August 18, 2022

Volume XII, Number 230

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DFPI Issues Proposed Rules for Commercial Financing

On June 24, the California Department of Financial Protection and Innovation (DFPI) issued proposed regulations implementing certain provisions of the California Consumer Financial Protection Law (CFPL) related to commercial financial products and services. Written comments on the proposed regulations are due by August 8.

The proposed rules implement the DFPI’s authority under the CFPL to issue and enforce rules defining unfair, deceptive, or abusive acts or practices as they relate to commercial financing or financial products and services offered or provided to small businesses, nonprofits, and family farms. The proposal would make it unlawful “for a covered provider to engage, have engaged, or propose to engage in any unfair, deceptive, or abusive act or practice.” The proposed rules would find that an act or practice engaged in by a “covered provider” would be considered “unfair” or “deceptive” or “abusive” if it is unfair or deceptive or abusive within the meaning of the Dodd-Frank Act or the pertinent provisions of California Business and Professions Code section 17200. Other highlights from the notice include the following:

  • The proposal defines the following terms, among others: “family farm,” “nonprofit,” and “small business.”

  • Covered providers must submit annual reports containing information regarding their business activity.

Notably, companies licensed as lenders under the California Financing Law (CFL), or that hold other enumerated licenses under the California Consumer Protection Law are exempt from these regulations and the reporting requirements when acting under the authority of the held license. CFL licensees are already subject to an annual reporting requirement under the CFL.

Putting In Into Practice: The issuance of these latest proposed rules are timely as the commercial financing disclosure regulations in California were recently approved and will go into effect on December 9, 2022 (we discussed these regulations in a previous blog post here). Impacted companies should continue to be aware of the shifting landscape as the DFPI and other state regulators continue to apply traditional consumer protection requirements to commercial financing.

 

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 181
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
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