While the compliance deadline for the legislation impacting licensing and oversight for agencies working with consumers in California isn’t until Jan. 1, 2022, the state is encouraging companies to submit an application as soon as it is available in 2021.
California will become one of 35 states to require a license for debt collection effective Jan. 1, 2021, and agencies will have one year to comply.
The Debt Collection Licensing Act (SB 908), from California State Sen. Bob Wieckowski, D-Fremont, was signed into law by Gov. Gavin Newsom in September, as was legislation to create the Department of Financial Protection and Innovation (DFPI)—essentially a state version of the Consumer Financial Protection Bureau. The DFPI will include oversight of debt collectors and emerging financial technology products.
It was welcome news for the accounts receivable management (ARM) industry and ACA International that the governor approved both these measures, allowing for a separate licensing process outside of the DFPI.
With the governor’s signature on the licensing bill, starting Jan. 1, 2021, the commissioner of the Department of Business oversight shall take all actions necessary to prepare to be able to fully enforce the licensing and regulatory provisions of this division, including, but not limited to, adoption of all necessary regulations by Jan. 1, 2022.
The California Association of Collectors (CAC) advocated to ensure workable options for consumers and the ARM industry in the licensing bill. And the Collectors Insurance Agency (CIA) licensing team had a seat at the table to negotiate the best licensing legislation possible for the ARM industry.
While a license will not be required until 2022, the state has indicated the application and its checklist should be submitted as soon as they are live in 2021. The law permits the state to use the electronic Nationwide Multistate Licensing System (NMLS) for the licensing process. There will also be a bonding requirement as part of the licensing process.
License applications will be due by Dec. 31, 2021, and the DFPI expects to begin the licensing process in late summer or fall next year. Debt collectors that apply for a license before the deadline next year would be allowed to operate pending the approval or denial of the application.
Under the law, the DFPI will also appoint a seven-member Debt Collection Advisory committee.
Other requirements of note in the law include:
- The DFPI will have authority to enforce regulations and increased ability to supervise and enforce collection activities such as unlawful, unfair, deceptive, or abusive acts of debt collectors working on accounts of California residents.
- The law also includes placing a telephone call without disclosing the caller’s identity, as specified, and sending digital or written communications that do not display the license number of the debt collector in at least 12-point type as prohibited debt collection practices.
Even though the application is not available yet, ACA members and ARM industry professionals can contact the CIA licensing team to be added to the Licensing Service List. When the application and list of requirements is available, the team will provide more information on the service.
California Consumer Financial Protection Law
This year, Newsom also approved the California Consumer Financial Protection Law (AB 1864), which creates a state consumer protection agency. The law also expands the state’s power to target unfair, deceptive and abusive acts and practices by financial service providers.
Under the consumer financial protection law, the DFPI will:
- Significantly expand the state’s consumer protection capacity by adding dozens of investigators and attorneys to supervise financial institutions.
- Create a team to monitor markets to proactively identify emerging risks to consumers.
- Create a team dedicated to consumer education and outreach, listening and responding to consumers in specific communities, including veterans, immigrants and older Californians.
- Create a new Office of Financial Technology and Innovation, which will cultivate financial technology to serve consumers.
According to the DFPI website, rulemaking will begin next year and will include opportunities for industry stakeholders to provide feedback.
For more information on how the ACA licensing staff can assist with your licensing application completion needs in California as well as other states, please email [email protected] or call (952) 926-6547.