Editor’s note — The California Department of Business Oversight (DBO) supervises, licenses and regulates a variety of financial institutions, including some real estate mortgage loan originators (MLOs) holding a Nationwide Multistate (or Mortgage) Licensing System & Registry (NMLS) license. Alongside the California Department of Real Estate (DRE), the DBO shares the responsibility for overseeing MLOs depending on their license use.

The DBO publishes a monthly bulletin updating the public on the latest DBO news. Keep reading to catch up on August’s most important DBO happenings.

Capital One data breach

On July 29, 2019, Capital One announced a data breach affecting its many credit card customers and applicants. A lone hacker pilfered the information of over 100 million people who applied for a Capital One card from 2005 to 2019, including data such as:

  • names;
  • addresses;
  • postal codes;
  • phone numbers;
  • email addresses;
  • birth dates; and
  • self-reported income information.

While no credit card numbers, usernames or passwords were compromised, 140,000 Social Security numbers were.

The bank hastily patched the vulnerability in their system exploited by the hacker.

Capital One claims it is unlikely the accessed information was released or used for fraudulent purposes. Nevertheless, they are offering free credit monitoring and identity protection services to everyone affected.

Major corporate data breaches have become an all too familiar refrain, with complimentary credit monitoring and identity protection being the default (and often redundant) salve.

To protect customers’ information, the DBO offers financial institutions a few steps to help minimize the damage from data breaches, including:

  • ensuring vendor security practices are evaluated periodically;
  • verifying security updates are installed as soon as possible;
  • confirming credit report information with customers;
  • monitoring customer accounts for unusual activity;
  • flagging accounts of customers who report their information stolen; and
  • providing customers with data prevention and protection information after a breach.

The Federal Trade Commission (FTC) publishes a list of resources for consumers and businesses here. Click through to learn more about securing your and your customers’ sensitive information.

CFL, Payday and Mortgage Program reports

As the government body that licenses and regulates individuals and entities providing financial services in California, the DBO has published its annual activity reports for 2018 under the:

  • California Financing Law (CFL);
  • California Deferred Deposit Transaction Law (CDDTL); and
  • California Residential Mortgage Lending Act (CRMLA).

The CFL activity report reveals an upward trend in the number of consumer loans over $2,500. Note that the CFL does not cap interest rates on consumer loans of $2,500 or higher. Loans between $2,500 and $4,999 made up the largest category of consumer loans and over half of those carried annual percentage rates of 100% or higher.

Additionally, the number and principal amount of mortgages fell significantly in 2018. 19% fewer loans were originated in California and the total principal amount fell 14% compared to the prior year.

The CDDTL activity report, which focuses on payday loans, documents about a 4% drop in payday loans made in 2018 compared to 2017. The total dollar amount for loans slipped for the third straight year; it’s down 32% from its $4.17 billion peak in 2015.

The CRMLA activity report covers licensees making and servicing residential mortgages secured by one-to-four unit single family residences. In 2018, the number of loans dropped 18% from the previous year. The aggregate principal amount of loans originated likewise fell 15%.

These reports reflect a greater trend. The steep drop in 2018’s mortgage originations and balances echo California’s sluggish home sales volume. Expect this slowing trend to continue into the coming recession, expected to arrive by mid-2020.

Commercial Financing Regulations

The DBO invites public comments on draft regulations and sample disclosures for Senate Bill 1235 (SB 1235), which was passed in 2018. The bill requires lenders and other commercial financing companies provide clear and consistent disclosures to small business owners.

The draft text focuses on language and formatting used for commercial financing disclosures in relation to the amount of funds provided, payment terms and financing costs. You can find the draft text on the DRE’s website here.

The deadline to comment is September 9, 2019. Comments may be emailed to regulations@dbo.ca.gov (include “PRO 01-18” in the subject line and copy to Senior Counsel Charles Carriere at charles.carriere@dbo.ca.gov.)

And that’s a wrap on your August DBO bulletin digest. You can read the full bulletin here.

Check back next month for the most up-to-date DBO news.