California governor to create state's own version of CFPB

Dive Brief:

California Democratic Gov. Gavin Newsom is expected to unveil plans for the state to create its own version of the Consumer Financial Protection Bureau (CFPB), the Los Angeles Times reported Thursday.
The proposed California Consumer Financial Protection Law would revamp the existing Department of Business Oversight and rename it the Department of Financial Protection and Innovation, according to documents shared with the Times.
"As the Trump administration undermines and weakens the rules that protect consumers from predatory businesses, California is filling the void and stepping up to protect families and consumers," Newsom told the Times in an email.

Dive Insight:

As Democratic lawmakers take issue with the performance of the CFPB under the Trump administration, Newsom appears willing to take matters into his own hands.

"In the grip of President Trump, we have already seen the Consumer Bureau abandon its mission to protect the American people from unfair and predatory conduct," House Speaker Nancy Pelosi, D-CA, said in a press release in October.

The number of enforcement investigations initiated by the CFPB, which was created by the Obama-era Dodd-Frank Act in 2010, dropped from 63 in fiscal 2017 to 15 the following year, according to The Wall Street Journal.

Although California’s Department of Business Oversight is already one of the most active state agencies in terms of regulating and punishing the financial services industry, according to HousingWire, Newsom said his overhaul of the department would include "dozens of new staff" and greater scrutiny of consumer markets "to identify patterns of abuse."

The revamp also includes increased outreach to veterans and immigrants, demographics frequently targeted for questionable financial practices, the governor’s office told the Times.

Meanwhile, the CFPB’s leadership structure has come under fire and is the subject of a Supreme Court case to be heard in March.

Seila Law v. CFPB argues the regulator's setup is unconstitutional because it gives the president the power to fire the director only "for cause." The Justice Department criticized the for-cause clause in a September brief urging the high court to take the case. CFPB Director Kathy Kraninger has since aligned with the DOJ's stance.

Pelosi in October accused the administration of not defending the bureau's independence — and in doing so, "choosing special interests over America's consumers."