Starting in February 2025, providers of (1) debt settlement services, (2) student debt relief services, (3) private postsecondary education financing, and (4) income-based advances (a/k/a earned wage access (EWA) products) must begin registering and conform to annual reporting requirements in order to operate in California. We previously discussed this rule here.
These new rules are part of a four-year pilot program during which the DFPI will collect data on transaction volumes, business models, and consumer charges for the targeted financial services providers. This information will inform the legislature's decision on whether to make the registration and reporting requirements permanent. The DFPI is also accepting public comments on the rule until December 12, 2024, to decide whether to expand its registration requirements to additional industries, including those serving small businesses.
Putting It Into Practice: California's DFPI has a history of spearheading financial regulatory reform, often setting standards that are later adopted by other states. Given its size, the DFPI is able to operate as a de facto national regulator. To the extent the CFPB's regulatory efforts are pared back under the Trump administration, expect to see states like California step into the breach and leverage their authority under both state and federal law (to enforce regulatory requirements under the Dodd-Frank Act). For financial services providers, the DFPI's actions underscore the need to closely monitor California's regulatory developments, as they could signal broader national trends.
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