California governor Gavin Newsom just announced he will propose a Consumer Financial Protection Law as part of the proposed 2020-21 state budget, which will be introduced Friday.
Gov. Newson stated that this step is in response to the perceived weakening of the Consumer Financial Protection Bureau (CFPB) under the Trump administration. As several other states have done, Gov. Newson proposes to create a state version of the CFPB to "fill the void" in enforcement for consumer financial protection laws.
The details of Gov. Newsom’s proposal are limited at this point, but the proposed bill is rumored to change the functions of the Department of Business Oversight (DBO) and rename it the Department of Financial Protection and Innovation (DFPI).
The Department of Business Oversight is currently led by Manny Alvarez, a former CFPB enforcement attorney, who already actively engages in the enforcement of consumer protection laws. It appears the proposed law would give the state agency more regulatory power, responsibility, and increased staffing to allow for greater review of consumer markets and outreach to consumers. The proposed law would expand the DBO’s oversight to include debt collection.
If it comes to fruition, a new Department of Financial Protection and Innovation would make California an even more formidable regulator of financial services. We will continue to monitor developments in this space.