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Financial Services Law Insights and Observations

DFPI clarifies licensing provisions for several state laws

Licensing State Issues California State Regulators DFPI CCFPL California Financing Law Student Loan Servicing Act

The California Department of Financial Protection and Innovation (DFPI) recently filed a notice of proposed rulemaking with the Office of Administrative Law, seeking to add several sections to Title 10, Chapter 3 of the California Code of Regulations relating to the California Consumer Financial Protection Law (CCFPL), the California Financing Law (CFL), the California Deferred Deposit Transaction Law (CDDTL), and the California Student Loan Servicing Act (SLSA). (See also DFPI initial state of reasons here.) Among other things, the proposed regulations provide specific registration requirements for covered persons under the CCFPL and outline requirements for exemption from registration under the CCFPL for licensees under the CFL, CDDTL, and SLSA.

According to DFPI’s notice, the CCFPL grants the Department authority to require covered persons engaged in the business of offering and providing a consumer financial product or service to be registered but does not specify requirements for registration. The proposed regulations clarify these requirements, which include establishing an application process, outlining fees, and specifying persons and conditions for exemption. The proposed regulations also establish annual reporting requirements for filing reports with DFPI. The Department explained that “[e]xisting law exempts from CCFPL registration certain licensees who provide consumer financial products or services ‘within the scope of’ their licenses issued under other Department laws.” The proposed regulations clarify the meaning of “within the scope of” and specify that licensees under the CFL and the CDDTL are exempt from registering under the CCFPL. “[E]xempt licensees who provide products or services that would otherwise be subject to registration under the CCFPL [are required] to submit supplemental information on these activities in their annual reports required under their license,” DFPI explained.

With respect to the SLSA, DFPI noted that “[a]lthough an SLSA license does not confer upon a licensee the authority to originate financing within the scope of their license, the regulations exempt SLSA licensees from registration requirements for education financing when they meet specified requirements.”

The proposed regulations also clarify the applicability of the CFL to certain activities, by, among other things, providing that “an advance of funds to be repaid from a consumer’s future earned or unearned pay is a loan subject to the CFL” and that “providers of income-based advances and education financing who are registered under the CCFPL and whose charges do not exceed the charges permitted under the CFL” are exempt from licensure under the CFL. The proposed regulations also clarify provisions relating to collecting loan payments, monthly subscription fees, and loan contracts.

Comments on the proposed regulations are due May 17.