CA DFPI Issues Draft Rules to Implement CCFPL Provisions on Complaint Handling, UDAAP Definition for Commercial Transactions

The California Department of Financial Protection and Innovation
(DFPI) has issued an invitation for comments from interested parties on draft
rules to implement certain provisions of the California Consumer Financial
Protection Law (CCFPL) which became effective on January 1, 2021.  The
CCFPL provisions that the draft rules would implement deal with (1) procedures
for a covered person or service provider to respond to consumer complaints and inquiries, and (2) the definition of unfair, deceptive, or abusive acts and
practices in connection with the offering or providing of
commercial financing or other financial products and services to small business
recipients, nonprofits, and family farms.  Comments are due by September
17, 2021.

In February 2021, the DFPI issued an invitation for stakeholders to
provide input on rulemaking to implement the CCFPL.  In addition to
inviting input on any potential areas for rulemaking, the DFPI identified
certain areas where rulemaking may be “appropriate, desirable or necessary at
some point.”  The specific areas identified included complaint handling
and unfair, deceptive, or abusive acts and practices in connection with
commercial transactions.

Draft rules on complaint handling.  The draft rules would implement CCFPL
Section 90008(a), (b), and (d).   Section 90008 (a) requires the DFPI
to issue rules establishing reasonable procedures for the handling of consumer
complaints and inquiries by covered persons.  Section 90008(b) requires the
DFPI to issue rules requiring covered persons to provide responses to the DFPI
regarding consumer complaints or inquiries that include certain information
such as what steps were taken to respond to the complaint or inquiry and what
responses were received by the covered person from the consumer.  Section
90008(d) deals with consumer requests to covered persons for information
concerning the consumer financial product or service that the consumer obtained
from the covered person.  The draft rules address the following:

• A partial exemption for consumer reporting agencies as defined by the FCRA

• Definitions–A “complaint” is defined as “an expression of dissatisfaction” regarding a financial product or service and an “inquiry” is defined as “a question or request for information, interpretation, or clarification” about a financial product or service.

• Complaint processes and procedures

• Inquiry processes and procedures

• Processes and procedures for covered persons to provide a timely response to the DFPI

• Consumer requests for nonpublic or confidential information

Draft rule on UDAAP prohibition for commercial transactions.  The draft rule would implement CCFPL
Section 90009(e) which authorizes the DFPI to issue rules defining UDAAPs for
“commercial financing,” as that term is defined in Cal. Fin. Code 22800(d), or
financial products and services offered or provided to small business
recipients, nonprofits, and family farms.  It also authorizes the DFPI to
include in its UDAAP rulemaking requirements for data collection and reporting
on the provision of commercial financing or other financial products and
services.  The draft rule contains two provisions.  One provision
would establish standards for when an act or practice is unfair, deceptive, or
abusive.

The other provision would establish requirements for the
reporting of data on commercial financing to the DFPI.  The data to be reported
would consist of basic information about loan volume, loan size, and loan cost.