Governor’s proposal comes after Consumer Financial Protection Bureau dramatically scales back federal oversight
SACRAMENTO, CA – Consumer Reports applauded a proposal announced today by California Governor Gavin Newsom to create a state version of the Consumer Financial Protection Bureau (CFPB). The proposed financial watchdog was included in the Governor’s budget in the wake of the federal CFPB’s retreat from holding banks and other financial firms accountable when they engage in unfair and abusive practices.
“The CFPB has been shirking its responsibility to protect consumers at a time when working families face a variety of predatory practices that can do real damage to their financial security,” said Suzanne Martindale, senior policy counsel and western states legislative manager. “Given lax oversight at the federal level, it’s critical for states like California to take action to stop financial fraud and abuse.”
Martindale continued, “Governor Newsom’s proposal could help protect Californians from financial scams and ensure they are treated fairly when they seek to pay their bills, manage their debts, and build family wealth and security. We look forward to working with the Governor and state lawmakers to ensure this proposal is passed through the budget process with the strongest possible provisions.”
Governor Newsom is proposing to restructure the current financial regulator for the state, the Department of Business Oversight, as the Department of Financial Protection and Innovation (DFPI) – and to extend state oversight to important financial industries not currently subject to state licensing and supervision, such as debt collectors, credit reporting agencies and “fintech” companies among others. The DFPI would be strengthened with dozens of new staff charged with actively monitoring the marketplace to identify patterns of abuse and to secure relief for consumers who are treated unfairly by financial firms. The DFPI would be funded in its first three years by using reserves in the State Corporations and Financial Institutions Funds.
The CFPB under the Trump Administration has dramatically scaled back its enforcement of consumer financial protection laws and reduced financial penalties on firms caught cheating consumers. In addition, the CFPB has been working to roll back important payday loan protections adopted under the agency’s previous director, proposed weak rules governing debt collectors, and backed away from efforts to protect student loan borrowers.
Michael McCauley, mmccauley@consumer.org, 415-431-6747, ext. 7606