New York and California Aim to Provide Consumers with Additional Protections

New York Governor Andrew M. Cuomo recently introduced a number of new legislative proposals in his 2020 State of the State agenda, including proposals that would offer New York consumers increased protections.[1] Additionally, California Governor Gavin C. Newsom also outlined how California will provide additional protections to its consumers in the Governor’s Budget Summary for 2020-2021.[2] Below are some highlights from each state:

New York

I. Regulating and Licensing Debt Collection Firms.

In Governor Cuomo’s 2020 New York State of the State agenda, legislation was proposed that would grant the Department of Financial Services (DFS) the power “to license debt collection entities, and empower DFS to examine and investigate suspected abuses, including by requiring the submission of information to DFS, and authorizing DFS investigators to enter a debt collector’s office at any time to review its books and records.”[3] Consequently, DFS, with this new authority, would have the ability to initiate actions against debt collection organizations that could result in fines, or even the forfeiture of licenses that are required to conduct business in the state of New York.[4] The proposed legislation would also protect individuals from fraudulent schemes in which they would pay non-existing debts.[5] Governor Cuomo will also propose legislation that would authorize the state to “codify a Federal Trade Commission rule that prohibits confessions of judgement in consumer loans.”[6]

II. Bolstering Consumer Protection Laws.

In Governor Cuomo’s 2020 State of the State Agenda, legislation was also proposed that would “mak[e] New York State consumer protection law consistent with federal law.”[7] Currently, New York state authorities are unable to “bring the type of enforcement actions that federal authorities can bring for a broad range of unfair, deceptive, abusive acts and practices.”[8] The proposed legislation would empower the state to oversee numerous consumer services and products by eradicating exemptions that are currently in play.[9] Furthermore, the proposed legislation would eliminate loopholes and create an environment where regulated entities would all have the same chance to succeed.[10]

To assist with deterring illegal conduct, the proposed legislation would institute an increase in Insurance Law fines.[11] Additionally, it would alter the current penalties under the Financial Services Law (FSL) “to parallel federal enforcement penalties and ensure that bad actors cannot profit from violations,” and would “also add to the FSL explicit authority for DFS to collect restitution and damages.”[12]

III. Creating the Excelsior Banking Network and the Office of Financial Inclusion and Empowerment.

Governor Cuomo has “propose[d] the creation of the Excelsior Banking Network, which will increase access to safe, affordable bank accounts and small-dollar loans in underserved low-income communities across the State.”[13] In low-income communities throughout New York, Community Development Financial Institutions (CDFIs) are often the only available financial service providers.[14] Under the proposed legislation, “[t]he State will provide $25 million in new funding over five years for New York’s CDFI Fund, to be used in accordance with State criteria for expanding financial inclusion.”[15] Under the proposed legislation, “participating CDFIs will leverage this funding up to an aggregate of $300 million in targeted investment in underserved communities [in] New York.”[16]

Governor Cuomo also proposed legislation for the “creation of a statewide Office of Financial Inclusion and Empowerment to meet the financial services needs of low- and middle- income New Yorkers across the state.”[17] The office of Financial Inclusion and Empowerment will be located at the Department of Financial Services and “will maintain a centralized list of financial services counseling providers – across housing, student loan, debt, and general financial literacy – throughout the State and coordinate state and local services aimed at expanding access to credit and enhancing financial empowerment.”[18] The office will also maintain additional responsibilities, such as developing new programs.[19]

IV. Eliminating Robocalls.

In Governor Cuomo’s 2020 New York State of the State agenda, a three-part legislation was also proposed that would eliminate robocalls.[20] According to the Federal Trade Commission (FTC), a robocall takes place when individual receives a telephone call and only hears a recorded message as opposed to an actual person when the call is answered.[21]

Part one of the proposed legislation would hold telephone service providers accountable if they fail to block robocalls.[22] Under the proposed legislation, telephone service providers would be obligated to implement technology that blocks these calls.[23] This technology is currently offered by some companies, but its use is not mandatory.[24]

Part two of the proposed legislation would mandate the prompt implementation of the “STIR/SHAKEN protocol.”[25] The “STIR/SHAKEN protocol” is a technology that is used to help identify suspicious callers by giving call recipients supplementary caller identification information on phone numbers, including phone numbers that are located outside of New York.[26] While the majority of telephone service providers have committed to the use of this technology, many have not taken substantial steps towards its implementation.[27]

Part three of the proposed legislation would impose penalties on telecommunication companies.[28] “[C]ompanies that fail to [use] best efforts to stop robocalls will be held accountable and subject to investigation and fines of up to $100,000 per day by the Department of Public Services or the State Division of Consumer Protection.”[29] Furthermore, “doubling the current maximum fines for bad actors who make unsolicited calls in violation of the ‘Do Not Call’ Law from $11,000 per call to up to $22,000 per call” has also been proposed.[30]

California

According to the Governor’s Budget Summary for 2020-2021, in California, the Department of Business Oversight (DBO) is tasked with regulating specific financial services.[31] The DBO is also responsible for overseeing financial institutions that are licensed by the state.[32] Furthermore, the DBO licenses and regulates other financial entities and professionals such as escrow agents, securities lenders and investment advisers.[33]

California’s 2020-2021 budget lengthens the DBO’s reach in the consumer financial protection arena, and, as a result, its name will be changed to the Department of Financial Protection and Innovation to more accurately reflect its new role.[34] Included in the new budget are a “$10.2 million Financial Protection Fund and 44 positions in 2020-2021, growing to 19.3 million and 90 positions ongoing in 2022-23, to establish and administer the California Consumer Financial Protection Law, which will provide consumers with more protection against unfair and deceptive practices when accessing financial services and products.”[35]

Specific examples of activities that can be pursued by the Department of Financial Protection and Innovation include, but are not limited to, “[o]ffering services to empower and educate consumers, especially older Americans, students, military service members and recent immigrants,” and “[l]icensing and examining new industries that are currently under-regulated.”[36]

[1] Gov. Andrew M. Cuomo, 2020 State of the State (NY), https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/2020StateoftheStateBook.pdf

[2] Gov. Gavin C. Newson, Governor’s Budget Summary – 2020-21 (CA), http://ebudget.ca.gov/FullBudgetSummary.pdf,

[3] Gov. Andrew M. Cuomo, 2020 State of the State (NY), pg. 127, https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/2020StateoftheStateBook.pdf

[4] Id.

[5] Id.

[6] Id. at 127-28

[7] Id. 131

[8] Id.

[9] Id. at 132

[10] Id. at 132-33

[11] Id. at 133

[12] Id.