California’s new consumer agency targets junk fees, kickbacks and ‘corrupt practices’
Former CFPB Director Rohit Chopra says California will pursue companies that use illegal fees, hidden kickbacks and manipulative schemes to drive up consumer costs.
California’s newly reorganized consumer-protection agency is preparing to crack down on companies that use hidden fees, kickbacks and other questionable practices to inflate the prices families pay.
Rohit Chopra, the former director of the Consumer Financial Protection Bureau, said a major priority of the California Business and Consumer Services Agency will be identifying “harmful and corrupt practices” that raise costs for consumers and honest businesses.
The Cabinet-level agency officially began operating July 1, with Chopra serving as its first secretary.
“Californians and families across the country are feeling squeezed by higher prices, fees, and other costs,” Chopra wrote in an agency statement. He accused federal regulators and law-enforcement agencies of increasingly overlooking illegal charges and other abuses.
The agency will focus on whether companies clearly disclose prices and product features and whether consumers are being tricked or trapped into paying for products or services they do not want, Chopra said.
James R. Hood
Potential targets include undisclosed kickbacks, manipulative sales practices and businesses that have avoided federal scrutiny because of political connections or favoritism, he said.
More than a ‘California CFPB’
The new agency has sometimes been described as a state-level version of the CFPB, but its structure is broader.
It serves as an umbrella over several existing regulatory departments, including:
- the Department of Financial Protection and Innovation;
- the Department of Consumer Affairs;
- the Department of Real Estate;
- the Department of Alcoholic Beverage Control;
- the Department of Cannabis Control; and
- the California Horse Racing Board.
Those departments regulate banks, fintech companies, mortgage and real-estate businesses, contractors and dozens of other licensed industries.
The underlying departments retain their own enforcement and rulemaking powers. Chopra’s agency will help establish priorities and coordinate investigations across them.
That arrangement gives California multiple ways to pursue alleged misconduct. Regulators may conduct examinations, seek civil penalties or restitution, bring lawsuits and, in serious cases, revoke a company’s license to operate in the state.
Some departments may also act against violations of federal law, not just California law, Chopra said.
High-risk companies will get the most attention
Chopra said regulators will direct audit and inspection resources toward businesses posing the greatest risks rather than burdening smaller companies that present little or no danger to consumers.
The agency also plans to improve systems through which consumers, businesses and whistleblowers submit complaints and law-enforcement tips.
That could make complaints more than a way for individual consumers to seek help. A concentration of reports involving one company, fee or sales tactic could help regulators identify a broader pattern.
Likely areas of attention include junk fees, fintech products, earned-wage access services, buy now, pay later loans, artificial intelligence, consumer-data practices and potentially deceptive or abusive financial practices.
California’s rules often spread nationally
Although the agency’s direct authority is limited to California, its actions could have nationwide consequences.
California’s market is so large that companies frequently adopt its requirements across the country rather than operate one system for California residents and another for everyone else.
That means an enforcement case involving subscription charges, lending fees, payment products or deceptive disclosures could prompt a company to change its practices nationally.
The agency could also work with attorneys general and regulators in other states on joint investigations, expanding the reach of individual cases.
Chopra said such cooperation will become more important as federal agencies reduce consumer-protection and competition enforcement.
A continuation of Chopra’s CFPB agenda
As CFPB director during the Biden administration, Chopra made hidden and excessive fees a central enforcement and policy issue.
The bureau pursued banks, credit-reporting companies, mortgage servicers, payment firms and other financial businesses, frequently seeking refunds for consumers as well as penalties.
Many of those policies and enforcement priorities have since been reversed or scaled back by the Trump administration.
California Gov. Gavin Newsom appointed Chopra to lead the new agency, saying the state needed an aggressive consumer advocate as the federal government retreated from enforcement. Chopra’s appointment remains subject to state Senate confirmation, although he may serve in the meantime.
What consumers can do
California residents who encounter hidden fees, misleading pricing, unauthorized charges or high-pressure sales tactics should:
- save advertisements, contracts, receipts and screenshots;
- request an itemized explanation of all charges;
- dispute unauthorized charges promptly;
- complain to the agency that regulates the company or profession; and
- report patterns involving kickbacks, falsified records or deliberate deception.
Consumers may submit complaints through the California Business and Consumer Services Agency, which directs them to the appropriate department.
Even consumers outside California may benefit from the agency’s work. Major settlements, licensing actions and disclosure requirements imposed in California often lead companies to revise their practices nationwide.
