As predicted, California is moving to "fill the void" created by deregulation of consumer and small business finance at the federal level, particularly at the Consumer Financial Protection Bureau ("CFPB"). These efforts are coming from three sources: the California Department of Financial Protection and Innovation ("DFPI"), the California Attorney General, and the California Legislature. These actions underscore the need for companies to be diligent with their compliance efforts notwithstanding what is happening in Washington.
On the regulatory front, we are seeing significantly increased enforcement activity from DFPI, much of it not yet public, as well as increasing focus from the Attorney General on financial services. While the Attorney General's office has been largely focused on litigating with the CFPB and other federal agencies over staff layoffs and other such activities, we are seeing signs of greater scrutiny of financial products and services including likely enforcement activity.
Meanwhile, the California Legislature continues to encourage more aggressive regulation of financial services companies. For example, SB 825, introduced by state Senators Monique Limon and Tim Grayson, would amend the California Consumer Financial Protection Law to allow DFPI to employ its Unfair, Deceptive, or Abusive Acts or Practices ("UDAAP") authority against California licensees (such as California Finance Lenders), which previously were exempt. If enacted into law, this bill would substantially increase DFPI's ability to regulate its licensees, including by providing much greater penalty authority.
California's efforts parallel those in other historically aggressive states such as New York, and we expect other states to follow their lead.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
