California Legislature Approves Debt Collection Licensing Act


The bill, advocated for by the California Association of Collectors to ensure workable options for consumers and the ARM industry, is expected to be signed into law by the governor. Licenses will be required starting in 2022. The legislature also passed a bill to create a consumer protection bureau with state oversight of debt collectors.

9/1/2020 12:00

California’s legislature passed the Debt Collection Licensing Act (SB 908) Monday after a 41-13 vote by the assembly and agreement to the amendments by the Senate. Approval by the assembly required 41 votes.

The bill will be submitted to California Gov. Gavin Newsom, who is expected to sign it into law. Sept. 30, 2020 is the deadline for the governor to sign or veto bills.

With the governor’s signature, California will become one of 35 states to require a license for debt collection.

The legislation, from California State Sen. Bob Wieckowski, D-Fremont, requires a license for debt collectors and debt buyers from the California Department of Business Oversight (DBO), ACA International previously reported.

Existing law establishes the DBO, headed by the commissioner of business oversight, who, among other things, generally provides for licensure and regulation of persons who are engaged in various consumer financial businesses.

In August, the Assembly Banking and Finance Committee approved the bill 9-3 and the California Assembly Appropriations Committee ordered a second reading after a 13-5 vote to not pass the bill as amended, ACA previously reported

It passed in the California Senate 29-4.

The California Association of Collectors (CAC) and Receivables Management Association International (RMAI) supported the bill before the August vote by the Assembly Banking and Finance Committee.

Advocates with the CAC worked with the bill’s authors to ensure the licensing system protects consumers and is workable for the accounts receivable management (ARM) industry.

The CAC was heavily involved in the negotiations concerning this bill. Along with RMAI, CAC was able to achieve significant amendments prior to the passage of SB 908, including:

  • Ensuring minor FDCPA violations would not result in the loss of a license.
  • Preempting local governments from licensing.
  • Eliminating consumer access to bonds.
  • Ensuring no requirements for branch licenses.
  • Allowing a family of companies to share a license and examination.
  • Eliminating a mandated state audit every two years.
  • Creating an advisory committee for rules and fees prior to publishing them for comment.
  • Delaying the licensing date by one year.

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.  

Requirements in the bill include:

  • Existing law, the Rosenthal Fair Debt Collection Practices Act, prohibits debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and defines “consumer debt” and “consumer credit” for purposes of that act.
  • 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 are prohibited debt collection practices under the bill.
  • Creation of a seven-member debt collection advisory committee within the DBO to advise the commissioner on matters related to debt collection.
  • 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.

If enacted, starting Jan. 1, 2021, the commissioner of the DBO 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.

California Consumer Financial Protection Law

On Monday, the California legislature also passed the California Consumer Financial Protection Law (AB 1864) 58-16 and sent the bill to Gov. Newsom for approval.

The 2020/21 budget proposal for a consumer protection bureau that would reportedly include state oversight of debt collectors was on hold in June due to the need for coronavirus relief funding and other more pressing matters, ACA International previously reported.

The governor’s budget summary states the California consumer protection bureau, titled the Department of Financial Protection and Innovation, 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.”

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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