California Governor Approves Debt Collection Licensing Act and State Consumer Protection Agency


ACA International advocated for workable solutions in licensing bill on behalf of members. The consumer protection agency, part of the state’s 2020/21 budget proposal, will include oversight of debt collectors.

9/27/2020 9:00

California Gov. Gavin Newsom, facing a Sept. 30 deadline, approved the Debt Collection Licensing Act and legislation to create the Department of Financial Protection and Innovation (DFPI)—essentially a state version of the Consumer Financial Protection Bureau—Friday. The DFPI will include oversight of debt collectors and emerging financial technology products.

It is 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.

The Debt Collection Licensing Act (SB 908), from California State Sen. Bob Wieckowski, D-Fremont, makes California one of 35 states to require a license for debt collection.

The California Association of Collectors (CAC) advocated to ensure workable options for consumers and the ARM industry in the licensing bill.

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.

Licenses will be required starting Jan. 1, 2022. Debt collectors that apply for a license before Jan. 1, 2022, would be allowed to operate pending the approval or denial of the application. Read more on requirements in the licensing bill in coverage from ACA here.

The CAC was involved in the negotiations regarding SB 908 from the start to do what it could to influence its final form and to soften its impact as much as possible, according to Tom Griffin, general counsel for the CAC.

“The CAC elected to take a seat at the table rather than simply oppose a bill that, in this legislature, was going to pass whether or not CAC was involved,” Griffin said. 

California Consumer Financial Protection Law

Newsom’s approval of the California Consumer Financial Protection Law (AB 1864) 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.

According to a news release from the governor’s office, 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.

The California legislature passed the California Consumer Financial Protection Law 58-16 Aug. 30 and sent the bill to Newsom for approval.

Creation of the DFPI was a key component of the governor’s 2020/21 budget proposal, ACA previously reported.

The governor’s budget summary states the California consumer protection bureau is designed to “provide consumers greater protection from predatory practices while facilitating innovation and ensuring a level playing field for all companies operating responsibly in California.”

Student Loan Servicing Requirements

Gov. Newsom also signed a bill on student loan servicing (AB 376) before the Sept. 30 deadline.

According to the bill summary, it would

  • Impose new requirements on a student loan servicer, defined as any person engaged in the business of servicing student loans in the state. These requirements would include the timely posting, processing, and crediting of student loan payments within certain timeframes, applying overpayments consistent with the best financial interest of a student loan borrower, as defined, applying partial payments to minimize late fees and negative credit reporting, maintaining records, timely processing of paperwork, and diligently overseeing service providers. The bill would require a student loan servicer to provide specialized training for customer service personnel that advises military borrowers, borrowers in public service, borrowers with disabilities, and older borrowers.
  • The bill would require, beginning on July 1, 2021, the Commissioner of Business Oversight, as specified, to designate a student loan ombudsman to work within the department and to hire additional staff, as needed to implement these provisions. The bill would require the student loan ombudsman to receive and review complaints, to refer complaints to an appropriate unit within the department that would be authorized to investigate the complaint, and to refer complaints regarding servicers not subject to licensing under the Student Loan Servicing Act to the Department of Justice, which would be permitted to investigate those complaints. The bill would require complaints regarding any private postsecondary educational institution licensed by the Bureau for Private Postsecondary Education to be referred to the Bureau for Private Postsecondary Education’s Office of Student Assistance and Relief. The bill would require the student loan ombudsman not later than 18 months after the operative date of the bill, and no less than once yearly thereafter, to submit a report to the appropriate committees of the Legislature regarding the implementation of these provisions, the types of complaints received, and other data and analysis on student loan issues.
  • The bill would also, beginning July 1, 2021, authorize the Commissioner of Business Oversight to monitor for risks to consumers in the provision of student loan servicing and would authorize the commissioner to gather information regarding the organization, business conduct, and activities of student loan services. The bill would authorize the commissioner to gather and compile information from student loan servicers and to develop and publicize metrics based on the data collected. Among other actions, the bill would authorize the commissioner to require student loan servicers to file, under oath or otherwise, annual or special reports or answers in writing to specific questions.

ACA is continuing to review these legislative measures to provide additional updates for members.

For more information on how the ACA Licensing staff can assist with your licensing needs, please contact us at [email protected] or call (952) 926-6547.

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