On 31, 2020, the California legislature passed the California Consumer Financial Protection Law (CCFPL) august. The law reflects Governor Newsom’s eyesight of an infinitely more effective banking agency with brand new registration 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 through the range regarding the legislation and can impose limitations in the Department that is new of Protection and Innovation’s (DFPI) workout of its authority.
We talk about the reorganization and expansion regarding the banking regulator that accompanies the true title switch towards the DFPI within our companion client alert. We highlight the important thing conditions associated with 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 financial loans and solutions] has left consumers susceptible to abuse and forced California businesses to compete with unscrupulous providers.”[1] They relate to UDAAP and also to discriminatory methods times that are multiple. They even relate to innovation that is technological “offers great promise,” but additionally “poses risks to consumer and challenges to police force.”[2]
On the other hand, the goals of Dodd-Frank Title X are a lot more balanced, talking about protecting customers from UDAAP and discrimination, but in addition: (a) the necessity for consumers to have prompt and information that is understandable make accountable decisions; (b) the requirement to reduce unwarranted regulatory burdens; (c) constant enforcement of federal customer financial legislation to advertise reasonable competition and transparency; and (d) efficient procedure of areas for customer financial loans 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 wouldn’t normally replace the landscape that is regulatory state-chartered and state-licensed entities. This position is mirrored when you look at the form of the CCFPL passed away by the legislature, which exempts nationwide banking institutions, banking institutions chartered by California or other state, and current DBO licensees apart from payday loan providers and education loan servicers, through the CCFPL.[4] The CCFPL also exempts licensees and their staff of every California state agency apart from the DFPIwhere the employee or licensee is acting underneath the authority for the other state agency’s permit. For instance, this will exempt property licensees underneath the Real Estate Law and their workers acting under those licenses.
The jurisdiction that is broad the statute, then, is applicable nearly solely to entities that formerly weren’t certified because of the DBO.[5] These entities needs to be “covered persons,” that are individuals participating in providing or consumer that is providing services or products, affiliates that work as companies, and any supplier that partcipates in the providing or supply of their very very own customer monetary service or product.[6] A“service provider” is any person who offers a material solution up to a covered individual associated with the covered person’s offering or providing of the customer monetary products or services.[7 as with Title X]
Whether an entity is really a person that is“covered varies according to whether it provides or supplies a “consumer financial service or product.” The meaning of “financial service or product” 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] Such as Dodd-Frank, the CCFPL authorizes the DFPI to issue laws determining any kind of 
financial products or services predicated on specified requirements.[9]