California Governor Proposes Reorganization of DBO

California Governor Gavin Newsom recently published the proposed 2020-21 state budget, which (beginning on page 173) provides for $10.2 million to begin reorganizing the Department of Business Oversight (DBO).  The proposed budget anticipates that this reorganization will take three years and ultimately cost $19.3 million.

Currently, the California DBO serves as the primary regulator of financial services and oversees state-licensed financial institutions, including mortgage companies.  Under the proposed budget, the agency’s staff would be expanded, the agency would be tasked with establishing and administering the California Consumer Financial Protection Law, and the agency’s authority would be broadened to include unlicensed financial service providers not currently subject to the DBO’s regulatory oversight authority, including, for example, fintech companies, creditor reporting agencies, and debt collectors.  The proposed budget references changes with the federal CFPB, describing the changes as a “rollback” of the CFPB, as a reason for the reorganization.

Under this framework, the DBO would be authorized to engage in the following new activities, among others: licensing and examining new, under-regulated industries; bringing enforcement actions against unfair, deceptive, and abusive practices; and establishing a new Financial Technology Innovation Office.

Additionally, under the proposed expansion of the DBO, the name of the agency would change to the Department of Financial Protection and Innovation.