FinTech Innovation Webinar Recap at California’s Newest Financial Regulator | Davis Wright Tremaine LLP
[co-author: Michael Buckalew]
On October 1, 2021, DWT’s Department of Financial Protection and Innovation (DFPI) working group hosted a discussion with Christina Tetreault, Deputy Commissioner of DFPI Financial Technology Innovation Office (OFTI), to get his point of view on the new office.
Tetreault provided information on the creation of the OFTI, its organization and its priorities. The office is particularly focused on the intersection of people, technology and money. A recording of the full discussion is available here.
Why was OFTI created?
Tetreault noted that OFTI was created, in accordance with California’s Consumer Financial Protection Act, to meet the “great promise of a more effective and efficient delivery of financial products and services to consumers” and risk associates for consumers. OFTI aims to clarify the expectations of entrepreneurs for responsible mining, while creating innovative products and services for Californians.
How is OFTI organized and structured?
The office currently has four roles:
- The deputy commissioner of OFTI (Tétreault).
- Senior Counsel (Adam Wright, who recently joined OFTI).
- An analyst, who will help with engagement, support staff during office hours, work with a researcher, and hopefully organize summons.
- A researcher, who will have extensive experience in collaborating and designing forward-looking research.
In addition, the researcher will have market surveillance functions complementary to the DFPI’s market surveillance, which is modeled on the organization of the Consumer Financial Protection Bureau. The first topics of interest will include loans, regulatory technology (RegTech), the various applications of machine learning, payments, etc.
There are currently three priorities for the office:
- Standing the OFTI: This means establishing regular office hours and functions of OFTI, as well as developing the co-creation process – which will be determined by the roles of the four members of OFTI.
- Determination of impact priorities: The priorities of the office remain to be determined. However, Tetreault made it clear that removing obstacles is a clear priority for OFTI, but that his office needs help identifying these obstacles in order to overcome them. Another priority for the office is to make ideas workable, but the ultimate authority over policy directions will come from the DFPI Commissioner.
- Obtain the name of the office in the public sphere: Meeting people inside and outside the DFPI is a key priority. Tetreault sees the efficiency of the office directly related to the way it works with internal and external stakeholders.
OFTI will seek to conduct in-reach within the rest of the DFPI to see what their colleagues are doing and how they can help them. Additionally, she expects the meetings not to be one-off events but rather a series of dialogues.
Activities / Functions
For the activities and functions of OFTI, there were three main themes:
- Commitment: Although OFTI does not offer legal advice, it nevertheless intends to meet with companies, their lawyers, professional associations, academics and others to see what they know, what they need. and what questions they have. Tetreault emphasized the OFTI’s open door policy, with one exception: execution. Execution conversations must be strictly separated from those with OFTI.
OFTI will take all other inquiries or complaints and forward them to the DFPI Ombudsman, the Advocate General or the Customer Support Office, as the case may be. Tetreault plans to create a newsletter to facilitate ongoing engagement.
- Research: OFTI seeks to study the process of starting a business, what awaits businesses and consumers, and where the opportunities and risks lie. Research will collect massive amounts of data and convert it into a more accessible and digestible form.
- Synthesis and education: Tetreault said the office’s intention is to take and apply OFTI’s research through education and dialogue sessions on hot topics. Ideally, this would create a collaborative ecosystem producing responsible innovation.
In addition to the topics discussed above, a number of other relevant points were raised during the discussion.
- OFTI assumptions: The bureau assumes that businesses want to be compliant and that protecting consumers is not necessarily at odds with innovation.
- Buy now, pay later (BNPL): In response to a question about the DFPI’s position on BNPL, Tetreault explained that the state has already taken action on this problem (for example, by concluding memoranda of understanding with several BNPL suppliers), but the OFTI is happy to put people in touch with information on this topic.
- Cryptocurrency: OFTI has seen a huge spike in consumer interest in digital assets. It has also seen an increase in consumer complaints, most often about fraud, with cryptocurrency being the medium of exchange. In particular, Tétreault noted that young consumers and consumers of color are increasingly numerous investors in this area, and OFTI is extremely interested in this area.
- Money Transmission Modernization Act: A DFPI member served on the Conference of State Bank Supervisors committee that drafted the model legislation, suggesting it could be an area of interest, but Tetreault did not confirm.
- Mortgage and tenant relief: The state has pledged to get relief on rents, mortgages and utilities through the Housing is the Key website.
We will continue to monitor the developments of OFTI and look forward to monitoring its progress under Tétreault.