CFPB California Style: The California Customer Financial Protection Law Brings More Prov Morrison & Foerster LLP

CFPB California Style: The California Customer Financial Protection Law Brings More Prov Morrison & Foerster LLP

On 31, 2020, the California legislature passed the California Consumer Financial Protection Law (CCFPL) august. What the law states reflects Governor Newsom’s eyesight of a more effective banking agency with brand new enrollment authority, UDAAP authority mirroring the authority for the CFPB, and expanded enforcement authority. But essential amendments used because of the legislature will exempt many regulated entities through the range associated with the legislation and certainly will impose limitations regarding the Department that is new of Protection and Innovation’s (DFPI) workout of its authority.

We talk about the reorganization and expansion associated with banking regulator that accompanies the true title switch towards the DFPI inside our companion client alert. We highlight the important thing conditions for the CCFPL below.

Give attention to Customer Protection

The statutory purpose differs from the purpose and objectives of Dodd-Frank although most of the CCFPL comes directly from Dodd-Frank Act Title X. The legislative findings assert that “lack of [a dedicated economic solutions regulator with broad authority over providers of lending options and solutions] has left customers at risk of abuse and forced California organizations to compete with unscrupulous providers.”[1] They relate to UDAAP and also to discriminatory practices times that are multiple. In addition they reference technological innovation that “offers great promise,” but in addition “poses risks to consumer and challenges to police force.”[2]

In comparison, the goals of Dodd-Frank Title X are much more balanced, talking about protecting consumers from UDAAP and discrimination, but additionally: (a) the necessity for customers to possess prompt and understandable information to make accountable decisions; (b) the requirement to reduce unwarranted regulatory burdens; (c) constant enforcement of federal customer monetary legislation to advertise reasonable competition and transparency; and (d) efficient operation of areas for customer lending options and solutions.[3]

Expanded Jurisdiction Bounded by Immense Exemptions

Considering that the proposed legislation ended up being introduced, the DBO has consistently explained its view that the CCFPL wouldn’t normally replace the regulatory landscape for state-chartered and state-licensed entities. This place is reflected within the form of the CCFPL passed by the legislature, which exempts banks which can be nationwide banking institutions chartered by California or just about any state, and existing DBO licensees apart from payday loan providers and education loan servicers, through the CCFPL.[4] The CCFPL additionally exempts licensees and their staff of any Ca state agency except that the DFPIwhere the licensee or worker is acting underneath the authority of this other state agency’s permit. As an example, this would exempt estate that is real beneath the Real Estate Law and their staff acting under those licenses.

The jurisdiction that is broad the statute, then, is applicable very nearly solely to entities that formerly are not certified because of the DBO.[5] These entities should be “covered persons,” that are individuals participating in offering or consumer that is providing products, affiliates that behave as providers, and any supplier that partcipates in the providing or supply of their very own customer economic service or product.[6] As with Title X, a “service provider” is any person who supplies a product solution up to a covered individual associated with the covered person’s offering or providing of the customer economic service or product.[7]

Whether an entity is really a “covered person” varies according to whether it provides or offers a “consumer financial service or product.” This is of “financial service or product” mirrors the broad meaning in Title X, with the help of brokering the offer or purchase of a franchise within the state with respect to another.[8] The CCFPL authorizes the DFPI to issue laws determining some other economic service or product centered on specified requirements.[9 like in Dodd-Frank]