BILL ANALYSIS �
AB 1396
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1396 (Committee on Banking and Finance) - As Introduced:
March 6, 2013
Policy Committee: Banking and
Finance Vote: 12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill would change the name of the proposed Department of
Business Oversight (DBO) to the Department of Financial Services
(DFS) and transfers duties from the Department of Financial
Institutions (DFI) and Department of Corporations (DOC) to DFS.
FISCAL EFFECT
Minor and absorbable fiscal impact.
COMMENTS
1)Purpose . According to the author, the name DBO does not convey
in any sense that the new department is the regulator of state
licensed financial service entities. The author states that
during the recent subprime lending and foreclosure crisis, the
Banking and Finance committee staff received numerous
inquiries from consumers unsure of what regulator they should
contact regarding a complaint concerning a mortgage loan
originator, a bank or other financial services provider.
According to the author, DBO could further lead to confusion
as consumers search for help, or new startup financial service
providers seek a license. Other financial regulators in the
United States have a term in their official title that denotes
a concentration on matters concerning finance and banking. It
is for these reasons that changing DBO to DFS is necessary and
fundamental, the author argues.
2)Background . Last year the Legislature acted on the Governor's
Reorganization Plan No. 2 (GRP #2) which assigns and
AB 1396
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reorganizes the functions of state government among executive
offices and agencies. Among the many changes was the
reorganization of DOC and DFI into a new department.
3)What is in a name ? According to background papers prepared as
part of the GRP #2 process:
"The creation of a new department affords an important
opportunity to rectify a decades-old problem with the name
"Department of Corporations." Many consumers and businesses
mistakenly contact the Department of Corporations about
matters unrelated to financial services regulation.
Historically, ten percent of all inquiries to the DOC call
center (where reports on fraudulent activity by DOC
licensees are reported) are referred to the Secretary of
State, who actually issues business licenses to
corporations. The need to accurately "brand" the
department has been identified in past DOC strategic plans
as well.
The name "Department of Business Oversight (DBO)" is
unlikely to clarify the purpose of the DOC or DFI. There is
concern that the DBO title will lead to even greater
business and consumer confusion and unnecessary diversions
of state resources. Additionally, the DBO title is not
easily distinguished from the Department of Consumer
Affairs and the term "oversight" is redundant.
Among states with the most significant banking activity, the
names of their banking and financial regulators denote their
respective regulatory purview making it all the more important
that California also has a regulator body with a title that
denotes its function and status. For example,
New York- Department of Financial Services
Delaware-Office of State Banking Commissioner
Florida- Office of Financial Regulation.
Illinois- Office of Financial and Professional
Regulation.
Texas- Department of Banking
AB 1396
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1)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081