What is the California Consumer Financial Protection Law?

On September 25, 2020, California Governor Gavin Newsom signed into law the California Consumer Financial Protection Law (CCFPL), which was passed by the state legislature in August of 2020. Under the CCFPL, California’s Department of Business Oversight (DBO) has been renamed the Department of Financial Protection and Innovation (DFPI). Modeled after the Consumer Financial Protection Bureau (CFPB) provisions in the Dodd-Frank Act, the CCFPL aims to strengthen consumer protections by expanding the regulatory authority of the DFPI and promoting access to responsible and affordable credit. The substantive provisions of the CCFPL went into effect on January 1, 2021.

The law gives expanded authority to protect consumers from predatory businesses by:

• Responsible innovation in financial services by clarifying regulatory expectations for emerging products and services.
• Oversee financial activity previously unregulated by DFPI and keep up with emerging financial trends
• Increase public outreach and education to vulnerable populations.

The enactment of the CFPL transferred enforcement of unfair, deceptive, or abusive practices from the California Attorney General's Office (AGO) to the DFPI. The AGO has a long history of enforcement of California's unfair competition statute. The AGO's enforcement has included numerous actions based on activities of financial service providers, including licensed or chartered entities and unlicensed entities. 

By contrast, the DFPI's enforcement activities have historically been limited to enforcement violations of existing licensing laws by DFPI-licensed entities. DFPI's enforcement activities have been almost exclusively conducted through the administrative law system rather than in the civil courts. However, the CFPL specifically does not strip the AGO of this fundamental jurisdiction.

The effects of the CCFPL should be felt by certain nonbank financial companies – for example, payday lenders and student loan servicers – as well as affiliated “service providers” to financial companies. Because of statutory exclusions for regulated banks and many other current DBO nonbank licensees.

The CCFPL gives the DFPI the authority to define other financial services whose providers would thereby become subject to its jurisdiction, and it includes new provisions relating to unfair, deceptive and abusive acts and practices enforcement authority (UDAAP) over statutorily covered persons and service providers. The DFPI will also have the authority to bring civil actions under the Dodd-Frank Act’s consumer protection provisions against all state-licensed banks and nonbank financial companies.

As a result, financial institutions doing business in California are now facing a reinvigorated regulatory authority. They are there to investigate consumer complaints about financial service providers that you think may be using unlawful, unfair, deceptive, or abusive practices.

The department can be reached by visiting dfpi.ca.gov or calling toll free at (866) 275-2677 or (916) 327-7585.

For the full law visit leginfo.legislature.ca.gov.