The California DFPI issues proposed regulations to implement new Debt Collection Licensing Act

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On April 23, 2021, the California Department of Financial Protection and Innovation (“DFPI”) issued proposed regulations to implement the Debt Collection Licensing Act (“DCLA”).

Debt collector licenses are required beginning on January 1, 2022 but a debt collector that applies for a license before that date can continue to operate while the application is pending.  In its Notice of Rulemaking Action, the DFPI states that it anticipates that final rules will become effective on or about November 19, 2021, thereby allowing debt collectors to apply for a license before January 1, 2022.

Specifically, the DFPI is proposing to add the following sections to subchapter 11.3 of title 10 of the California Code of Regulations setting forth the requirements for obtaining a debt collection license under the DCLA:

  • Section 1850 – Defines terms used in the regulations.
  • Section 1850.6 – Requires electronic filing of license application and related information through the Nationwide Multistate Licensing System (NMLS).
  • Section 1850.7 – Sets forth the license application and information requirements.
  • Section 1850.8 – Requires appointment of the commissioner as agent for service of process.
  • Section 1850.9 – Requires fingerprinting through the California Department of Justice.
  • Section 1850.10 – Requires investigative background report for non-residents of the U.S.
  • Section 1850.11 – Provides notices concerning information practices and privacy.
  • Section 1850.12 – Sets forth the process to challenge information in NMLS.
  • Section 1850.13 – Provides for sharing information with other government agencies.
  • Section 1850.14 – Clarifies “financial responsibility” for purposes of denying a license.
  • Section 1850.15 – Sets forth grounds for denying a license.
  • Section 1850.16 – Requires designated email address to receive communications from the department.
  • Section 1850.30 – Provides process for reporting changes to information in the license application.
  • Section 1850.31 – Provides process for reporting new officers, directors and other key personnel.
  • Section 1850.32 – Provides process to register new branch office or change of existing branch office.
  • Section 1850.50 – Requires surety bond of at least $25,000 and sets forth the bond form.
  • Section 1850.60 – Provides license is effective until revoked, suspended or surrendered.
  • Section 1850.61 – Provides process to surrender license.

The 45-day public comment period for the proposal ends on June 8, 2021.  Comments can be sent by email to regulations@dfpi.ca.gov or by regular mail to Department of Financial Protection and Innovation, Attn: Sandra Sandoval, 300 S. Spring Street, Suite 15513, Los Angeles, California 90013.

We know that many in the industry have a number of questions about whether they will need to obtain a license, how existing licenses may (or may not) obviate the need to obtain a license, the scope of exemptions, and a host of other topics.  This is a critical opportunity to raise those questions and advocate for the desired outcome.  Our firm is already working with the DFPI on a number of matters and stands ready to assist in the comment submission process.

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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