CALIFORNIA LOW-INCOME CONSUMER COALITION

August6,2020 TheHonorableMoniqueLimónChair,AssemblyCommitteeonBanking&FinanceStateCapitol,Room6031Sacramento,CA95814

TheHonorablePhilTingChair,AssemblyBudgetSubcommittee6StateCapitol,Room6026Sacramento,CA95814

RE:DepartmentofFinancialProtectionandInnovation-SUPPORT DearChairwomanLimónandChairmanTing:WewriteinstrongsupportoftheproposaltorevamptheDepartmentofBusinessOversight(DBO)andcreatetheDepartmentofFinancialProtectionandInnovation(DFPI),anagencydedicatedtoconsumerfinancialprotectionatatimewhenthatmissionismoreessentialthanever.Thismatterisurgent.TheCOVID-19crisishasthrownhugenumbersCaliforniansoutofwork–morethan7millionofushavefiledunemploymentclaimssinceMarch.Whilethepandemiccontinues,Californiansarepilingondebt,alltoooftenfromhigh-interestlenderswhotargettheirloansspecificallytolow-incomecommunitiesandcommunitiesofcolor.Insomecounties,aggressivedebtcollectorshaveusedthepandemicasanopportunitytoincreasethenumberoflawsuitstheyfile,againstCalifornianswhohavelosttheirsourceofincome.Bothconsumersandsmallbusinessesarebeingvictimized.

ThecurrentDBOdoesnothavetheauthorityortheresourcesitneedstostoptheseabuses.Californiaurgentlyneedsanenhancedagencywiththemissionandtheabilitytoprotectconsumersandsmallbusinessesproprietors.Thatispreciselywhatthebudgettrailerbillprovides.ThetrailerbillwouldrenameDBOtheDepartmentofFinancialProtectionandInnovation(DFPI)andestablishtheDFPIasaregulatorwithcomprehensiveoversightofthefinancialindustry.Itwouldensurethattheagencyhasthenecessarytoolstomonitoreveryonefromdebtcollectorstofintechcompaniesofferingconsumersquickcash.ItwouldoffersecurityandrelieftothetensofmillionsofCalifornianswhonowfindourselvestooclosetothefinancialedge.AnditwouldestablishCaliforniaasanationalleaderinprotectingconsumers,smallbusinesses,andcommunitiesstrugglingtorecoverfinanciallyfromthepandemic.TheLegislaturecouldprovidetheseprotectionsimmediately,withoutimpactingtheGeneralFund.TheproposalwouldunlockexistingfundsatDBOfrompastenforcementactionstoincreasetheDepartment’soperatingbudgetthrough2023.Indeed,whiletherewillbenocosttotheGeneralFundifthetrailerbillisenactedintolaw,therecouldbenegativeconsequencesfortheGeneralFundifitisnotenacted.Manyconsumersnowteeteringjustabovethesafetynetwillrequireadditionalsupportsandservicesiftheyarenotprotectedfromimmediatethreatsoffinancialharm.AnypolicydesignedtoeffectivelyaddressthemanyoffshootsoftheCOVID-19pandemicmustincludebetterstatetoolstooverseethefinancialindustryandprotectvulnerableCalifornians.Thefinancialshockthatpeopleareexperiencingnowwillonlydeepeninthecomingmonths.ItwilltakeyearsforCalifornianstorecover–andtheywillhaveahardertimerecoveringiftheLegislaturefailstoactnow.Intheaftermathofthelastfinancialmeltdownin2008,consumersweresubjectedtodebtreliefscams,predatorylending,andaggressivedebtcollectionactions.Thesekindsofabusivefinancialpracticescanpushpeopleintobankruptcyandpoverty–buttheycanbestoppedifwehaveaneffectiveconsumerwatchdog.Thedepthsofthiscrisisarerapidlyeclipsingwhatwesawin2008,andareexpectedtocontinuedisruptingourdailylivesoveratleastthenextthreeyears.Ifwefailtoactnow,wemaycreateaviciousdownwardspiralinwhichunscrupulousactorsgouncheckedandtakeadvantageofconsumersandsmallbusinesses,who,inturn,couldfallfurtherbehindandbeunabletofullyparticipateinoureventualeconomicrecovery.Forallthesereasons,anoverhaulofDBOintoanewmission-driven,consumer-focusedagencyisurgentlyneededthisyearsotheagencywillbeinplaceduringtheworstofthecomingdownturn–whenthedesperationoflow-incomeCalifornianswillbeatitsheight,andtheswindlerswhopreyuponthemmostruthless.WeofferourcollectiveknowledgeandexperiencetocontinuetorefinethedetailsofthetrailerbillsothatCalifornia’sconsumerprotectionlawsandagenciesaresufficienttomeettheneedsofthecomingmoment.WelookforwardtocontinuingtoworkwiththeLegislaturetoenactthisproposalasacrucialpartofCalifornia’s2020-2021budget.Sincerely,

BeneficialStateFoundationBerkeleyCenterforConsumerLaw&EconomicJusticeCalPIRGCaliforniaLow-IncomeConsumerCoalitionCaliforniaReinvestmentCoalitionCaliforniansforAutoReliabilityandSafetyCenterforResponsibleLendingConsumerActionConsumerAttorneysofCaliforniaConsumerFederationofAerConsumerFederationofCaliforniaConsumerReportsConsumerWatchdogElderLaw&AdvocacyNationalConsumerLawCenter(onbehalfofitslow-incomeclients)NexGenCaliforniaOfficeofKatTaylorPublicCounselPublicLawCenterRichardCordray,formerCFPBDirectorStudentBorrowerProtectionCenterWesternCenteronLaw&PovertyCc:Hon.ManuelAlvarez,CommissionerofBusinessOversight