Comments on the proposal to fulfill the requirements of the state’s Debt Collection Licensing Act are due March 27.
02/14/2024 10:15 A.M.
3 minute read
California’s Department of Financial Protection and Innovation (DFPI) is seeking input to help define debt collection licensee fees and annual report requirements in a proposed rulemaking (PDF) under the Debt Collection Licensing Act (DCLA).
The DCLA took effect in January 2022, starting with a debt collection licensing system for the state.
Among other things, the DCLA requires a licensee to pay the DFPI annually its pro rata share of all costs and expenses reasonably incurred in the administration of the DCLA.
The first assessment will occur in 2024. The calculation of the pro rata share is based, in part, on the amount of net proceeds generated by California debtor accounts in the preceding year.
The term “net proceeds” is not defined by statute; therefore, the DFPI has proposed adopting a definition through the rulemaking.
The proposed definitions include:
- For a debt buyer, net proceeds are equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses.
- For a purchaser of debt that has not been charged off or debt that is not in default, net proceeds are equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses.
- For a third-party collector, net proceeds are equal to the amount a collector receives from its clients, regardless of fee structure, before deducting costs and expenses. For purposes of this section, “client” means the company on whose behalf the third-party collector has been contracted to collect on an account.
- For a first-party collector, net proceeds are equal to the amount it receives in fees and other charges from debtors that it would not have received had the debt been paid on time, before deducting costs and expenses. For purposes of this section, a first-party collector means a person or entity that collects a debt owed directly to it.
Annual Report Proposals
The DCLA also requires a licensee to file an annual report and mandates certain information that must be disclosed in the report. This rulemaking action clarifies terms in the annual report and establishes additional annual reporting requirements.
The DCLA authorizes the commissioner to require additional information to add to the existing required report such as:
- The total number of California debtor accounts collected in full.
- The total number of California debtor accounts collected on that were resolved for less than the full amount of the debt.
- The total number of California debtor accounts collected on where less than the full amount of the debt was collected, and a balance remains due.
Meanwhile, the first annual report following the current requirements under the licensing law is due to the DFPI March 15, 2024.
The current requirements for the annual report can be found in California Financial Code section 100021(a) (1) – (4), (6) and (7). The annual report must be filed through the DFPI portal, according to the DFPI, ACA International previously reported.
The public comment period regarding the proposed rulemaking ends on March 27, 2024.
Comments may be submitted by mail to:
Department of Financial Protection and Innovation
Attn: DeEtte Phelps, Regulations Coordinator
2101 Arena Boulevard
Sacramento, California 95834
Comments may be submitted electronically to [email protected] with a copy to [email protected]. Comments should be identified by PRO 01-23 in the subject line and submitted in Microsoft Word format, if available.
For more information, the DFPI’s initial statement of reasons for the proposed regulations (PDF) is available here.
For more information on how the ACA licensing staff can assist with your licensing application completion needs, please contact us at [email protected] or call (952) 926-6547.
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