A 2020/21 budget proposal for a consumer protection bureau that would reportedly include state oversight of debt collectors in California is on hold due to the need for coronavirus relief funding and other more pressing matters.
According to a report from BankingDive, the proposal was tabled before the June 15 deadline to submit an updated budget to California Gov. Gavin Newsom.
The state lawmakers have until Aug. 31 to finalize the state budget, which means the proposal could resurface, according to the report.
The governor’s budget summary states the California consumer protection bureau, titled the Department of Financial Protection and Innovation, is designed to “provide consumers greater protection from predatory practices while facilitating innovation and ensuring a level playing field for all companies operating responsibly in California.”
“This proposal, known as the California Consumer Financial Protection Law, seeks to cement California’s consumer protection leadership amidst a consumer-protection retreat by federal agencies, including the Consumer Financial Protection Bureau,” according to the budget summary. “The fragmented oversight of financial services has left consumers vulnerable to abuse. These problems are further exacerbated in times of crisis, including the ongoing COVID-19 pandemic.”
Additional goals of the proposal include:
- Protect consumers from predatory businesses, without imposing undue burdens on honest and fair operators.
- Restore financial protections that have been paralyzed at the federal level.
- Spur—not stifle—innovation in financial services by improving regulatory communication and anticipating emerging products and services. Extend state oversight to important financial-services providers not currently subject to state supervision, such as debt collectors.
- Increase public outreach and education, especially for vulnerable populations.
- Expand fact-based decision-making through studies on consumer behaviors and market impacts of financial products and services.
- Provide more effective services to consumers by increasing responses to consumer complaints and integrating consumer needs and experiences into oversight and enforcement.
It appears the timing and other priorities in the budget, especially due to COVID-19, caused the delay in moving forward with the state’s consumer protection bureau, according to BankingDive.
It is important to note, according to the governor’s budget summary, that, “this proposal will not affect entities licensed through a different department or agency, provided the entity is acting within the scope of their license.”
BankingDive reports the department would be funding through licensing fees and fines and on a pilot basis in the first year of operation.
