CA Dept. Of Financial Protection And Innovation Uses New CCFPL Authority To Take Enforcement Action Against Individual And Companies That Advertised PACE Financing And Solicited Consumers

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The California Department of Financial Protection and Innovation (DFPI) announced last week that it has entered into a consent order that permanently bars James Berry and any company he owns or controls from soliciting customers for Property Assessed Clean Energy (PACE) financing and seeking future enrollment as a solicitor for PACE programs.  In its press release about the consent order, the DFPI highlighted its reliance on the new California Consumer Financial Protection Law (CCFPL) for its authority to take enforcement action against the individual and his companies.

Since the CCFPL became effective on January 1, the DFPI has moved quickly to exercise its new jurisdiction and authority.  The CCFPL gave the DFPI new rulemaking and enforcement authority over “covered persons” relating to unlawful, unfair, deceptive, or abusive acts and practices and defines the term “covered persons” expansively to include many entities that previously were not subject to DBO oversight or oversight by a primary regulator.  After announcing on January 19 that is had launched an investigation into multiple debt collectors, the DFPI announced on January 27 that it had signed memorandums of understanding with five earned wage access companies.  Those announcements were followed in February by the DFPI’s issuance of an invitation for stakeholders to provide input on rulemaking to implement the CCFPL and the announcement that it had launched an investigation into whether student-loan debt-relief companies operating in California are engaging in illegal conduct under the CCFPL and Student Loan Servicing Act.

Under the California Financing Law, the DFPI regulates PACE programs by licensing PACE program administrators that administer PACE programs on behalf of, and with the consent of, public agencies.  A PACE administrator enrolls and oversees PACE solicitors and solicitor agents who market PACE products to property owners and facilitate PACE program applications processed by the administrator.  One of Mr. Berry’s companies had been enrolled as a PACE solicitor and Mr. Berry had been enrolled as a PACE solicitor agent for that company.  Both the enrolled company and Mr. Berry were disenrolled by the administrator.  In addition to using the disenrolled company to advertise and solicit customers, Mr. Berry used another company that had never been enrolled as a solicitor to advertise PACE financing and solicit customers for such financing.  According to the DFPI, Mr. Berry not only used an unenrolled company to advertise and solicit customers, but also misled consumers by engaging in unfair and deceptive marketing practices that offered “no-cost” government-funded PACE projects and made it appear that the unenrolled company was a California government agency or affiliate.

In its press release, the DFPI states that, before the CCFPL’s enactment, Mr. Berry and his companies would have fallen outside of the DFPI’s regulatory oversight because it did not have the authority to bring enforcement actions against unenrolled individuals or companies.  However, the CCFPL prohibits “covered persons” from engaging in unfair, deceptive, or abusive practices and authorizes the DFPI to enforce that prohibition.  A “covered person” includes “[a]ny person that engages in offering or providing a consumer financial product or service to a [California resident],” or their affiliate or service provider.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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