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DFPI seeks statutory fee increases to avoid insolvency; LAO recommends time‑limited approval and reporting
Summary
DFPI told the Assembly budget subcommittee that decades‑old licensing and exam fees are insufficient and an independent analysis shows the agency risks insolvency without fee increases; DFPI proposed trailer‑bill authority to raise selected fees effective July 1, 2025.
The Department of Financial Protection and Innovation (DFPI) told the Assembly Budget Subcommittee 5 that decades‑old licensing and examination fees have not kept pace with operating costs and that an independent Crowe LLP review found the department risks insolvency without fee adjustments. DFPI requested trailer‑bill authority to raise fees for selected programs and to allow the commissioner to set hourly exam rates tied to average costs.
DFPI officials told the committee that some program fees date to 1959 and many had no increases since 2013 (and earlier), and that new statutory mandates (for example, the Debt Collection Licensing Act, the California Consumer Financial Protection Law and the Digital Financial Assets Law) have added startup and operating costs that are not yet covered by program revenues. DFPI said it used enforcement fund balances to manage deficits but those reserves have declined and a structural deficit remains.
Crowe LLP and the department presented a five‑year projection showing a multiyear funding gap; a figure discussed in testimony put the total gap at roughly $200,000,000 between fiscal years covered in the study. DFPI proposed targeted fee increases covering some programs and asked for authority to implement annual adjustments and to set an hourly exam rate to align with costs.
LAO recommendations: Heather Gonzales of the Legislative Analyst's Office recommended the legislature approve fee increases on a three‑year limited‑term basis and require DFPI to report actual revenues collected and market conditions (especially for franchise, mortgage lending and escrow industries). LAO said the trailer bill as proposed would address only a portion of the projected shortfall and urged DFPI to provide a detailed plan for programs not addressed in the bill.
Industry concerns and specifics: DFPI officials and the fee study recommended sizable increases for certain license categories; witnesses and industry groups raised concerns about the scale and distributional effects of some increases. DFPI cited escrow and mortgage licensing fee increases (proposal language discussed an annual assessment not to exceed $7,215 per escrow location after study recommendations) and explained examination hourly rates could rise (the department noted a proposed exam hourly rate around $120). The Escrow Institute and mortgage industry representatives said the proposed increases would be large for many small firms and urged audits, efficiency measures and reconsideration of special assessments.
Quotes and attribution: “The study found that if the current fee structures remain unchanged, the department risks insolvency by 2025–26,” DFPI staff told the committee summarizing the Crowe LLP analysis. LAO analyst Heather Gonzales recommended a time‑limited approval and additional reporting to allow the legislature to observe industry responses and actual revenue collection.
Ending: Committee members expressed concern about large fee jumps for small firms and asked DFPI for follow‑up information; DFPI told the committee it planned annual monitoring of revenues and costs and said statutory authority for ongoing fee adjustments would help provide certainty to licensees. The trailer bill language was presented for legislative consideration; the transcript records no final committee action.
