In late August, the California legislature passed Assembly Bill 1864, creating a Department of Financial Protection and Innovation and bolstering legal protections for consumers.
The new Department is intended to be a state-level version of the Consumer Financial Protection Bureau (CFPB).
For example, similar to the CFPB, the commissioner of the Department is authorized to bring a civil action or other proceeding to enforce the provisions of the federal Consumer Financial Protection Act of 2010 and its associated federal regulations. Like the CFPB, the Department has investigative authority and can demand documents, reports and information from the entities it supervises. Likewise, the Department has been granted rule-making authority over certain areas including state licensure requirements, reporting requirements and identifying unlawful, unfair, deceptive, or abusive acts or practices.
Another section of the same bill passed the California Consumer Financial Protection Law, which generally proscribes engaging in, or even proposing to engage in, unlawful, unfair, deceptive, or abusive act or practice with respect to consumer financial products or services. It also provides whistleblower protections, prohibiting a supervised entity from terminating or discriminating against employees who attempt to enforce consumer protection laws or object to an activity that violates those laws.
Certain financial service providers who are already otherwise licensed in the state, including banks, mortgage lenders, servicers and originators, may be excluded from the new law and the Department’s oversight.
The Governor is expected to sign the bill in the near future, after which it will become law.