On October 22, the California DFPI announced the state's approval of registration regulations enacted under the CCFPL, which will require providers of (1) debt settlement services, (2) education financing, (3) income-based advances (including earned wage access products), and (4) student debt relief services to register with the state and comply with data submission requirements. Financial service providers covered by the new regulations must file an application to register by February 15, 2025, to continue operating legally in the state.
Debt settlement companies are likely the largest sector under the new registration regime, but California has recently seen the number of student loan relief and earned wage access (EWA) products grow dramatically. EWA and wage advance products are already classified as loans under state law, and any voluntary or optional payments are considered "finance charges."
The mandatory registration is also temporary, lasting just four years. The DFPI will collect information on transaction volumes, business models and charges to consumers and will prepare a report at the end of the four-year period. The California legislature will then review the report and determine whether to continue with the oversight going forward.
Putting It Into Practice: The enactment of these licensing and registration requirements show the DFPI's intent to provide closer oversight of providers of innovative financial products. It also follows a trend of state and federal rulemaking and enforcement activity targeting companies offering credit repair services (previously discussed here, here, and here) and EWA providers (previously discussed here, here, and here).
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