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California’s revamped consumer protection agency subpoenas debt collectors, signaling more regulation in Biden era

·3 min read

California’s newly empowered consumer protection agency is investigating twelve debt collectors for engaging in predatory practices, Yahoo Finance has learned.

The California Department of Financial Protection and Innovation (DFPI), using new oversight and enforcement authority under the California Consumer Financial Protection Law that went into effect on January 1, issued subpoenas to the companies after receiving consumer complaints.

“We take our expanded responsibility very seriously,” DFPI Commissioner Manuel P. Alvarez said in a statement, “and are moving swiftly to ensure debt collectors do not violate the rights of California consumers.”

This is the first major action the agency has taken under the new law.

“It’s a good sign that they are starting fast, and the action they’re bringing against these debt collectors is meaningful,” Richard Cordray, former director of the Consumer Financial Protection Bureau, who also played a key role in establishing the DFPI, told Yahoo Finance.

US and California Republic Flags, San Francisco, California, US
US and California Republic Flags. (Getty Images)

Cordray noted that the DFPI’s investigation being partly based on consumer complaints is “a very good sign. That’s exactly where you want an agency like this to take its bearings.”

California’s DFPI also has oversight and enforcement authority over fintech companies such as credit unions, student loan servicers, investment advisers, payday lenders, and non-bank installment lenders.

The companies subpoenaed in this latest investigation were Portfolio Recovery Associates, LLC; Encore Capital Group; Midland Credit Management, Inc.; Midland Funding, LLC; Atlantic Credit and Finance, Inc.; Enhanced Recovery Company LLC; Resurgent HP LLC and LVNV Funding LLC; IC System, Inc.; The Offices of Morgan and Moss; Convergent Outsourcing, Inc.; Spectrum Billing Services; and Monterey Financial Services LLC.

The companies, which did not respond to requests for comment, will have until mid-February to respond to the subpoenas.

Portends the opportunity for a great deal of direct cooperation’

The investigation comes days after the Biden administration announces its pick for the Consumer Financial Protection Bureau (CFPB), signalling an intent to double down on action.

Last week, reports indicated that Cordray’s former colleague, Rohit Chopra, a strong consumer advocate and presently a member of the Federal Trade Commission, would be tapped to lead the CFPB. Chopra previously served as the assistant director at the CFPB, as well as a student loan ombudsman.

The pick signals a shift in how Trump-appointed Kathleen Kraninger ran her agency, given Chopra’s alignment with Massachusetts Senator Elizabeth Warren.

UNITED STATES - FEBRUARY 14: Rohit Chopra, nominee to serve on the Federal Trade Commission, testifies during a Senate Commerce, Science, and Transportation Committee confirmation hearing in Hart Building on February 14, 2018. (Photo By Tom Williams/CQ Roll Call)
Rohit Chopra, nominee to serve on the Federal Trade Commission, testifies during a Senate Commerce, Science, and Transportation Committee confirmation hearing in Hart Building on February 14, 2018. (Photo By Tom Williams/CQ Roll Call)

“It’s a return to the days of the CFPB as it was under my leadership,” said Cordray.

And “this portends the opportunity for a great deal of direct cooperation and coordination between the DFPI and the newly-aggressive CFPB, which is what we will have in the wake of Rohit Chopra taking the reins,” he added.

The DFPI, which is considered to be a mini-CFPB as Yahoo Finance reported last February, was born partly out of a need to fill a vacuum left by Trump’s CFPB, as well as an urgent desire on the part of California lawmakers to enact stronger consumer protections independent of D.C.

While other states like New York are also aggressive about protecting consumers’ rights and is also a leader on this matter, Cordray said, California’s new tools under the financial protection law “puts it at the forefront of consumer protection nationally.”

Aarthi is a senior reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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