A California statute that took effect in January changed the name of the state’s “Department of Business Oversight” to “Department of Financial Protection and Innovation.” As the new designation suggests, the department’s focus and its powers have expanded significantly.
The department already had regulatory authority over a variety of financial-industry entities, including state-chartered banks and credit unions, securities issuers, mortgage lenders and servicers, escrow companies and others. The shift brings many industries directly impacting consumers under the department’s authority. The DFPI announced at the beginning of the year that it would immediately begin to “investigate consumer complaints against previously unregulated financial products and services, including debt collectors, credit repair and consumer credit reporting agencies, debt relief companies, rent to own contractors, private school financing, and more.”
The new legislation, and the oversight it vests in the DFPI, track closely with the federal Consumer Financial Protection Act (Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act) that created the federal Consumer Financial Protection Bureau (CFPB).
This increased oversight is welcome during a time when many consumers are facing unprecedented financial challenges due to the Covid-19 pandemic, business closures, high unemployment rates and other related challenges. As many Californians and consumers around the country struggled during the pandemic, Encore saw record profits and Portfolio called the situation “a perfect storm from a cash perspective.” During the same period, the DFPI saw a 40%+ increase in consumer complaints. Complaints to the federal CFPB from California consumers reached a 3-year high in late 2020.
Early DFPI Actions
In January, the DFPI announced that it had launched investigations into several debt collectors based on consumer complaints suggesting that the companies engaged in illegal, unfair, deceptive or abusive practices. The investigations targeted a number of large debt collectors, including Portfolio Recovery Associates, LLC; Midland Credit Management, Inc.; Enhanced Recovery Company LLC; and Resurgent HP LLC.
Many of these companies have a history of consumer complaints and litigation in California and around the country. Portfolio settled a class action in California in 2016 and has faced similar litigation in other states. In 2018, 42 states and the District of Columbia entered into a settlement with Encore Capital Group, the parent company of Midland Credit Management and Midland Funding. In 2020, the federal Consumer Financial Protection Bureau (CFPB) filed suit against Encore and its subsidiaries for violating a consent order in a prior case and continuing to file lawsuits against consumers without required documentation.
DFPI Complaints
California consumers can use a simple online form to file a complaint with the DFPI. The department may be able to facilitate an agreement between the consumer and the debt collector, bank, or other regulated financial services entity. But, it’s important to note that the DFPI does not act as an advocate for individual consumers, and doesn’t have the authority to order a debt collector or other company to take a specific action with regard to a particular individual. The department also doesn’t offer legal advice to consumers.
Filing a complaint with the DFPI is useful because:
- Sometimes the company will agree to a quick resolution in an attempt to stop the department from digging deeper into the issue that triggered the complaint and finding systemic problems
- The DFPI uses the data to identify problems within specific industries or companies and address them in various ways, including new regulation and enforcement actions
However, filing a complaint with the DFPI usually isn’t a solution for the consumer. So, when you believe your rights have been violated by a mortgage servicer, debt collector, payday loan provider or other financial services company, or are just struggling with debt and facing collection action, it’s important to get advice–and possibly representation–to address your specific situation.
Talk to an Experienced Los Angeles Debt Resolution Lawyer
Fighting dishonest debt collectors and other shady players in the consumer finance arena is a two-front battle. Governmental entities like the DFPI and larger actions like the class actions against some debt buyers and collection agencies mentioned above work toward moving the industry in a better direction through regulation and enforcement. But, those are slow-moving solutions and there will always be companies that play fast and loose with the rules–or even ignore them completely.
Just as importantly, not all debt collection problems involve debt buyers or collectors crossing the line. Sometimes, the consumer is just in a difficult situation. Debt may spiral out of control due to job loss, large unexpected medical expenses coupled with lost work time while undergoing treatment and recovering, divorce, or other major life events. One financial mistake, such as taking on an adjustable rate mortgage (ARM) and being unprepared for the jump in payments, can trigger a financial crisis. Other times, people just made mistakes, incurring too much debt and only recognizing the problem when payments became unmanageable.
Whatever the situation, the best step you can take is to educate yourself about your rights and options. The attorneys at Borowitz & Clark have decades of experience helping people in the Los Angeles area resolve debt. We offer free consultations to help you make good decisions about taking control of your finances. You can schedule yours right now by calling 877-439-9717 or filling out the contact form on this page.