New Registration Requirements Proposed for Financial Products and Services Covered Under California’s Consumer Financial Protection Act | Alston & Bird


Last year, California passed the California Consumer Financial Protection Law (“CCFPL”), which renamed the Department of Business Oversight to Department of Financial Protection and Innovation (“DFPI”) and expanded the authority of the department, including the increase in regulatory authority related to certain financial products. As part of this expanded scope, DFPI has now proposed regulations requiring the registration of certain providers of financial products, including education funding and salary-based advances.

The CCFPL as promulgated

By law, certain regulatory burdens apply to “covered persons” and “service providers” which broadly include entities offering credit extensions and other financial services and products to consumers, with certain exceptions and exemptions. . With respect to the currently proposed regulation, the CCFPL allows the DFPI, with certain exceptions, to prescribe rules regarding the registration requirements applicable to a covered person carrying out an activity of offering or providing a financial product or service. to consumers. The CCFPL also states, however, that registration will not be required for any Covered Person licensed by the Department under another law and who provides a financial product or service under this license. The DFPI invited comments on the proposed regulations, including “to clarify if and when the registration requirements apply to licensees in the Department and to licensees and registrants of other state agencies. “. Comments on this and other potential issues with the proposed regulations can be submitted by December 20.

The draft regulation

The proposed settlement, if finalized, would require registration for “the products in question”, including for covered persons offering payday advances or education funding. Wage advances are defined in the draft regulation as “funds paid to workers by a supplier other than a debtor which are based on wages or remuneration that a worker or the worker’s debtor has represented, and which a supplier has reasonably determined, have been earned but not, at the time of the advance, been paid to the worker for work performed for or on behalf of one or more debtors. Education funding is defined as including any credit “granted for the purpose of funding post-secondary education and tuition fees at a post-secondary institution, including, but not limited to, tuition, fees, charges, fees. books and supplies, accommodation and food, transportation and various personal items. expenses. “

The proposal contemplates registration through the National Multi-State Licensing System (NMLS), including the use of uniform forms (“MU1”). Applicants are not required to complete section 10 (“Bank account information”) or section 17 (“Eligible persons”) of the MU1 form. With regard to the business activities described, in addition to any other relevant activity, education funders should refer to “private student loans”, while those providing salary-based advances fall under the category “other – funding. for consumption ”on the form. Registrants should also disclose other business names, designate contact employees, provide organizational charts (including indirect owners), organizational charts and detailed business descriptions. Registered persons will also need to identify certain persons, including key officers, directors, executive members, general partners, persons controlling (directly or indirectly) 10% or more, and persons responsible. Identified persons do not need to take their fingerprints. The branches would also be registered, including the identification of branch managers, separately using form MU3. Changes to the information submitted would also be updated in the NMLS. Annual financial reports and disclosures, as well as fees are also offered.

Outside of the NMLS, the regulations, if finalized as proposed, would require that an applicant for registration submit additional information directly to DFPI, including sample forms. Education funders should include copies of third party contracts and agreements as well as additional marketing materials and sample documents. For those providing salary-based advances, the additional request would also include examples of additional contracts and agreements used to provide the service as well as additional information regarding the product cycle.


Registration requirements are not in effect until DFPI has completed the comment period and other rulemaking procedures. The date of entry into force of any future finalized regulations is unclear. It’s also not clear whether current industry participants will be able to continue operating while registrations are pending once rules are finalized. We will continue to monitor the situation as the regulations progress.

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