2018 California Consumer Finance, Payments, and Financial Privacy Laws

The 2017 California legislative session was again unusually quiet in the areas of consumer finance, payments and financial privacy. Only a handful of bills were passed and signed; however, there have already been a number of potentially important bills introduced in 2018: so be alert!

For the full summary: Jun-Soter 2017 California Chapter Law Summary

This summary is provided as a joint effort of Paul Soter and Michelle Jun. We have recognized that our practices are highly complimentary and that our expertise overlaps but are not identical. We expect to continue to work together to provide a broad range of services to clients in the financial services industry.

Which is it: Money Transmission or MSB

MSB does not always mean money transmission.  This can be illustrated most simply by looking at the definitions provided in one state money transmitter law (California) and by FinCEN:

MSBs (as defined by FinCEN) are money service businesses, which include but are not limited to money transmission. MSBs include check cashers, issuers/sellers/redeemers of money orders and traveler’s checks, currency dealers, currency exchangers, and providers/sellers of prepaid access (includes prepaid cards). For more information, MSBs are defined at 31 CFR 1010.10

Money Transmission (as defined in California) includes selling or issuing payment instruments; selling or issuing stored value; or receiving money for transmission.  For more information, the California Money Transmission Act starts at Cal. Fin. Code 2000

** Please note that any information provided on this site is not legal advice, and does not create an attorney-client relationship.



2017 has arrived. Be on the lookout:

Young woman is looking through a binocularsNew Laws

2016 did not bring dramatic changes to financial services in California, but there are a few key changes to take note of:

  • Data breaches will need to be reported if encrypted information and the encryption key were acquired by an unauthorized person.
  • Licensing will be required for Student Loan Servicers and independent contractors of Residential Mortgage Lenders who engage in activities of loan processing or underwriting.
  • Added CFL licensing exemption for one commercial loan for a 12-month period.
  • Makes mandatory requirements for debt collectors regarding identity theft.
  • Extended Increased Access to Small Dollar Loans pilot program.

For the full summary: jun-soter-2016-california-chapter-law-summary

New Regulatory and Industry Developments

Along with all the predicted changes to the CFPB, as well as:

  • OCC‘s special limited purpose national bank charter proposal for companies who lend money, pay checks or receive deposits. Public comments will be accepted until January 15, 2017. Comments are to be sent to specialpurposecharter@occ.treas.gov
  • Fast Company’s 5 Fintech Startups to Watch
  • PYMT’s 2017 predictions



Finally, Prepaid Rules are Finalized

plastic cardsThe CFPB’s Final Prepaid Card (Account) Rules are finally here after many years in the making. Rest assured there will be plenty of legal analysis and summaries provided on the 1,689 page rule the CFPB published October 5.

Here are a variety of reactions–from an industry news provider, leading prepaid provider, trade association and consumer group:

American Banker: “The bureau’s new rules are poised to disrupt, if not destroy, this industry and eliminate thousands of prepaid options from retail racks and online stores. Simultaneously, the rules will fundamentally transform the nature of the products themselves, making them function more like the heavily regulated banks they sought to replace.”

Green Dot‘s Steve Streit: “Green Dot embraces the new rule as recognition that the industry we started more than 15 years ago continues to serve an increasingly significant role in the everyday financial lives of a growing number of American families. We fully support the CFPB’s mission to ensure fairness, integrity and consumer protections for all participants in the financial system.”

NBPCA (Network Branded Prepaid Card Association): “While we are still analyzing the lengthy final rule to determine its full impact, it is already clear that the CFPB has dismissed many of our serious concerns and moved forward with a rule that will harm the very consumers it aims to protect. Instead of fostering financial innovation and inclusion, the CFPB’s rule will ultimately limit access to an essential mainstream consumer product that helps millions of Americans participate in the digital economy, affordably manage funds, and safely hold money.”

Pew Charitable Trusts: “By staying the course, the bureau has closed the door on practices that could have compromised consumers’ ability to use these products safely and stay out of debt.”

Recent Doings By Consumer Financial Service Regulators

Young woman is looking through a binocularsConsumer Financial Service regulators at the federal and state level have been quite productive in 2016. To highlight a few:


Dwolla Consent Order (UDAPP application on the payment platform’s data security representations e.g. their “data-security practices ‘exceed industry standards,’ or ‘surpass industry security standards'”)

Proposed Rule to Ban Mandatory Arbitration Clauses in contracts for consumer financial products or services.

Online Payday Lending Study (Press Release Stated: “CFPB Finds Half of Online Payday Borrowers Rack Up an Average of $185 in Bank Penalties”)


A Survey on Consumer and Small Business Online Lenders (survey of 5 years of aggregate data from 13 online lenders)


Dealing in personal data? Seller Beware”  Warning to lead generators and data brokers in particular–do not sell personal data where there is no legitimate need for the financial information.

** Please note that any information provided on this site is not legal advice, and does not create an attorney-client relationship.