California broadens DFPI commissioner’s enforcement authority

State Issues State Legislation California Student Lending Student Loan Servicer PACE Licensing Mortgages Enforcement State Regulators

On August 26, the California governor signed AB 2433, which broadens DFPI’s unlawful practices oversight and enforcement power over any person currently engaging in or having engaged in the past, in unlicensed activity. Among other things, the bill amends the DFPI commissioner’s enforcement of various laws, such as the California Commodity Law, Escrow Law, California Financing Law (CFL), Property Assessed Clean Energy (PACE), Student Loan Servicing Act, and California Residential Mortgage Lending Act. The bill establishes that the commissioner may act “upon having reasonable grounds to believe that a broker-dealer or investment advisor has conducted business in an unsafe or injurious manner.” The bill also permits the DFPI to “act upon having cause to believe that a licensee or other person has violated the CFL.” The CFL provides for the licensure and regulation of finance lenders, brokers, and specified program administrators by the Commissioner of Financial Protection and Innovation to issue a citation to the licensee or person and to assess an administrative fine, as specified, among other things. The CFL also regulates certain persons acting under the PACE program, including PACE solicitors and PACE solicitor agents. The new bill establishes that “if the commissioner, upon inspection, examination, or investigation, has cause to believe that a PACE solicitor or PACE solicitor agent is violating any provision of that law, or rule or order thereunder, the commissioner or their designee is required to exhaust a specified procedure before bringing an action.” Additionally, bill specifies that certain “procedures apply when the commissioner has cause to believe that a PACE solicitor or solicitor agent has violated any provision of that law or rule or order thereunder.” The bill also mentions the Student Loan Servicing Act, which “provides for the licensure, regulation, and oversight of student loan servicers by the commissioner,” and establishes that the commissioner is required, upon having reasonable grounds after investigation to believe that a licensee is conducting business in an unsafe or injurious manner, to direct, by written order, the discontinuance of the unsafe or injurious practices. This bill specifies “that these procedures also apply if, after investigation, the commissioner has reasonable grounds to believe that a licensee has conducted business in an unsafe or injurious manner.” The bill is effective immediately.