California orders lenders to report on their handling of insurance payouts to LA fire survivors

SACRAMENTO, Calif. (AP) — California officials on Thursday will order mortgage lenders, including banks and credit unions, to report on how they have handled insurance payouts to survivors of the 2025 Los Angeles-area fires.

The California Business and Consumer Services Agency and the Department of Financial Protection and Innovation seek to speed up the release of insurance proceeds that lenders hold before distributing them to homeowners. DFPI has received more than 160 complaints about payment delays or other issues since January 2025. The state is giving lenders two weeks to submit their reports.

“It’s unacceptable that after running through a gauntlet of paperwork to file insurance claims, some wildfire survivors still have not gotten access to the funds they need to rebuild,” said Rohit Chopra, secretary of the Business and Consumer Services Agency.

The Palisades and Eaton fires destroyed more than 16,000 homes and other structures as they tore through residential neighborhoods in and around Los Angeles. Very few homes have been rebuilt since.

In July, Gov. Gavin Newsom wrote a letter to bankers’ associations and credit unions, saying fire victims rebuilding their homes reported that lenders sometimes hold on to those payouts for weeks before releasing them. He ordered the state to collect data on lenders that take longer than 10 days to distribute insurance proceeds and don’t develop a plan to speed up those payouts.

He signed a law last year requiring banks and credit unions to pay homeowners interest on insurance payments they hold.

Newsom said the state is taking crucial action Thursday to support families and business owners as they rebuild.

“The last thing survivors need is unnecessary red tape, delays, and barriers standing between them and the relief they deserve,” he said in a statement.

More broadly, questions about who should bear the financial costs of California’s wildfires have persisted throughout Newsom’s nearly eight years as governor. He took office in 2019, months after the deadliest and most destructive fire in state history, and immediately had to grapple with who should cover the costs of fires caused by utility equipment. In his final legislative session as governor, Newsom pushed a plan that would have required home insurers to bear more of the cost. But the deal fell apart when lawmakers couldn’t agree on a solution.

DFPI Commissioner KC Mohseni said the department will take action, including potentially through fines, against banks and credit unions that unnecessarily delay insurance payouts.

“It is critical that as homeowners and families continue to rebuild and recover, lenders do not stand in their way,” he said in a statement.