Commissioner Manuel P. Alvarez

While the state’s newly expanded Department of Financial Protection and Innovation (DFPI) is focusing on hiring new employees to meet its increased workload, the department will be looking at IT options in the future, the department’s spokesperson has told Techwire.

“We remain focused on hiring in these early stages. We expect future functional leaders to help assess tech optimizations,” Communications Director Mark Leyes said last week. “DFPI will leverage existing IT systems as part of our program administration to the extent possible, but also will use this as an opportunity to assess opportunities for improvement in areas such as our consumer database, as one example.”

Language in the Budget Change Proposal, drafted by department officials to persuade lawmakers to increase funding for the 90 new positions the new department will fill during the next three fiscal years, outlines some of the expected technology investments.

The renamed department, the former Department of Business Oversight, will officially begin its expanded operations on Jan. 1 after Gov. Gavin Newsom signed AB 1864 by Assembly Member Monique Limón, D-Santa Barbara, on Sept. 25. The new name, however, took effect on Sept. 29. It is within the Business, Consumer Services and Housing Agency

Officials said DFPI will have expanded enforcement powers to protect California consumers from pandemic-inspired scams, promote innovation, clarify regulatory hurdles for emerging products and increase education and outreach for vulnerable groups. (The department is recruiting through Oct. 21 to fill a deputy commissioner position, a Career Executive Assignment.)  

In a press release, department Commissioner Manuel Alvarez said the new law also creates an Office of Financial Technology Innovation that will engage with new industries and consumer advocates to encourage consumer-friendly innovation and job creation in the state.

The new office “will help us cultivate financial innovation and allow the department to track and regulate emerging financial products so we can serve consumers and licensees in a more meaningful and efficient way,” he said.

Based in San Francisco, the office will alert department officials to early signs of emerging products and services and have three primary functions:

  • Engage with new industries and entrepreneurs to encourage innovation and job creation in California;
  • Modernize laws relating to industrial banks to enable financial technology (fintech) companies to operate nationwide with a single DFPI registration;
  • Research new industries, new and innovative technologies, emerging trends, and the integration of new technologies into traditional financial services.

Another new element will be the Division of Consumer Financial Protection, which will include a new Market Monitoring, Consumer Research, Insights and Analytics Office charged with keeping up with emerging financial products such as cryptocurrency. Leyes said this office will probably account for most of the new technology that will be purchased, both products and services, as the function will be built from scratch.

The new office is expected to monitor markets, do retrospective reviews and analyze consumer behavior. Included will be monitoring the impact of emerging technologies on the terms and characteristics of consumer financial products and services.

The other new office within the division will focus on consumer education, which among other duties will develop Web tools and resources to help consumers make better-informed financial decisions.

Finally, the new department will register and supervise an estimated 9,000 people offering financial products or services who are not currently regulated. The program will process registration applications and collect annual fees and assessments.

The reorganized department would increase IT resources to support innovation strategies. To begin that process, the department will add six permanent positions in the Information Technology Office — three in 2020-21 and three more in 2021-22. The new employees will:

  • Onboard new CFP personnel with IT equipment and software tools
  • Initiate a project to augment the department’s network bandwidth, data storage and data backup architecture
  • Gather business and automated process requirements, perform alternative system solutions analysis and engage in the funding process to incorporate functionalities into an electronic database system
  • Initiate project management oversight of the procurement, development and integration of automated processes into an electronic database system

With enhanced powers and authorities, state officials said, the expanded department, modeled after the federal Consumer Financial Protection Bureau, can be a leader in providing consumer financial protection to California. It is expected to focus on products targeting groups said to be least able to protect themselves, including seniors, new Californians, service members and students.