The first DBO Bulletin Digest of 2020 gets right to business with a DBO overhaul and fintech initiatives.

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.

Licensees, read on to start your decade on the right foot.

Newsom proposes DBO revamp

Governor Gavin Newsom recently unveiled an ambitious plan to overhaul the DBO as part of California’s 2020-21 budget. The proposal is to change the Department’s name to the Department of Financial Protection and Innovation (DFPI) and expand its consumer protection role. According to the proposal, its goal is to provide consumers with more protection against unfair, deceptive and abusive practices when accessing financial services and products.

Currently, the DBO’s regulatory jurisdiction is limited to certain financial services and state-licensed financial institutions like banks, credit unions and money transmitters. Some real estate agents are already well acquainted with the DBO as it also licenses and regulates mortgage lenders, escrow agents and other commercial and consumer lenders.

To meet evolving consumer needs, the proposal expands the DBO’s regulatory powers into new and under-regulated industries, including debt collection, fintech and credit reporting. If approved by state lawmakers, the DFPI’s new offerings will include:

  • consumer education on sound financial protection practices;
  • licensing and examinations for new and under-regulated industries;
  • market analyses to inform policy and enforcement;
  • enforcing legislation that prohibits unfair, deceptive and abusive practices;
  • establishing a Financial Technology (fintech) Innovation Office that develops new consumer financial products;
  • providing legal support for the administration of the new law; and
  • expanding existing administrative and information technology staff to support the Department’s new responsibilities.

If you’re experiencing déjà vu, you may be thinking of the Consumer Financial Protection Bureau (CFPB). In fact, the proposed DFPI is modeled after the CFPB. According to the proposal, the new Department is meant to fill a void at the federal level left by the CFPB’s rollback.

The plan still requires the approval of state lawmakers and details of its implementation are expected by February 1, 2020. In the meantime, you can read the proposal here.

CSBS Accountability Report

This month, the Conference of State Bank Supervisors (CSBS) released an Accountability Report that outlines progress made toward its Vision 2020 fintech initiatives. The Conference, which is made up of financial regulators from all 50 states, acts on recommendations by an advisory panel of fintech leaders as part of the Vision 2020 program.

Vision 2020’s main objective is to modernize state regulation through a networked system of nonbank licensing and supervision. The Accountability Report highlights a few developments toward this goal, including:

  • expanding NMLS use for managing an increasing number of license types;
  • increasing state regulation transparency through the CSBS State Regulatory Guidance Portal; and
  • drafting a model state money services business (MSB) law to clarify activities requiring licensure.

Read the full CSBS Accountability Report here.

Reminders

The DBO issues licensees a few friendly reminders in this month’s bulletin, including one concerning Assembly Bill 857. The bill, which went into effect January 1, 2020, allows local governments to establish public banks. With this new legislation in place, the DBO stresses that establishing a bank under this law requires a DBO certificate of authorization and Federal Deposit Insurance Corporation (FDIC) insurance. Read the full bill text here.

Separately, the DBO reminds licensees that all commercial banks, industrial banks and trust companies need to file with the DBO a list of the offices they maintain and operate.

The deadline was January 1, 2020, but the DBO urges stragglers to file as soon as possible to avoid possible fines and penalties. If you have not done so already, email your filing to Licensing@dbo.ca.gov or mail to:

Department of Business Oversight
Division of Financial Institutions
Attn: Licensing & Information Reporting Office
One Sansome Street, Suite 600
San Francisco, CA  94104-4428

That’s a wrap on the first DBO Bulletin Digest of 2020! Check back next month for February’s DBO Bulletin Digest. As always, you can read the full DBO bulletin on their website.