California Governor Gavin Newsom Announces Plans to Create State Consumer Financial Protection Agency
Last week, while releasing his budget proposal for the state, California Governor Gavin Newsom revealed plans to establish a powerful state agency modeled after the federal Consumer Financial Protection Bureau (CFPB). As part of the proposal, Newsom wants to refocus the current Department of Business Oversight and rename it the Department of Financial Protection and Innovation.
The state legislature would need to approve a consumer protection law, increasing the department’s authority and allowing the name change. In a statement from Newsom’s office, the Governor cited the Trump Administration’s efforts to weaken the federal CFPB, telling American Banker that the “federal government’s withdrawal and inaction now leaves Californians vulnerable to predatory businesses and leaves companies without the clarity they need to innovate.”
The proposed consumer protection law would expand oversight of important nonbank service providers. This includes debt collectors and fintechs, as well as other institutions that are not currently subject to state supervision.
An additional goal of the proposed law is to add “dozens of new staff charged with protecting consumers, vindicating their rights and securing them relief,” the statement from Newsom’s office read. The new department would also increase public outreach, focusing on new Americans, veterans, and other communities.
Newsom’s proposal would set aside $44.3 million in California’s 2020-21 budget, which will cover the new department’s start-up costs for the first three years.