weakened federal enforcement. The governor’s announcement of Chopra’s appointment emphasized California’s efforts concerning junk fees, privacy, scams, corporate transparency, and other consumer-protection issues. 

Chopra’s own statements have reinforced that theme. In July, he said California’s various departments would work with other states to increase scrutiny of potentially unlawful practices. He also emphasized that some California agencies have authority in appropriate circumstances to enforce federal as well as state law.

For companies operating nationally, that raises an obvious question: Will California increasingly become the venue in which regulatory theories that are no longer being pursued aggressively at the federal level are tested?

It is too early to know the answer. But Chopra’s statements suggest that California intends to play that role more aggressively.

Technology is another emerging priority

Chopra has also identified technology as a major concern.

In an August 31 article, he wrote that a top priority of BCSA will be ensuring that new technologies benefit Californians rather than undermine their health and safety. He emphasized that BCSA’s responsibilities span areas such as health care, housing, automobiles, and financial services, giving the agency exposure to the effects of technological change across a wide range of industries. 

This could become particularly significant for financial services.

Artificial intelligence, algorithmic decision-making, data use, personalized pricing, fintech, and other emerging technologies are already generating difficult questions for financial-services companies and regulators. Chopra’s background at the CFPB and FTC makes it reasonable to expect that he will pay close attention to these developments.

Again, however, there is an important distinction between an announced priority and an accomplished regulatory initiative. So far, Chopra has articulated the concern; it remains to be seen what specific California regulatory or enforcement initiatives will follow.

Chopra has already shown a willingness to engage on federal matters

Chopra also wasted little time demonstrating that his new position does not prevent him from participating in national consumer-protection debates.

On July 6, BCSA filed a submission with the Federal Trade Commission urging it to reject X Corporation’s request to terminate an existing FTC law-enforcement order concerning privacy and data-security practices. The California filing argued that terminating the order would undermine protections for users and could expose them to additional privacy and security risks. 

Whatever one’s view of the merits of that particular dispute, the episode illustrates something important about Chopra’s approach: he appears prepared to use his California position to engage with federal regulators when he believes California’s interests are implicated.

The bigger question for consumer financial services

The most interesting question may be whether Chopra can turn BCSA into something more than an administrative umbrella.

California already has powerful individual regulators, including DFPI. What is new is the attempt to bring numerous consumer-facing agencies together and improve coordination among them.

If Chopra succeeds, California could become an increasingly important source of coordinated regulatory and enforcement initiatives affecting companies that operate nationally.

That possibility deserves particular attention from consumer financial services companies.

The CFPB under Chopra was a powerful federal regulator with a broad consumer-finance mandate. BCSA is something different: a much broader state agency with the potential to connect financial-services regulation with competition, privacy, technology, licensing, real estate, health care, and other areas of state regulation.

For now, the record is still being written. But Chopra’s first three months provide a reasonably clear indication that he intends to use his new position to make California a more coordinated and assertive consumer-protection jurisdiction.

The more consequential question is what that will mean once the new agency moves from announcing priorities to exercising its enforcement and regulatory authorities.