SECTION 1.

 The Legislature finds and declares all of the following:

(a) According to the Federal Reserve Bank of San Francisco, low-income consumers and consumers of color are less likely to have traditional banking relationships than consumers with average incomes or White consumers. Disparities in access to basic financial services is one factor that results in disparities in access to credit. Across mortgage, small business, and auto loans, Black and Hispanic consumers are more likely to be denied credit or receive higher interest rates when they do get a loan. Secret shopper studies have shown that Black and Hispanic consumers receive different information from bankers when applying for loans as well. The more limited availability of traditional, affordable credit may push these consumers into predatory products or those with very high interest rates, like payday loans, or may result in reliance on traditional—but more expensive—types of debt, like credit cards.

(b) The Department of Financial Protection and Innovation regulates and oversees providers of financial services and products in California. Among its duties, the department administers licensing programs that cover state banks, state credit unions, independent mortgage companies, nonbank lenders, and certain financial technology companies that provide payment services or make loans. While the department examines these companies for compliance with the requirements and prohibitions of applicable licensing laws, these laws do not authorize or direct the department to evaluate how well these companies are serving the needs of underserved communities.

(c) In 2020, the Legislature passed and the Governor signed Assembly Bill 1864 (Limón) (Chapter 157), which provided the Department of Financial Protection and Innovation (DFPI) with flexible authority to regulate and oversee providers of financial services that are not covered by existing licensing laws. The authority provided by AB 1864 was modeled after the authority provided by Congress to the Consumer Financial Protection Bureau, including authority to investigate and bring enforcement actions against unfair, deceptive, or abusive acts or practices. On March 16, 2022, the Consumer Financial Protection Bureau announced that it would expand its antidiscrimination efforts to combat discriminatory practices across the board in consumer finance, as such practices may constitute an unfair act or practice.

(d) In 1977, the federal government enacted the Community Reinvestment Act, which establishes a continuing and affirmative obligation for banks to help meet the credit needs of the local communities in which they are chartered and instructs the federal banking regulators to assess banks on how well they meet the credit needs of their communities. The Community Reinvestment Act does not cover credit unions, independent mortgage companies, or other nonbank financial service providers, all of which have grown in importance and market share in the financial services industry since 1977.

(e) It is the intent of the Legislature to enact this division to begin the process of increasing the priority of equity and the needs of underserved communities in the supervisory and regulatory activities of the Department of Financial Protection and Innovation, as such activities relate to licensees of the department.