CA DFPI issues draft rules to implement CCFPL provisions on complaint handling, UDAAP definition for commercial transactions

Ballard Spahr LLP

Ballard Spahr LLP

The California Department of Financial Protection and Innovation (DFPI) has issued an invitation for comments from interested parties on draft rules to implement certain provisions of the California Consumer Financial Protection Law (CCFPL) which became effective on January 1, 2021.  The CCFPL provisions that the draft rules would implement deal with (1) procedures for a covered person or service provider to respond to consumer complaints and inquiries, and (2) the definition of unfair, deceptive, or abusive acts and practices in connection with the offering or providing of commercial financing or other financial products and services to small business recipients, nonprofits, and family farms.  Comments are due by September 17, 2021.

In February 2021, the DFPI issued an invitation for stakeholders to provide input on rulemaking to implement the CCFPL.  In addition to inviting input on any potential areas for rulemaking, the DFPI identified certain areas where rulemaking may be “appropriate, desirable or necessary at some point.”  The specific areas identified included complaint handling and unfair, deceptive, or abusive acts and practices in connection with commercial transactions.

Draft rules on complaint handlingThe draft rules would implement CCFPL Section 90008 (a), (b), and (d).   Section 90008 (a) requires the DFPI to issue rules establishing reasonable procedures for the handling of consumer complaints and inquiries by covered persons.  Section 90008(b) requires the DFPI to issue rules requiring covered persons to provide responses to the DFPI regarding consumer complaints or inquiries that include certain information such as what steps were taken to respond to the complaint or inquiry and what responses were received by the covered person from the consumer.  Section 90008(d) deals with consumer requests to covered persons for information concerning the consumer financial product or service that the consumer obtained from the covered person.  The draft rules address the following:

  • A partial exemption for consumer reporting agencies as defined by the FCRA
  • Definitions–A “complaint” is defined as “an expression of dissatisfaction” regarding a financial product or service and an “inquiry” is defined as “a question or request for information, interpretation, or clarification” about a financial product or service.
  • Complaint processes and procedures
  • Inquiry processes and procedures
  • Processes and procedures for covered persons to provide a timely response to the DFPI
  • Consumer requests for nonpublic or confidential information

Draft rule on UDAAP prohibition for commercial transactionsThe draft rule would implement CCFPL Section 90009(e) which authorizes the DFPI to issue rules defining UDAAPs for “commercial financing,” as that term is defined in Cal. Fin. Code 22800(d), or financial products and services offered or provided to small business recipients, nonprofits, and family farms.  It also authorizes the DFPI to include in its UDAAP rulemaking requirements for data collection and reporting on the provision of commercial financing or other financial products and services.  The draft rule contains two provisions.  One provision would establish standards for when an act or practice is unfair, deceptive, or abusive.

The other provision would establish requirements for the reporting of data on commercial financing to the DFPI.  The data to be reported would consist of basic information about loan volume, loan size, and loan cost.

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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