Brace Yourselves: California Debt Collection Licensing is (Probably) Coming

California shows that a pandemic won't slow its government down. In addition to California's Attorney General finalizing CCPA regulations roughly two weeks ago, California's legislature has now passed a new piece of legislation, the Debt Collection Licensing Act (SB 908). The Act is now awaiting the governor's review. If he chooses to, Governor Gavin Newsom has until the end of September to veto the bill. If passed, the requirements would go into effect on January 1, 2022.

Licensing

As its name suggests, the Act calls for the licensure, regulation, and oversight of debt collectors by the Commissioner of Business Oversight from the Department of Business Oversight (DBO). It would require debt collectors located in California and those who collect debts from California residents, regardless of office location, to obtain a license. It would also require such businesses to comply with regulatory oversight, including examination and reporting, of DBO.

According to the Legislative Council's Digest:

This bill would require each licensee to, among other things, file reports with the commissioner under oath, maintain a surety bond, and pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of these provisions, as estimated by the commissioner. The bill would authorize the commissioner to enforce these provisions by, among other things, adopting regulations, performing investigations, suspending a license, issuing orders and claims for relief, and enforcing the provisions, as specified.

Actions Forbidden by the Act

The Act prohibits certain acts and practices. Some of these are nothing new to debt collectors, such as not using profane language, annoying consumers by causing their phones to ring repeatedly, or communicating so frequently with consumers to the point where it constitutes harassment.

A new addition to the prohibitions includes sending communications--either written or digital--without displaying the California license number in at least 12-point type.

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Advisory Committee

The good news for debt collectors is that the Act requires DBO to create a Debt Collection Advisory Committee to advise the Commissioner on matters related to debt collection. The committee would consist of 7 members, one of which must be a consumer advocate. Committee members shall be appointed by the Commissioner and shall serve 2-year terms.

Potential Rulemaking

The Act also gives authority to the Commissioner to adopt regulations necessary for the DBO to be prepared to perform its regulatory duties by January 1, 2022. This means that we very well may see proposed rulemaking within the next year.