July 2022 DFPI Bulletin Focuses on Small Businesses funding disclosuresproposed rules on commercial financial productsand the Contribution rate 2022-2023 for financial institutions, among other topics.
Editor’s Note – California Financial Protection and Innovation Department (DFPIformerly the Business Supervision Department) oversees, licenses and regulates a variety of financial institutions, including certain home mortgage originators (MLOs) holding a National Multi-State (or Mortgage) Licensing System and Registry (NMLS) Licence. Along with the California Department of Real Estate (DRE), the DFPI shares responsibility for overseeing MLOs based on their use of licenses.
Licensees, stay up to date with MLO July 2022 news and events below.
Extension of Commercial Finance Disclosure Regulations
On June 9, 2022, California Office of Administrative Law (OAL) approved the DFPI’s proposed regulation on trade finance disclosure. The regulations extend disclosure protections to California small businesses when those businesses seek commercial financing.
The disclosures will take effect on December 9, 2022. They are intended to provide small businesses in California with a better understanding of the costs and benefits of commercial financing offers. Armed with this information, small businesses will be better able to compare different offers to find the best financing solution for their needs. The Final Settlement and Final Statement of Reasons are posted on the DFPI website.
DFPI’s work on these disclosures dates back to the passage of SB 1235 in 2018, which requires commercial finance providers to provide disclosures to small businesses. The bill requires suppliers to disclose:
- total funds provided;
- total dollar cost of financing;
- duration or estimated duration;
- method, frequency and amount of payments;
- a description of prepayment penalties; and
- the total cost of financing at an annualized rate.
Related article:
The Future of Cryptocurrency in Real Estate Transactions
Proposed rules on commercial financial products and services
The DFPI has filed a Notice of Proposed Action inviting the public to comment on proposed regulations under the Consumer Financial Protection Act (CCFPL). The proposed regulations implement, interpret or establish specific provisions of the Financial Code relating to the commercial financing of small businesses, non-profit organizations and family farms.
Submit your comments by email to [email protected] with a copy to [email protected]. Please include “PRO 02-21” in the subject line.
Alternatively, comments can be mailed to:
Financial Protection and Innovation Department
Attention: Sandra Navarro
2101 Arena Blvd.
Sacramento, CA 95834
The text of the draft regulations and the initial statement of reasons are available on the DFPI website.
The 45-day public comment period ends on August 8, 2022.
Public comment period on oversight of financial services related to crypto assets
While public interest in cryptocurrencies has exploded since the pandemic, regulation remains thin. Regarding the oversight of financial products and services related to crypto-assets, the DFPI is currently seeking comments on:
- regulatory priorities;
- Regulation and supervision of CCFPL; and
- market surveillance functions.
For any regulatory recommendation, commenters are encouraged to provide a description of any economic impact of the recommendation for California businesses and consumers.
Governor Gavin Newsom issued Executive Order N-9-22 last May to create a transparent regulatory and business environment for web3 companies, to foster responsible innovation, support the California economy and, most importantly, protect consumers . As part of this strategy, the DFPI is seeking input to develop regulatory guidance, clarity, and oversight in the offering of financial products and services related to crypto assets in California.
The DFPI has posted topics and questions to help reviewers generate feedback. Find the official Request for Comments on the DFPI website.
Comments will be accepted until August 5, 2022, and can be submitted by email to [email protected]. Include “Review Invitation – Financial Products and Services Related to Crypto Assets” in the subject line.
Comments can also be mailed to:
Financial Protection and Innovation Department, Legal Department
Attention: Sandra Navarro, Rules Coordinator
2101 Arena Blvd.
Sacramento, CA 95834
2022-23 contribution rates for financial institutions
On June 30, 2022, the 2022-23 Annual Assessment invoice was emailed to banks, credit unions, and money transmitters. Licensees who have not received their invoices should notify the Accounts Receivable Unit at [email protected] as soon as possible.
Invoices are payable no later than August 1, 2022 with more time allowed for payments made by Electronic Funds Transfer (EFT). EFT payments are due by August 8, 2022.
For commercial banks, foreign banksand trust companiesthe base rate was set at $1.39 per $1,000 of assets, down $0.05 from last year’s rate of $1.44.
For credit unionsthe 2021-22 contribution rate has been set at $1.01 per $1,000 of assets, the same rate as last year.
For industrial banksthe base rate was set at $1.39 per $1,000 of assets, down $0.05 from last year’s rate of $1.44.
Finally, for money transmitters, the 2021-2022 contribution rate has been set at $0.014 per $1,000 received for transmission by a holder during the 2021 calendar year, a decrease of $0.006 from the rate for the year last. The 2021-2022 assessment rate for issuers of payment and stored value instruments has been set at $0.63 per $1,000 of payment and stored value instruments sold by a licensee.
For assessment calculation questions, see “How to Calculate Your Assessment” or contact Patrick Carroll at (415) 263-8559 or [email protected]. Questions regarding the processing of assessment payments should be directed to the Accounts Receivable Unit at [email protected].
Openings of the Escrow Advisory Committee
From September 2022, there will be three openings on the Escrow Advisory Committee.
The Committee is made up of eleven members, including the Statutory Auditor (or his delegate).
Appointed members sit for a period of two years without indemnity or reimbursement of expenses. The committee meets quarterly at the ministry office. The next meeting is tentatively scheduled for Wednesday, September 7, 2022.
The current vacancies on the committee are representatives of:
- a small escrow company;
- an escrow company that has a different type of business ownership; and
- a CPA who has fiduciary clients.
Managers or corporate officers of independent escrow companies are eligible to serve. Examples of different business ownership include companies owned by title companies or brokers.
Chartered Trustees and qualified CPAs who meet any of the above criteria are encouraged to apply by sending a letter of qualifications and/or resume to Paul Liang at [email protected], or by post to:
Financial Protection and Innovation Department
320 West 4th Street, Suite 750
Los Angeles, California 90013
The deadline for submission is July 29, 2022. Direct your questions to [email protected] or (213) 576-7535.
2021 report on increased access to responsible small loans and nonprofits
The DFPI has released the 2021 Annual Report of the Pilot Program for Increased Access to Responsible Small Loans (RSDL). The program is designed to provide an alternative to payday loans and other more expensive forms of consumer credit. This report contains detailed information collected earlier this year from participating lenders.
The pilot program aims to increase the availability of small responsible installment loans by at least $300 but less than $2,500. In 2018, the maximum loan amount increased to $7,500.
Additionally, the DFPI released the 2021 Annual Report for Nonprofit Entities Offering Zero-Rate Loans. Senate Bill 896 was signed into law in 2015 to encourage nonprofit organizations (exempt organizations) to facilitate low-interest, low-cost loans. In part, small dollar loans are intended to allow consumers to establish, build and improve their credit ratings.
That’s the end of the July 2022 DFPI Bulletin. To learn more about the topics mentioned here, read the full bulletin on the DFPI website.
