CFPB Ca 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 an infinitely more banking that is powerful with brand new enrollment authority, UDAAP authority mirroring the authority of this CFPB, and expanded enforcement authority. But essential amendments used because of the legislature will exempt many regulated entities from the range regarding the legislation and certainly will impose restrictions in the Department that is new of Protection and Innovation’s (DFPI) workout of its authority.

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

Give attention to Customer Protection

Although all of the CCFPL comes straight from Dodd-Frank Act Title X, the statutory function varies through the function and goals of Dodd-Frank. The legislative findings assert that “lack of [a dedicated economic solutions regulator with broad authority over providers of financial loans and solutions] has left customers in danger of abuse and forced California businesses to compete with unscrupulous providers.”[1] They relate to UDAAP and also to discriminatory practices numerous times. Additionally they make reference to technological innovation that “offers great promise,” but in addition “poses risks to consumer and challenges to police force.”[2]

On the other hand, the goals of Dodd-Frank Title X are much more balanced, talking about protecting customers from UDAAP and discrimination, but additionally: (a) the necessity for customers to have 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 services.[3]

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 when you look at the form of the CCFPL passed away by the legislature, which exempts banks which are national banks chartered by California or just about any other state, and current DBO licensees apart from payday loan providers and education loan servicers, through the CCFPL.[4] The CCFPL additionally exempts licensees and their staff of every Ca state agency aside from the DFPIwhere the employee or licensee is acting underneath the authority regarding the other state agency’s license. As an example, this would exempt estate that is real beneath the Real Estate Law and their workers acting under those licenses.

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

Whether an entity is just a person that is“covered depends upon whether or not it provides or supplies a “consumer financial service or product.” The meaning of “financial products or services” mirrors the definition that is broad Title X, by the addition of brokering the offer or sale of the franchise into the state on the part of another.[8] The CCFPL authorizes the DFPI to issue laws determining just about any economic service or product support advance america payday loans com predicated on specified requirements.[9 like in Dodd-Frank]