Administration - - CA Financial

Section § 90006

This section outlines the authority and responsibilities of California's department in regulating consumer financial products and services. The department can enforce both state and federal consumer financial laws, hold hearings, and issue reports. It also has the power to bring legal actions and create outreach programs. A Financial Technology Innovation Office is to be established to promote innovation and consumer access. However, merchants and retailers who provide credit for nonfinancial goods and services are generally exempt from this oversight unless they're pretending to avoid the law.

(a) The department shall regulate the offering and provision of consumer financial products or services under California consumer financial laws and shall exercise nonexclusive oversight and enforcement authority under California consumer financial laws. To the extent permissible under the federal consumer financial laws, the department shall exercise nonexclusive oversight and enforcement under the federal consumer financial laws.

(b) In addition to existing functions, powers, and duties, the department shall have all of the following functions, powers, and duties in carrying out its responsibilities under this law:

(1) To bring administrative and civil actions, and to prosecute those civil actions before state and federal courts.

(2) To hold hearings and issue publications, results of inquiries and research, and reports that may aid in effectuating the purposes of this law.

(3) To perform such other functions as may be authorized or required by law.

(d)

(1) The department shall establish the Financial Technology Innovation Office.

(2) The commissioner may investigate, research, analyze, and report on markets for consumer financial products or services.

(3) The commissioner may develop and implement outreach and education programs to underserved consumers and communities.

(4) The commissioner may develop and implement initiatives to promote innovation, competition, and consumer access within financial services.

(e) Merchants, retailers, and other sellers of nonfinancial goods and services are excluded from the department’s authority, subject to the following conditions:

(1) The department may not exercise authority under this division as to the following:

(A) The bona fide extension of credit by a merchant, retailer, or seller of nonfinancial goods and services to a consumer for the acquisition of a nonfinancial good or service, provided that all of the following conditions are met:

(i) The credit extended does not significantly exceed the fair market value of the nonfinancial good or service provided.

(ii) The merchant, retailer, or seller does not sell or otherwise assign the debt, except as to the sale of delinquent debt for the purposes of collection.

(iii) The merchant, retailer, or seller of nonfinancial goods and services does not regularly extend credit, as defined under the federal Truth in Lending Act (15 U.S.C. Sec. 1601 et seq.) and regulations issued thereunder.

(B) The collection or sale of delinquent debt arising from credit described in clause (i).

(2) Nothing in paragraph (1) shall limit the department’s authority to the extent that the department finds the sale of the nonfinancial good or service is done as a subterfuge, so as to evade or circumvent the provisions of this title.

consumer financial products nonexclusive oversight administrative actions civil actions Financial Technology Innovation Office commissioner responsibilities outreach programs innovation in financial services merchant credit exemption bona fide credit extension fair market value condition sale of delinquent debt subterfuge consumer financial laws enforcement authority

(Added by Stats. 2020, Ch. 157, Sec. 7. (AB 1864) Effective January 1, 2021.)

Section § 90007

This section of the law explains how funds collected by the state’s financial regulator are handled and utilized. First, any money collected is put into the Financial Protection Fund to help manage related regulations. The department can charge a yearly fee for businesses that need to register, with the fee covering costs related to oversight activities and protecting consumers from unfair financial practices.

Furthermore, if an inspection or examination is required, the subject of the inspection is responsible for covering the costs. The commissioner can also use funds from fines and settlements obtained from enforcing rules to support the administration of this section.

With respect to funds under this division:

(a) All moneys collected or received by the commissioner under this division shall be deposited with the State Treasurer to the credit of the Financial Protection Fund, which is hereby created. All moneys in the Financial Protection Fund shall be available, upon appropriation by the Legislature, to the commissioner for purposes of administering this division.

(b) The department may set and collect an annual registration fee for each entity required to register under subdivision (a) of Section 90009, which may be scaled based on the size or market participation of the entity. The annual registration fee shall be limited to the reasonable regulatory costs under this division incident to issuing registrations and performing investigations, inspections, examinations, audits, and supervisory activities; and the administrative enforcement and adjudication of this division with respect to registrants. The regulatory costs for the administrative enforcement of this division are for the purposes of protecting consumers against unfair, deceptive, or abusive acts or practices in connection with any transaction involving the provision of financial products and services in this state; protecting registrants against unfair competition; improving accountability and transparency; and ensuring equitable enforcement of consumer financial laws.

(1) The cost of every inspection and examination of a covered person conducted under the authority of this law shall be paid to the department by the covered person examined and the department may maintain an action for recovery of those costs in any court of competent jurisdiction. In determining the cost of any inspection or examination, the department may use the estimated average hourly cost, including overhead, for all persons performing inspections or examinations of licensees or other persons subject to this division for the fiscal year.

(2) Nothing in this subdivision shall alter or supersede the requirements for the cost of an examination conducted under the authority of any other law administered by the commissioner.

(c)

(1) The commissioner shall use funds obtained by the commissioner through the enforcement of any of the laws administered by the commissioner, including moneys received through fines, penalties, settlements, judgements, or otherwise, for the administration of this division, whether those funds were received before or after the enactment of this division. This provision shall not be applicable to fines, penalties, settlements, or judgments received by any other agency unless the settlement, judgment, or an agreement expressly allocates funds for the administration of this division.

(2) In addition to funds obtained through the enforcement of any of the laws administered by the commissioner, the commissioner may use funds for the administration of this division that are obtained, awarded, delegated, or otherwise attributed to the department through the enforcement of any other consumer, borrower, or investor protection law, regardless of whether the action is brought directly by the commissioner or by another agency or official.

(3) Funds designated as restitution or other ancillary relief to an injured person shall not be subject to this subdivision.

(d) The fees and assessments paid pursuant to this section are nonrefundable.

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(Added by Stats. 2020, Ch. 157, Sec. 7. (AB 1864) Effective January 1, 2021.)

Section § 90008

This law requires a department to set up procedures for responding quickly to consumer complaints or inquiries about financial service providers, known here as "covered persons." Covered persons must also respond promptly to the department regarding any consumer issues, detailing their actions and plans for resolution.

The requirements do not apply to consumer reporting agencies as defined by federal law. Additionally, financial service providers must provide consumers with all information about their financial products, except for certain types of confidential or legally protected information like algorithms and fraud prevention data.

The department must create rules for implementing these requirements before taking any enforcement action against a financial service provider.

(a) The department shall, by rule, establish reasonable procedures to provide a timely response to consumers, in writing where appropriate, to complaints against, or inquiries concerning, a covered person.

(b) The department shall, by rule, require a covered person to provide a timely response, in writing where appropriate, to the department concerning a consumer complaint or inquiry, including all of the following:

(1) Steps that have been taken by the covered person to respond to the complaint or inquiry of the consumer.

(2) Responses received by the covered person from the consumer.

(3) Follow-up actions or planned follow-up actions by the covered person to respond to the complaint or inquiry of the consumer.

(c) Subdivisions (a) and (b) shall not apply to a covered person to the extent it is a consumer reporting agency, as defined by the Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(f)).

(d) With respect to the provision of information to consumers by covered persons, all of the following shall apply:

(1) A covered person shall, in a timely manner, comply with a consumer request for information in the control or possession of that covered person concerning the consumer financial product or service that the consumer obtained from that covered person, including supporting written documentation, concerning the account of the consumer.

(2) Notwithstanding paragraph (1), a covered person may not be required by this section to make available to the consumer any of the following information:

(A) Confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors.

(B) Information collected by the covered person for the purpose of preventing fraud or money laundering, or detecting or making any report regarding other unlawful or potentially unlawful conduct.

(D) Nonpublic or confidential information, including confidential supervisory information.

(E) Information collected, received, maintained, disclosed, sold, or processed pursuant to the Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.), but only to the extent subdivision (b) is inconsistent with any provision of the Fair Credit Reporting Act, and then only to the extent of the inconsistency, or to the extent that subdivision (b) imposes a requirement that is otherwise prohibited under Section 1681t(b) of Title 15 of the United States Code.

(3) This subdivision shall not apply to a consumer credit reporting agency subject to Section 1785.10 of the Civil Code.

(e) The department shall promulgate regulations to implement subdivisions (a) and (b) before commencing an enforcement action against a covered person or service provider for a violation of those provisions.

consumer complaints financial service providers timely response confidential information consumer inquiries covered person supporting documentation fraud prevention credit score algorithms consumer financial products department regulations information disclosure protected information enforcement action consumer rights

(Added by Stats. 2020, Ch. 157, Sec. 7. (AB 1864) Effective January 1, 2021.)

Section § 90009

This section allows the California financial department to set up rules for registration of businesses offering consumer financial services. Some enterprises are exempt from registration if they are already licensed. The department can monitor businesses to protect consumers against risks, and it may demand that businesses keep records and undergo background checks.

The department can identify and act against financial practices that are unfair or deceptive. However, it can only label actions as 'abusive' if they significantly hinder a consumer's understanding or exploit them. Rules can ensure that financial service details are clear and disclosed effectively to consumers.

The department may oversee and collect data on commercial financing and small business financial services, and it can interpret state credit costs to avoid legal evasion.

If rules overlap with another agency's jurisdiction, the department must collaborate with the agency before setting regulations. The department must establish regulations before taking enforcement actions.

(a)

(1) The department may prescribe rules regarding registration requirements applicable to a covered person engaged in the business of offering or providing a consumer financial product or service, including requiring a filing be made under oath, and requiring the payment of registration fees. The department may require registration through the Nationwide Multistate Licensing System and Registry.

(2) Notwithstanding paragraph (1), the department shall not require the registration or the payment of a fee by any of the following:

(A) A covered person who is licensed by the department under another law and who is providing a financial product or service within the scope of that license.

(B) A covered person who is licensed or registered by another agency unless the covered person is offering or providing a financial product or service that is not regulated by the agency licensing or registering the covered person.

(C) A covered person who is licensed by the department or a federal agency who engages in deposit-taking activity unless the covered person is offering or providing a financial product or service that is not regulated by the agency licensing the covered person.

(b) The following procedures apply to the oversight of persons required to register under subdivision (a):

(1) The department may prescribe rules to facilitate oversight of covered persons and assessment and detection of risks to consumers.

(2) The department may require a covered person to generate, provide, or retain records for the purposes of facilitating oversight of those persons and assessing and detecting risks to consumers.

(3) The department may prescribe rules regarding a covered person to ensure that such persons are legitimate entities and are able to perform their obligations to consumers. Such requirements may include background checks for principals, officers, directors, or key personnel and bonding or other appropriate financial requirements.

(c) The department may prescribe rules applicable to any covered person or service provider identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Such rules shall consider the relative harm to the consumer, the frequency of the act or practice in question, and whether such act or practice is unintentional or stems from a technical, clerical, or nonmaterial error. Rules under this section may include requirements for the purpose of preventing those acts or practices.

(1) The department shall interpret “unfair” and “deceptive” consistent with Section 17200 of the Business and Professions Code and the case law thereunder.

(2) The department shall have no authority under this law to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice either:

(A) Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service.

(B) Takes unreasonable advantage regarding any of the following:

(i) A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service.

(ii) The inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service.

(iii) The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

(3) The term “abusive” shall be interpreted consistent with Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (12 U.S.C. Sec. 5481). Any inconsistency shall be resolved in favor of greater protections to the consumer and more expansive coverage.

(d) The department may prescribe rules applicable to any covered person to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.

(e) The department, by regulation, may define unfair, deceptive, and abusive acts and practices in connection with the offering or provision of commercial financing, as defined in subdivision (d) of Section 22800, or other offering or provision of financial products and services to small business recipients, nonprofits, and family farms. The rulemaking may also include data collection and reporting on the provision of commercial financing or other financial products and services.

(f)

(1) In conducting any monitoring, regulatory or assessment activity, the department may gather information from time to time regarding the organization, business conduct, markets, and activities of any covered persons and service providers.

(2) The department may require any covered persons and service providers participating in consumer financial services markets to file with the department, under oath or otherwise, in the form and within a reasonable period of time as the department may prescribe by rule or order, annual or special reports, or answers in writing to specific questions, as necessary for the department to fulfill its monitoring, assessment, and reporting responsibilities.

(3) To clarify the applicability of state credit cost limitations, including rate and fee caps, to the offering and provision of consumer financial products and services by covered persons, the department may interpret and implement, including to prevent evasion thereof, all California credit cost provisions as to their applicability to consumer financial products and services. Nothing in this paragraph shall be construed to give the department authority to establish a usury limit applicable to an extension of credit offered or made by a covered person to a consumer, except as otherwise provided for by statute.

(g) If the department and another agency have joint authority, the department shall consult with that agency before promulgating regulations under such laws. The department shall conduct this consultation a minimum of 30 days before the issuance of a notice of proposed rulemaking and a minimum of 30 days before the issuance of any final rule. The commissioner may not amend or rescind any regulation promulgated by another department or agency.

(h) The department shall promulgate regulations to implement subdivisions (a), (b), and (d) before commencing an enforcement action against a covered person or service provider for a violation of these provisions.

consumer financial services business registration licensing exemptions consumer protection unfair practices deceptive practices abusive practices financial product disclosure commercial financing small business financial services credit cost limitations joint authority regulation consultation recordkeeping requirements background checks

(Added by Stats. 2020, Ch. 157, Sec. 7. (AB 1864) Effective January 1, 2021.)

Section § 90009.5

This law outlines registration regulations for certain financial service providers, emphasizing enforcement and legislative oversight processes. If the department takes enforcement action against covered entities, they must set registration rules within three years. These registration rules will expire in four years unless extended by law, or included in a broader licensing law, after a public legislative review. The department must report annually to the Legislature on its regulatory activities and plans, including enforcement actions, business model reviews, regulation proposals, outreach efforts, and use of authority from a connected section. Legislators can ask for additional topics to be covered.

(a) Notwithstanding paragraph (1) of subdivision (a) of Section 90009, the department shall promulgate rules regarding registration requirements applicable to a covered person no later than three years following the initiation of its second action to enforce a violation of this division by persons providing the same or substantially similar consumer financial product or service as the covered person.

(b) The regulation requiring a covered person to register with the department shall become inoperative on January 1, of the calendar year that is four years following the initial year of required registration unless the Legislature takes action to extend the registration or to incorporate the scope of the activity in which the covered person is authorized to engage into a new or existing licensing law. The Legislature shall conduct public hearings to obtain input on the desirability or feasibility of extending, revising, or terminating the regulation. Failure of the Legislature to take action pursuant to this section shall not impact the department’s enforcement authority under this division.

(c) The department shall submit to the appropriate committees of the Legislature on or before December 1 before the year a regulation described in subdivision (b) is set to become inoperative, a complete report of the department’s activities related to the covered persons required to be registered by the regulation covering the entire period since the initial year of required registration.

(d) At least once annually, prior to March 15, the commissioner shall appear before and present a report to the appropriate committees of the Legislature reviewing all of the activities conducted to implement this division during the prior year and summarizing, with specificity, all of the activities it intends to conduct during the upcoming year. This report shall include, but not be limited to, all of the following:

(1) A summary of all enforcement actions taken to implement this division during the prior year.

(2) A review of business models in use among covered persons that it studied during the prior year and a description of which business models in use among covered persons it plans to study during the upcoming year.

(3) A review of all regulations it proposed, or finalized, or on which it sought public feedback during the prior year and a description of all regulations it intends to propose, finalize, or on which it intends to seek public feedback during the upcoming year.

(4) A review of all of the activities in which it engaged during the prior year using authority contained in paragraph (1) of subdivision (d) of Section 90006 and a description of the activities in which it plans to engage during the upcoming year.

(5) A review of all outreach efforts it conducted during the prior year using authority contained in paragraph (2) of subdivision (d) of Section 90006 and a description of subject matter it plans to include and groups to which it plans to outreach during the upcoming year.

(6) A review of all activities it conducted during the prior year using authority contained in paragraph (3) of subdivision (d) of Section 90006 and a description of what activities it plans to conduct during the upcoming year.

(7) Any other topic deemed relevant by the commissioner or requested to be covered by a chair of the appropriate committee of the Legislature.

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(Added by Stats. 2020, Ch. 157, Sec. 7. (AB 1864) Effective January 1, 2021.)