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Consumer advocates urge stronger state financial oversight if federal protections are reduced
Summary
The executive director of the Consumer Federation of California told the Little Hoover Commission that the state’s Department of Financial Protection and Innovation should be resourced and prepared to fill gaps if federal consumer‑finance enforcement is curtailed, citing recent federal personnel cuts and new state crypto licensing mandates.
Robert Harel, executive director of the Consumer Federation of California, told the Little Hoover Commission on April 24 that the proposed reorganization should preserve and strengthen state consumer‑financial oversight—particularly the Department of Financial Protection and Innovation (DFPI).
Harel noted that DFPI’s remit already includes state‑chartered banks and a wide range of nonbank financial services, and he urged the commission to consider resourcing DFPI to meet a changing enforcement landscape. “Last week, the new leadership at the Federal Consumer Financial Protection Bureau … attempted to do an almost 90% reduction in force. That is to say, 1,483 of the people who work for the Federal Consumer Financial Protection Bureau were going to be laid off,” Harel said, arguing the state should be prepared to pick up consumer‑protection responsibilities that could be weakened at the federal level.
Harel said DFPI was created in 2020 to cover a broader set of financial products and services including fintech players and nonbank lenders, and that California should be ready to enforce consumer protections for new digital financial products. He pointed to the state’s work to license digital‑asset firms — “AB 39” and related implementation — as an example of where DFPI will need to stand up new programs.
Harel also urged reexamination of functions inside the Department of Consumer Affairs, which he said has historically struggled in some areas to protect consumers — for example in oversight of private post‑secondary schools. He said reorganization offers an opportunity to refresh structural arrangements and ensure agencies have the funding, staffing and technical capacity to enforce consumer protections.
In response to commissioners’ questions about federal preemption and the limits of state authority over federally chartered institutions, Harel acknowledged those constraints but said state regulators already oversee significant activity—especially among state‑chartered banks, credit unions, and a broad range of licensed nonbank financial services—and that the shift in federal enforcement priorities increases the value of robust state enforcement.
Ending: Consumer advocates asked the commission to recommend that DFPI and the consumer protection elements of the reorganization be given the staffing, funding and statutory tools necessary to enforce consumer protection in an evolving, technology‑driven financial marketplace.
