By: Jenny Eldred, RBFL Student Editor<\/p>\n
The California Consumer Financial Protection Law went into effect January 1, 2021,[1]<\/span><\/a> reorganizing the Department of Business Oversight into the newly created Department of Financial Protection and Innovation. The DFPI assumes the reserved powers carved out of the Dodd-Frank Act for state regulators to protect consumers against unfair, deceptive, or abusive acts and practices.[2]<\/span><\/a> The new California statute expands the jurisdiction of the consumer watchdog to cover previously unregulated actors including debt collectors, rent-to-own contractors, consumer credit reporting agencies, credit repair agencies, and\u2014most notably\u2014fintech.[3]<\/span><\/a><\/p>\n However, the DFPI does not have authority over any \u201cbank, bank holding company, trust company, savings and loan association, savings and loan holding company, credit union\u2026when acting under the authority of a license, certificate, or charter under federal law or the laws of another state.\u201d[4]<\/span><\/a> The exclusion of federally-chartered banks and banks chartered in other states was inserted into the bill as a result of the lobbyist efforts of the California Bankers Association.[5]<\/span><\/a> The CCFPL is also limited in scope by not applying to persons licensed under other California state laws not administered by the DFPI, which effectively narrows CCFPL\u2019s regulatory scope to mostly small lenders and fintech[6]<\/span><\/a>\u2014a major claw-back in scope from the original bill.[7]<\/span><\/a><\/p>\n The year 2020 presented significant challenges for consumer protection that likely prompted the California legislature into action, ranging from the COVID-19 pandemic[8]<\/span><\/a> to Donald Trump running for reelection after effectively gutting the federal Consumer Financial Protection Bureau.[9]<\/span><\/a> The CCFPL\u2019s language also points to the emergence of fintech as another impetus of its enactment.[10]<\/span><\/a><\/p>\n The DFPI now has the opportunity to supplement what the CFPB doesn\u2019t do particularly well at the federal level\u2014regulating fintech. Tasked with regulating all actors who offer a financial product to consumers (from many individual payday lenders to massive banks), the CFPB may be too consumed with its responsibilities to fully pursue oversight of fintech industry actors.[11]<\/span><\/a> During its first month, the DFPI has already signed memorandums of understanding with five fintech companies to provide it with information, follow industry best practices, and disclose their fees.[12]<\/span><\/a> These agreements may possibly be the first of their kind between fintechs and a state regulatory agency.[13]<\/span><\/a> California\u2019s DFPI is undoubtedly an entity to watch in the emerging area of fintech regulation.<\/p>\n <\/p>\n <\/p>\n \u00a0<\/u><\/p>\n \u00a0<\/u><\/p>\n \u00a0<\/u><\/p>\n \u00a0<\/u><\/p>\n [1]<\/span><\/a>Antonio F. Dias, et al., California Passes Legislation to Create Mini-CFPB.<\/em> Jones Day. (Oct. 2020), https:\/\/www.jonesday.com\/en\/insights\/2020\/10\/california-passes-legislation-to-create-minicfpb<\/a> [https:\/\/perma.cc\/6MXY-WMSN<\/a>].<\/p>\n [2]<\/span><\/a>Cal. Fin. Code \u00a7\u00a7 90012(a); 90009(c); 12 U.S.C. \u00a7 5531(a), (b).<\/p>\n [3]<\/span><\/a>Department of Consumer Protection and Innovation, California Consumer Protection Law for Businesses<\/em> (Feb. 5, 2021, 11:35 AM), https:\/\/dfpi.ca.gov\/california-consumer-financial-protection-law\/ccfpl-for-businesses\/.<\/p>\n [4]<\/span><\/a>See Cal. Fin. Code \u00a7 90002 as enacted by\u00a0Assembly Bill No. 1864<\/a>.<\/p>\n [5]<\/span><\/a>Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of 2019 CA A.B. No. 1864 as amended Aug. 25, 2020.<\/p>\n [6]<\/span><\/a>See<\/em> Id.<\/p>\n [7]<\/span><\/a>See<\/em> Id.<\/p>\n [8]<\/span><\/a>See Cal. Fin. Code \u00a7 90000 as enacted by\u00a0Assembly Bill No. 1864<\/a>.<\/p>\n [9]<\/span><\/a>See Biden Taps Proponents of Stricter Wall Street Rules for His agency Review Teams During Transition. The Washington Post. (Nov. 11, 2020, 6:24 AM), https:\/\/www.washingtonpost.com\/business\/2020\/11\/10\/biden-transition-wall-street-regulation.<\/p>\n [10]<\/sup><\/a>See Cal. Fin. Code \u00a7 90000 as enacted by\u00a0Assembly Bill No. 1864<\/a>.<\/p>\n [11]<\/span><\/a>See <\/em>Rory Van Loo, Technology Regulation by Default: Platfoms, Privacy, and the CFPB<\/em>, 2 Geo. L.Tech. Rev. 531, 545 (2018).<\/p>\n