The Greene Room
The Department of Financial Protection and Innovation (DFPI) is often the target of complaints leveled by those who tumble within its powerful wake. In the course of the past decade, I have heard grumblings about the length and cost of the licensing process, the burden of preparing commercial finance disclosures, the complexity of annual reports, the disruption caused by surprise audits, the strict interpretation of certain key provisions of the California Financial Code and other activities that may adversely affect the bottom line of lenders and brokers alike.
I am often asked whether there is any recourse against a state agency like the DFPI. Everyone has heard the time worn adage “you can’t fight city hall.” Well, in fact, most of the time you can fight city hall, as well state agencies, like the DFPI. Still, the more appropriate concern is whether you can beat them, and at what cost.
A recent case will be worth watching. Two trade associations and a licensed debt collector filed a putative class action in the San Francisco Superior Court alleging that the DFPI’s annual debt collector licensing assessments violate the Debt Collection Licensing Act, Proposition 26 (2010), and the California Administrative Procedure Act. The case is called ACA International et al vs. California Department of Financial Protection and Innovation, filed on April 7, 2026. [see the link below to the class action petition.
The class action challenges 1243 annual assessments statewide. The basis of the claims is that the assessments exceed regulatory costs, invoking a provision of Prop 26 which mandates that “regulatory fees must reflect the actual cost of issuing licenses, performing investigations, or enforcing regulations, rather than acting as general revenue sources.”
The lawsuit also alleges that the assessment formula was not adequately disclosed to licensees. In addition, the petition claims that the advisory process was flawed.
The DFPI has many sources of revenue, including annual assessments, renewal fees, and application fees. There are also penalties, fines, and assessments, which can amount to tens of thousand of dollars or more.
I will be keeping a close eye on this case. If the ACA is victorious, it could give rise to legal challenges by commercial finance licensees or their trade associations claiming that the cost of becoming and remaining a CFL licensee is higher than the law permits.
Stay tuned…
Read more about the case here.
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