By: Linda L. Goodman
California Assembly Bill 1864 was passed by the legislature in August creating a “Department of Financial Protection and Innovation” under the guise of increasing legal protections for consumers in the financial sector. However, the new Department is suspiciously structured similar to the unconstitutional Consumer Financial Protection Bureau (“CFPB”).
The “appointed” 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. The Department has investigative authority and can demand documents, reports, and information. It has also been granted rule-making authority over an already extensive bureaucracy including but not limited to state licensure and reporting requirements as well as identifying unlawful, unfair, deceptive, or abusive acts or practices.
In combination with the California Consumer Financial Protection Law, which in general terms prohibits engaging in, proposing to engage in, or actually engaging in unlawful, unfair, deceptive, or abusive act or practice with respect to consumer financial products or services. With whistleblower protections in place prohibiting a supervised entity from terminating or discriminating against employees who attempt to seek enforcement of consumer protection laws or object to any activity that violates those laws, it is expected that similar to the CFPB hostages will be taken unless and until they pay a voluntary fine.
Certain financial service providers who are already otherwise licensed in the state, including banks, mortgage lenders, servicers, and originators, are be excluded from the new law and the Department’s oversight. Who is the target? Alternative, sub-prime lenders.
As soon as the Governor signs the bill – you should expect staffing build up to the new agency and then enforcement actions.
For more information, see the bill text here: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1864
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This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
Linda L. Goodman is the founder of The Goodman Law Firm, concentrating its practice in internet business and law. Her firm’s clients include Advertisers, Affiliates, Affiliate Networks, and ISP’s.
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