California SB825 and AB487 Join CARS Act Creating Significant Consequences for Auto Lenders
In a recent “Industry Insights” (October 2025), prepared monthly for F&I Sentinel clients and partners, we covered the impacts of the three bills recently passed in California that will shape the Auto Finance industry.
Notably, while passage of the CARS Act (SB766) has drawn much of the attention, Assembly Bill 487 and Senate Bill 825—expanding the Department of Financial Protection and Innovation’s (DFPI) enforcement authority—also carry important implications for service contract administrators, auto finance companies, and their dealer partners.
The effects of the former are limited to vehicle service contract administrators, but the enforcement mandate established by the latter—created by removing an existing exemption—places market actors in the crosshairs of state as well as federal regulators.
California as a Regulatory Trendsetter
Even lenders that do not fund vehicles in California need to pay attention to its legislative activity as the trend toward increased state-level enforcement and regulatory modernization grows, and all three bills have details requiring close attention and careful analysis. Leaving the sizeable requirements of the CARS Act for a separate discussion, highlights from the other two bills include:
- AB487 amends the state’s insurance code pertaining to service contract administrators. It clarifies that disbursing refunds falls within the definition of a service contract administrator, alongside collecting funds, paying for repairs, and remunerating claims.
- SB825 expands the unfair, deceptive, or abusive acts and practices (UDAAP) authority of the DFPI. Previously, the California Consumer Financial Protection Law (CCFPL) exempted entities holding “certain licenses, certificates, or charters issued by the department,” which included licensed finance lenders. The new law removes this exemption, allowing licensed entities to be penalized for UDAAP violations and allows new penalties.
From its inception, proponents of SB825 have cited changes at the Consumer Financial Protection Bureau (CFPB) as justification for expanding the DFPI’s “independent enforcement authority.” Traditionally, the DFPI pursued UDAAP-related legal action against exempted entities with the authority granted to states by the Consumer Financial Protection Act. However, that act requires the DFPI to consult with the CFPB prior to pursuing a claim.
SB825 frees the state regulator from these procedural constraints, allowing it to pursue alleged UDAAP violations separately from, or concurrently with, federal regulators.
Both AB487 and SB825 are due to go into effect on January 1, 2026.
The Future of Auto Financing
California’s new laws require in-depth consideration and may likely affect your business. We anticipate a ripple effect in other states, with legislatures continuing to enact new laws, and as auto lenders re-examine portfolios tied to high-risk aftermarket products.
If you are interested in learning more about how California’s new regulations or other auto finance news impacts your operations, connect with F&I Sentinel to schedule a no-obligation meeting with a member of our Concierge Compliance team today.
The information provided in this post does not, and is not intended to, constitute legal advice; instead, all information, content, and materials referenced are for general informational purposes only. Readers should contact their attorney to obtain advice with respect to any particular legal matter.
