Ballard Spahr LLP

The California Department of Financial Protection and Innovation (DFPI) is seeking comments on a proposed rulemaking under the California Consumer Financial Protection Law (CCFPL).  The proposal would implement the authority that the CCFPL gives the DFPI to require companies that provide financial products and services to California consumers to register with the DFPI and to require registered companies “to generate and provide records to facilitate oversight of registrants and detect risks to California consumers.”  Comments must be submitted by December 20, 2021.

The proposal would require businesses that provide the following financial products and services to register with the DFPI:

  • Debt settlement
  • Student debt relief
  • Education financing
  • Wage-based advances

With regard to education financing, there are no exceptions for open-end credit, loans secured by real property or a dwelling, or school payment plans or short term extensions of credit.  The DFPI states in its Invitation for Comments that the registration requirement would apply to providers of any form of credit where the credit’s purpose is to fund postsecondary education “regardless of whether the provider labels the credit a loan, retail installment contract, or income share agreement, and regardless of whether the credit recipient’s payment obligation is absolute, contingent, or fixed.”

The proposal prohibits a person, unless exempt, from offering or providing these products and services to a California resident without first registering with the DFPI.  It provides that registering with the DFPI “does not constitute a determination that other laws, including other licensing laws under the commissioner’s jurisdiction, do not apply” and that “granting registration to an applicant does not constitute a determination that the applicant’s acts, practices, or business model complies with any law or regulation.”

The proposal sets forth registration application procedures and designates the Nationwide Multistate Licensing System & Registry to handle all applications, registrant filings, and fee payments on behalf of the DFPI.  It also requires registrants to pay annual assessments and satisfy annual reporting requirements.

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