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  • California DFPI proposes new regulations under the Debt Collection Licensing Act

    State Issues

    On February 9, the California Department of Financial Protection and Innovation (DFPI) published a proposed rule to adopt new regulations under the Debt Collection Licensing Act (DCLA). Under the DCLA, a debt collector licensee is required to pay the DFPI Commissioner its “pro rata share of all costs and expenses incurred in the administration” of the DCLA, which is calculated in part based on the licensee’s “net proceeds generated by California debtor accounts,” but the term “net proceeds” was not defined in the statute. The proposed rule defines “net proceeds generated by California debtor accounts” to mean “the amount retained by a debt collector from its California debt collection activity.” The proposed rule also specifies the formulas used in calculating the net proceeds depending on the party, including a debt buyer, purchaser of debt that has not been charged off or in default, third-party collector, and first-party collector.

    Additionally, the proposed rule requires licensees to file an annual report with the DFPI and specifies the information required in the annual report, including (i) the number of California debtor accounts collected on in the previous year; (ii) the number of California debtor accounts in the licensee’s portfolio as of December 31 of the preceding year; and (iii) the number and dollar amount of California debtor accounts for which collection was attempted, but not successfully collected or resolved during the previous year. Comments to the proposed rule must be submitted by March 27.

    State Issues California Agency Rule-Making & Guidance Debt Collection Licensing Act

  • DFPI issues reminder to debt collection licensing applicants

    Recently, the California Department of Financial Protection and Innovation (DFPI) issued a reminder that starting January 1, 2023, the agency will begin approving applications under the Debt Collection Licensing Act. As previously covered by InfoBytes, the California governor signed AB 156 in September to allow any debt collector that submits an application to the DFPI commissioner by January 1, 2023, to operate pending the approval or denial of the application. DFPI reminded applicants that background checks will be performed at a later date. The period for individuals to provide fingerprints upon request from DFPI is extended from 60 to 90 days. Written notification will be sent to applicants through the Nationwide Multi-State Licensing System 90 days prior to fingerprinting being due. Additionally, DFPI stated that due to the delay in the application process, final approvals may be delayed. Further announcements will be issued in the coming weeks concerning conditional approvals, DFPI said, noting that it will provide at least 30 days' notice before implementing any changes to existing processes.

    Licensing State Issues State Regulators DFPI California Debt Collection NMLS Debt Collection Licensing Act

  • California amends certain debt collector licensing provisions

    On September 27, the California governor signed AB 156, which, among other things, amends various provisions of the Debt Collection Licensing Act to allow any debt collector that submits an application to the commissioner of the Department of Financial Protection and Innovation before January 1, 2023, to operate pending the approval or denial of the application. The amendments also authorize the commissioner to issue a conditional license pending the receipt and review of fingerprints and related information. Additional provisions state that a conditional license will expire under certain conditions, including the issuance of an unconditional license. The amendments also grant the commissioner authorization to deem an application abandoned. The amendments take effect January 1, 2023.

    Licensing State Issues State Legislation California DFPI Debt Collection Debt Collection Licensing Act

  • DFPI says debt collection licenses “unavoidably delayed”

    On May 23, the California Department of Financial Protection and Innovation (DFPI) sent a notice to applicants and prospective applicants announcing unforeseen delays in the issuance of licenses under the Debt Collection Licensing Act. The FBI informed DFPI that new changes are needed to state agency protocols for requesting federal background checks. Prospective licensees are encouraged to continue submitting applications through the Nationwide Multistate Licensing System. DFPI stated that during this delay (which “is necessary to enable the Department to effectuate the licensing background check required under the Debt Collection Licensing Act”), “applicants may continue to engage in business, and the Department will not take action for unlicensed activity against applicants who filed their applications after December 31, 2021.” DFPI will reach out to applicants with instructions for submitting fingerprints for background checks when the process becomes available, and advised licensees that “[f]or purposes of including California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.11, an applicant who has filed its application through NMLS may indicate “license number pending” or similar verbiage until a license is issued.” DFPI will notify applicants when it begins issuing licenses and encourages applicants to check the Department’s website for updates.

    Licensing State Issues California DFPI State Regulators NMLS Debt Collection Licensing Act Debt Collection

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