Department of Financial Protection and Innovation Opens Comments for Debt Collection Licensing Act Second Proposed Rulemaking

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By Alexandra Loyo

On August 19, 2021, the Department of Financial Protection and Innovation (DFPI) published notice of the invitation to comment on a second rulemaking under SB 908 (Wieckowski) (Chapter 163, Statutes of 2020), otherwise known as the Debt Collection Licensing Act (DCLA). According to the notice, the DCLA, enacted in September 2020 by the Legislature with an effective date of January 1, 2022, tasks DFPI via its Commissioner to provide for licensure, regulation, and oversight of debt collectors. Debt collectors in California were not required to be licensed before this law.

On June 29, 2021, OAL approved DFPI’s first rulemaking under the DCLA, and he has now initiated a second round of rulemaking by inviting public comment on a range of new issues. During this proposed second rulemaking, the DFPI seeks to focus on three areas for potential rulemaking: the scope of the DCLA, the required annual reports, and the potential increase of bond amounts.

The Department asked a series of questions to guide the public comments. When looking at the scope of the DCLA, DFPI asked commenters to identify any unclear definitions within Financial Code section 100002, seeking to reconcile some of these terms with the corresponding terms in the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) and the Fair Debt Buying Practices Act (FDBPA). The Department also inquired about whether further clarification was needed regarding the terms “engage in the business of debt collection,” “in the ordinary course of business,” and the word “regularly.” DFPI also suggested that the term “due or owing” may not be clear in reference to the definition of “debtor.” As a final part of DFPI’s push to explore the scope of the DCLA, it seeks to clarify its authority to enforce the Rosenthal Act and the FDBPA.

DFPI further asked if there should be additional information that the Department should require from licensees in their annual reports. DFPI is also considering rulemaking for higher bond amounts if required by the Financial Code, and how, if DFPI should require higher bond amounts, the amounts should relate to the number of affiliates under the license and the dollar amount of consumer debt collected by the licensee.

Public comment was due to DFPI by October 5, 2021.

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