On February 4, 2021, the California Department of Financial Protection and Innovation (DFPI or the Department) issued an invitation for stakeholder comments on potential rules that will govern the operations and authority of the Department. This invitation is the first opportunity for industry participants to weigh in on the functions of the DFPI—a newly reconstituted regulator whose oversight will significantly affect many financial services companies operating in California.
The DFPI (formerly known as the Department of Business Oversight) was established by the California Consumer Financial Protection Law (CCFPL), which was enacted last September. In addition to renaming and reorganizing one of California’s financial regulators, the CCFPL grants the DFPI authority very similar to that granted to the CFPB under the Dodd-Frank Act, including expanded regulatory and enforcement powers. And while many licensees are exempt from these new authorities—e.g., mortgage lenders licensed under the state’s Real Estate Law—uncertainty around their scope and implementation should lead all potentially relevant market participants to monitor and consider participating in the rulemaking process.
The DFPI’s recent invitation seeks input from stakeholders in developing regulations to implement aspects of the CCFPL over which the Department has authority. The DFPI identified various areas where rulemaking may be appropriate, desirable or necessary at some point, but interested parties may submit comments related to any area for which the DFPI has authority to adopt rules. The invitation includes a list of suggested topics with related questions to which commenters can directly respond. Some of the most notable topics and questions include:
- Definitions. The DFPI has the authority to define additional financial products or services subject to the CCFPL by regulation. Stakeholders are encouraged to comment on whether the DFPI should bring any additional financial products or services within the scope of the CCFPL.
- Exemptions. The DFPI asks whether it should issue regulations to clarify the scope of exemptions from the CCFPL.
- UDAAP. Stakeholders are invited to comment on any specific acts or practices in the market for consumer financial products or services or in the commercial financing market that stakeholders believe are unlawful, unfair, deceptive, or abusive.
- Other topics. Registration requirements, complaint handling, data collection and reporting, disclosures, and credit cost provisions are among the other topics on which the DFPI seeks comment.
Industry participants should consider providing comments on these or other questions as this may be the best opportunity to influence the rules that will govern the DFPI. Comments can include a description of any economic impact, if known, and must be submitted by March 8, 2021.
For additional analysis on the formation of the DFPI, please see our previous commentary.