A California lawmaker is in the “early stages” of exploring how to create a state-level Consumer Financial Protection Bureau.
Assemblywoman Monique Limon, D-Santa Barbara, said Wednesday that California needs more consumer protection, either through the creation of a new agency similar to the federal CFPB, or by increasing the enforcement budget of the state’s Department of Business Oversight.
“We are working to really rethink what a state CFPB would do,” said Limon, who chairs the Assembly Banking and Finance Committee. "We see the presence of predatory lending products in auto loans, payday loans, cash-advance and small-business loans."
Limon held a press conference at the state capitol with former CFPB Director Richard Cordray to build support for more consumer protection legislation. She is backing a student loan borrower "bill of rights" and last month introduced a bill that would cap interest rates at 36% for consumer loans of between $2,500 to $10,000.
Under California law, the interest rate on consumer installment loans of under $2,500 is capped at around 30%. But above the $2,500 threshold, the state has no rate cap. Golden State lawmakers have repeatedly defeated legislation that would close the loophole by capping rates at 36% for larger consumer loans.
Cordray said California needs to take the lead because the CFPB has pulled back on overall enforcement. CFPB enforcement actions have plummeted 80% in the past year, according to a recent study.
Since President Trump won the election in 2016, observers have frequently said they'll be looking to the states for enhanced enforcement of consumer laws as long as the federal consumer agency is under Republican control. A number of state attorneys general pledged to step up their enforcement activity to fill the gap, but progress on that effort
“If, at the federal level, they are pulling back, a large and important state like California can make an important difference here,” Cordray said. "If the system is not preventing massive problems and exploitation, even the people that are most careful can be hurt."
