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 vision of a more banking that is powerful with new enrollment authority, UDAAP authority mirroring the authority for the CFPB, and expanded enforcement authority. But crucial amendments used because of the legislature will exempt many regulated entities through the scope associated with legislation and can impose limitations regarding the brand new Department of Financial Protection and Innovation’s (DFPI) workout of their authority.

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

Concentrate on Customer Protection

Although the majority of the CCFPL comes directly from Dodd-Frank Act Title X, the statutory function varies through the purpose and goals of Dodd-Frank. The legislative findings assert that “lack of [a dedicated economic solutions regulator with broad authority over providers of lending options and solutions] has left consumers susceptible to abuse and forced California organizations to compete with unscrupulous providers.”[1] They relate to UDAAP also to discriminatory methods multiple times. In addition they make reference to technological innovation that “offers great promise,” but additionally “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 customers from UDAAP and discrimination, but in addition: (a) the necessity for customers to possess timely and understandable information to make accountable decisions; (b) the requirement to reduce unwarranted regulatory burdens; (c) constant enforcement of federal consumer economic legislation to promote reasonable competition and transparency; and (d) efficient procedure of areas for customer lending options and solutions.[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 will never replace the landscape that is regulatory state-chartered and state-licensed entities. This place is reflected within the form of the CCFPL passed by the legislature, which exempts banking institutions which are nationwide banks chartered by California or every 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 any Ca state agency aside from the DFPIwhere the licensee or worker is acting beneath the authority regarding the other state agency’s permit. As an example, this will 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 were not licensed because of the DBO.[5] These entities needs to be “covered persons,” that are people participating in providing or supplying customer financial services or products, affiliates that work as providers, and any supplier that partcipates in the providing or supply of their very very own customer economic service or product.[6] As with Title X, a “service provider” is any person who offers a product solution up to a covered individual regarding the the covered person’s offering or providing of the customer economic service or product.[7]

Whether an entity is a person that is“covered depends upon whether it provides or offers a “consumer financial service or product.” This is of “financial products or services” mirrors the broad meaning in Title X, with the help of brokering the offer or purchase of a franchise into the state on the behalf of another.[8] As with Dodd-Frank, the CCFPL authorizes the DFPI to issue laws defining some other economic service or product predicated on specified requirements.[9]