California's Mini-CFPB initiative roared back to life when, as part of its 2020–21 budget, the California state senate approved a plan to establish a state consumer financial protection agency—the Department of Financial Protection and Innovation (DFPI) —the so-called "the California mini-CFPB," under a division of the California Financial Code titled the "California Consumer Financial Protection Law" (CCFPL). The bill states that the CCFPL seeks to "strengthen consumer protections by expanding the ability of the department to improve accountability and transparency in the California financial system and promote nondiscriminatory access to responsible, affordable credit, among other purposes."
The idea of a "mini-CFPB," a state agency designed with similar authorities, resources, and consumer protection mandates as the federal Consumer Financial Protection Bureau (CFPB), has been percolating over the last few years. We have previously discussed the California mini‑CFPB in our webinar "Mini-CFPBs – What Increased Regulation, Enforcement, and Supervision by State Agencies Means for the Financial Services Industry" and accompanying article.
The California bill renames the Department of Business Oversight (DBO), California's primary regulator of consumer financial services companies to the DFPI and permits the DFPI to expand upon the DBO's current role overseeing currently unregulated industries such as debt collection, credit reporting, and financial technology companies. Certain financial institutions licensed or chartered under other provisions of the Financial Code (and so currently regulated by the DBO) will not be subject to the CCFPL. The bill otherwise broadly defines "covered persons" under the CCFPL in a similar manner as the federal Consumer Financial Protection Act.
The DFPI would be tasked with protecting consumers through enforcement against unfair, deceptive, and abusive practices (UDAAP), among many other issues. The bill would authorize the DFPI to define unfair, deceptive, and abusive acts and practices in connection with the offering or provision of commercial financing, or offering financial products and services to small businesses. The DFPI would also provide guidance for the development of new consumer financial products.
California Governor Gavin Newsom is expected to sign the bill into law prior to the September 30 deadline. If signed into law, the CCFPL would become effective on January 1, 2021, and portions of the law would need to be implemented through rulemaking.