Frame of a home being rebuilt in Pacific Palisades. Photo Credit: YouTube.
State agencies mandate full disclosures from banks following 160 complaints of withheld insurance money from fire survivors.
By Sarah Lin.
State financial watchdogs launched a formal inquiry Thursday targeting mortgage lenders across California to determine if institutions are unlawfully withholding insurance payouts intended for survivors of the Eaton and Palisades fires.
The Department of Financial Protection and Innovation, alongside the Business and Consumer Services Agency, issued an administrative order requiring banks and credit unions to detail their handling of property loss, personal property, and living expense proceeds. State investigators are probing whether lenders intentionally delayed releases, failed to offer clear appeal options, or improperly retained insurance money after loans were completely paid off.
Since early 2025, state officials have received more than 160 formal consumer grievances detailing bureaucratic roadblocks with escrowed rebuilding funds. In response, regulators ordered lenders to provide comprehensive accountings by Sept. 30, 2026, documenting all received insurance funds, disbursement timelines, and explicit justifications for any withheld capital.
“Licensees must provide written explanations to BCSA and DFPI as to whether all funds were disbursed to survivors, how long the disbursements took, and reasons for any delays,” state regulators noted in Thursday’s filing, cautioning that non-compliant institutions face potential enforcement under state and federal consumer protection laws.
The regulatory crackdown expands on executive actions taken earlier by Gov. Gavin Newsom, who pressed financial trade groups over escrow delays while overseeing legislation passed in August 2025 requiring lenders to pay homeowners interest on withheld post-loss insurance funds.
State officials urged any fire survivors encountering payment delays or administrative friction to submit confidential consumer complaints directly through the DFPI online portal.