California’s Department of Financial Protection and Innovation (DFPI) issued a new rule expanding its authority to regulate unfair, deceptive, and abusive acts and practices (UDAAP).
The rule implements a provision of the state’s consumer financial protection law passed in 2020 that authorizes the DFPI to define UDAAPs for commercial financing with the intention to strengthen consumer protections and promote access to responsible credit. It also grants the DFPI the power to govern UDAAP in a manner similar to the authority granted to the Consumer Financial Protection Bureau by the Dodd-Frank Act.
Under the rule, the DFPI has the authority to impose penalties of $2,500 for “each act or omission” without proving a willful violation, as well as the power to increase the penalty up to $25,000 per day or $10,000 per reckless violation and $1 million per day or 1 percent of the violator’s new worth (whichever is less), or $25,000 for violations labeled as “knowing.” Willful, reckless, and knowing are all references to mens rea requirements for each activity and refer to the level of the actor’s intent to commit the violation.
The rule also puts in place a registration requirement. Covered providers that engaged in more than five commercial financial transactions to covered entities in 12 months must file an annual report electronically by March 15 every year that includes detailed information on the type and the amount of commercial financing transactions, contact information, and annual percentage rates.