The California legislature yesterday passed a bill that will create its own version of the Consumer Financial Protection Bureau, and Gov. Gavin Newsom — who spearheaded the initiative — has indicated he plans to sign the bill into law.
The bill — AB 1864 — will create the Department of Financial Protection and Innovation includes several exemptions for categories of companies that are already licensed by other state agencies in California, including mortgage servicers. Debt collectors or collection agencies are not specifically named in the bill, either under the section listing the state laws that the new agency is in charge of or the categories of companies that are exempt from the agency. There is a separate measure in California that would require collection agencies to obtain licenses in order to operate in the state, which may subsequently exempt them from the law, but that was not immediately clear upon reading the updated version of the bill.
The bill does prohibit the use of engaging in unfair, deceptive, or abusive acts or practices with respect to consumer financial products and services, which could include debt collection activities.
The new agency is charged with “all the investigatory and subpoena powers” set forth in Sections 11180 to 11191 of the Government code, and may assess a number of penalties, including rescinding contracts, refunding money, payment of damages, and notifying the public of the violation. The department can assess fines of up to $1 million and may bring civil actions against alleged wrongdoers.
Whether there was enough money and time for the state to create a Department of Financial Protection has been the “will they or won’t they” story for several months. The on again, off again nature has led to many stops and starts along the way, especially following the rapid advancement of the coronavirus pandemic across the United States.
