California To Possibly Get Its Own Consumer Financial Protection Bureau, According to Reports
21 Jan 2020
Approx Reading time: 3 minutes
- The budget presented by Governor Gavin Newsom highlights additional funding for the revamp of the Department of Business Oversight.
- The DBO may be renamed as the Department of Financial Protection and Innovation (DFPI).
- Under the renewed department, financial service providers might face additional regulations and regulatory fees, however, many may benefit from an improved regulatory framework.
It has been indicated in the budget presented by Governor Gavin Newsom of California that a Consumer Financial Protection Bureau (CFPB) may be established specifically for the California state. The budget includes a provision of $44.3 million that is expected to be used for the revamp of the state’s Department of Business Oversight, with a timeline of three years for the entire project.
The Department of Business Oversight, or DBO, is the regulatory authority in California that oversees operations of many financial services operating in the state. It is also the licensing authority, providing operating approvals to businesses.
According to the details provided in Governor Newsom’s plan, the DBO may change its name to the Department of Financial Protection and Innovation (DFPI). Overall, the role of the department is expected to change, and experts believe it would start performing functions that are very similar to the ones performed by the CFPB, although the CFPB has a federal jurisdiction.
Governor Newsom has highlighted the rollback of the CFPB by the federal government as a decision that has necessitated this change in California, as the absence of proper regulation can adversely impact the residents of the state. Also, according to him, unclear regulations can also hinder the growth of businesses.
The Governor’s plan is being supported by Richard Cordray, the former director of the CFPB, and also by Assemblywoman Monique Limon, among others.
Under the current structure and operations of the DBO, financial service providers including lenders of payday loans, mortgage loans, financial intermediaries, and security brokers, to name a few. Approval of the Governor’s plans could extend the DBO’s jurisdiction over many other financial service providers operating in the state, including the development of an innovation wing in the department.
According to the plan, $10.2 million would initially be given as an increase in the budget of the DFPI, opening space for the creation of 44 new roles. This extension would continue in subsequent years, with an added $19.3 million during the 2022-2023 fiscal year, which would create a further 90 positions in the department. The plans call for the department to fund its own operations, which means businesses may have to bear higher charges to operate in the state.
The revamped department would be able to provide greater public outreach programs to help financially vulnerable people make more informed financial decisions, improve regulatory practices and implementation especially in currently under-regulated sectors, improve efficiency in customer complaint resolution, offer better support to businesses when dealing with new policies, redefine abusive practices and formulate a framework to effectively tackle them, and establish a dedicated Office of Financial Technology Innovation to deal with emerging fintech products and services. Also, the plan also calls for the creation of a position that helps the DFPI coordinate with other law enforcement agencies more efficiently.