Governor Gavin Newsom recently proposed a revamp of the California Department of Business Oversight (“DBO”) with the purpose of stronger consumer protection. The revamp proposal includes increasing staffing at the department and changing the name to the Department of Financial Protection and Innovation. Per the DBO’s own press release, the new law is modeled after the Consumer Financial Protection Bureau (“CFPB”) and is intended to step in due to the regulatory retreat of federal agencies, including the CFPB (also described in press releases as “financial protections that have been paralyzed at the federal level”).
Some of the proposed new authority would include the creation of a new Division of Consumer Financial Protection to supervise financial services not currently regulated by the DBO. Also, establishing a new consumer protections ombudsperson to assist the public and the creation of an Office of Financial Technology Innovation to encourage and keep department outreach targeted to vulnerable populations.
Other new proposed activities included in the statewide budget related to this revamp:
• Offering services to empower and educate consumers, especially older Americans, students, military service members, and recent immigrants;
• Licensing and examining new industries that are currently under-regulated;
• Analyzing patterns and developments in the market to inform evidence-based policies and enforcement;
• Protecting consumers through enforcement against unfair, deceptive, and abusive practices;
• Establishing a new Financial Technology Innovation Office that will proactively cultivate the responsible development of new consumer financial products;
• Offering legal support for the administration of the new law; and
• Expanding existing administrative and information technology staff to support the Department’s increased regulatory responsibilities.
It had been expected that California would step in to fill the regulatory retreat at the federal level for the past 3 years. It is a bit surprising that it has taken so long. The new commissioner of the DBO is a former CFPB attorney. So, this proposal and its similarity to the duties of the CFPB are not surprising. At this stage, this is just a vague proposal. It will take some time for much of this to become law or enacted by the newly branded agency, if it does at all. But it will pose new regulatory challenges for California lenders.