Penalties for failing to register include the greater of either $5,000 for each day the violation or failure to pay continues or $2,500 for each act or omission in violation, whichever is less.
The California Department of Financial Protection and Innovation (DFPI) has issued guidance under the California Consumer Financial Protection Law (CCFPL) that impacts private postsecondary colleges operating in the state. The guidance provides that such institutions must register with DFPI as providers of postsecondary education financing even if they allow students to make payments on their tuition, while enrolled in college, with no fees or interest assessed on the tuition balance. Institutions should consider immediately registering with DFPI to avoid substantial potential penalties and other legal liabilities.
In 2020, the California Legislature passed the CCFPL as AB 1864. This law provided the DFPI with authority to oversee several areas of the financial marketplace, including private postsecondary education financing.
On February 7, 2025 (a week prior to the February 15, 2025, effective date), DFPI issued a notice to private postsecondary education institutions to register with DFPI if the institution is “engaging in the business of offering to provide or providing postsecondary education financing to California residents.” As described in Section 1003 of the CCFPL regulations, “education financing” means:
[C]redit extended for the purpose of funding postsecondary education and the cost of attendance at a postsecondary institution, including, but not limited to, tuition, fees, books and supplies, room and board, transportation, and miscellaneous personal expenses.
DFPI recently issued guidance on the postsecondary education financing section of their website, stating that tuition-only payment plans, including those that do not charge interest or finance charges, meet the definition of education financing under the CCFPL and require registration. Based on this, it appears that DFPI is taking the position that schools that offer payment plans to students who are California residents (including through a retail installment contract) must register with DFPI. Instructions for registering can be found on DFPI’s website. Public postsecondary and private nonprofit institutions are exempt from registration.
Penalties for failing to register include the greater of either $5,000 for each day the violation or failure to pay continues or $2,500 for each act or omission in violation, whichever is less. If the violation is knowing, the penalty can increase to either 1 percent of the institution’s total assets up to $1 million for each day the violation continues or $25,000 for each act or omission in violation. Institutions may also risk additional legal liabilities and sanctions by additional government regulators and accreditors for failing to comply.
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