California Regulator Opens Licensing Application For Debt Collectors

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Debt collectors operating in California may now submit applications for licensure by the Department of Financial Protection and Innovation (DFPI) in compliance with the state’s newly enacted Debt Collection Licensing Act (DCLA).

On September 1, 2021, the DFPI announced that it opened its license application for all debt collectors in California, representing the first step in the expansion of state oversight of the debt collection industry.  Debt collectors, debt buyers, and debt collection attorneys operating in California may now submit license applications to the DFPI online at the Nationwide Multistate Licensing System (NMLS).

Debt collectors must submit a license application prior to January 1, 2022 to continue operating in California next year.  Applicants must sign their applications under penalty of perjury and submit to a criminal background check.  Once a debt collector has submitted an application, they may continue operating as a debt collector in California while the application is pending.  If an application is submitted after December 31, 2021, the applicant will be required to wait for the issuance of a license before they can continue to operate in the state, according to the DFPI.

The DCLA was passed by the California legislature as Senate Bill 908 and signed into law by Governor Gavin Newsom in September 2020.  It was passed along with legislation that created the DFPI, which is essentially a state version of the Consumer Financial Protection Bureau, or “mini-CFPB” as LenderLaw Watch has previously reported.

The DCLA also allows the DFPI to collect borrowers’ complaints and enforce violations of California debt collection laws.  It will give consumers a single location to check whether companies are licensed, and whether they have been subject to any enforcement actions, including license suspensions or revocations, according to the DFPI.

“This is a win for California consumers and positions us alongside a growing number of states who offer direct oversight of the industry,” DFPI Senior Deputy Commissioner of the Consumer Financial Protection Division Suzanne Martindale said in the news announcement.  “The Department will now have the authority to review financial information from prospective licensees, conduct formal examinations, and pursue legal action against those who engage in unfair, deceptive, or abusive acts or practices or violate California’s fair debt collection laws.”

The DFPI said that it expects to license thousands of entities over the next two years.  It has created a Debt Collector’s web page and list of FAQs as resources.  A checklist of license application requirements is also available on the NMLS.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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