ANOTHER ACRONYM – CA DFPI
Consumer financial services has been a hot topic in California and was recently solidified with the passage of AB-1864. This bill renames the current “Department of Business Oversight” as the “Department of Financial Protection and Innovation” (DFPI). The former authority of the DBO is retained, even enhanced, with the passage of this bill. Its authority includes rulemaking, supervision and oversight, and enforcement. It goes into effect on January 1, 2021.
The structure of the DFPI models the CFPB – a mini-CFPB. As some have said, it will be the gold standard for financial service protections. New York, New Jersey, and Pennsylvania have similar organizations. The New York “Department of Financial Services” operates as an independent agency, much like the DFPI will. In Pennsylvania and New Jersey, these protections are housed under the authority of each State’s Attorney General.
So, if mini consumer protection bureaus are forming at state levels, how will a financial institution know how to function in compliance with each of these states? In the case of California, banks, savings associations and credit unions are subject to DFPI, but under the “Division of Financial Institutions.” They are not directly subject to the new regulations. The California Bankers Association successfully lobbied to keep them out of the crosshairs of the DFPI. So, who does that leave? Mostly, nonbank small business lenders and fintech companies, as it should be.
Is California’s new DFPI a template of things to come? How are bankers going to know to which states they are subject (ex: California Privacy)? It’s too mind-boggling to even think about. But we shall see as the future unfolds. It’s only beginning!
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