DFPI Increases Equity Requirements For California Finance License

Ken Greene is an attorney with the Law Office of Kenneth Charles Greene. To contact Ken, email: ken@kengreenelaw.com

The California Department of Financial Protection and Innovation (“DFPI”) recently made an announcement (rather quietly, in my opinion) that may prove disturbing to anyone applying for or maintaining a California Financing Law (CFL) lender of broker license. It has raised the equity requirement rather dramatically. Brokers must have and maintain a $50,000 net worth; Lender/Brokers must have and maintain a $250,000 net worth. This applies to every CFL applicant and licensee.

After a year in which licensees, particularly lenders (termed “providers” by the DFPI) shouldered the significant burden of the new disclosure laws, this increase will not be welcome news. One wonders just what the DFPI is thinking as lenders and brokers stop lending in California.

Maybe that will change next year with the departure of Commissioner Clothilde V. Hewlett. The Commissioner announced her retirement at the end of this year after serving in that position since 2021. Her background in consumer services and affairs, as well as victims’ compensation is certainly commendable. However, this may have translated to more oversight than the commercial finance industry needs or warrants. In this writer’s opinion, a bit more of Adam Smith’s laissez-faire economic philosophy is warranted. If the State of California truly wants to innovate and protect, the scope of those responsibilities should include not only protecting the borrowers from unscrupulous lenders, but protecting lenders from overbearing legislation which chases them out of the state. This is a disservice not only to the lenders, but to borrowers who are then deprived important channels of finance.

The Law Offices of Kenneth Charles Greene present this article. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Offices of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene is prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author..