On August 31, 2020, the Ca legislature passed the Ca customer Financial Protection Law (CCFPL). What the law states reflects Governor NewsomвЂ™s eyesight of a more banking that is powerful with brand new enrollment authority, UDAAP authority mirroring the authority for the CFPB, and expanded enforcement authority. But crucial amendments used by the legislature will exempt many regulated entities through the range regarding the law and can impose limitations regarding the Department that is new of Protection and InnovationвЂ™s (DFPI) workout of its authority.
We talk about the reorganization and expansion associated with banking regulator that accompanies the title switch towards the DFPI within our companion client alert. We highlight the important thing conditions associated with CCFPL below.
Concentrate on Customer Protection
Although almost all of the CCFPL comes directly from Dodd-Frank Act Title X, the statutory function varies through the function and objectives of Dodd-Frank. The legislative findings assert that вЂњlack of [a dedicated economic solutions regulator with broad authority over providers of lending options and solutions] has left customers susceptible to abuse and forced California organizations to compete with unscrupulous providers.вЂќ They make reference to UDAAP also to discriminatory methods numerous times. In addition they make reference to technological innovation that вЂњoffers great promise,вЂќ but additionally вЂњposes risks to consumer and challenges to police force.вЂќ
In comparison, the goals of Dodd-Frank Title X are much more balanced, discussing protecting consumers from UDAAP and discrimination, but additionally: (a) the necessity for consumers to possess prompt and information that is understandable make accountable decisions; (b) the necessity to reduce unwarranted regulatory burdens; (c) constant enforcement of federal customer monetary legislation to advertise reasonable competition and transparency; and (d) efficient procedure of areas for customer lending options and solutions.
Expanded Jurisdiction Bounded by Immense Exemptions
Because the proposed legislation ended up being introduced, the DBO has regularly explained its view that the CCFPL wouldn’t normally replace the landscape that is regulatory state-chartered and state-licensed entities. This place is mirrored into the type of the CCFPL passed away by the legislature, which exempts nationwide banks, banking institutions chartered by California or other state, and current DBO licensees apart from payday loan providers and education loan servicers, through the CCFPL. The CCFPL additionally exempts licensees and their staff of every Ca state agency aside from the DFPIwhere the licensee or employee is acting underneath the authority associated with other state agencyвЂ™s permit. For instance, this will exempt real-estate licensees underneath the Real Estate Law and their staff acting under those licenses.
The broad jurisdiction in the statute, then, is applicable nearly solely to entities that previously weren’t certified because of the DBO. These entities must certanly be вЂњcovered persons,вЂќ that are individuals participating in providing or supplying consumer financial services or products, affiliates that behave as companies, and any company that partcipates in the providing or supply of their very own customer monetary service or product. AвЂњservice providerвЂќ is any person who supplies a product service up to a covered individual relating to the covered personвЂ™s offering or providing of the customer monetary products or services.[7 as with Title X]
Whether an entity is just a вЂњcovered personвЂќ relies on whether or not it provides or offers a вЂњconsumer financial product or service.вЂќ This is of вЂњfinancial service or productвЂќ mirrors the definition that is broad Title X, by the addition of brokering the offer or purchase of the franchise within the state on the part of another. The CCFPL authorizes the DFPI to issue laws determining other economic service or product centered on specified requirements.[9 as with Dodd-Frank]