It’s Official: California is Ready to License Debt Collectors


The state’s licensing application hit NMLS Sept. 1, and one ACA member said she wanted to be one of the first to complete the application and share the process with fellow members.

9/1/2021 9:00

Cindy Yaklin, president of California Association of Collectors Inc. (CAC) and States Recovery Systems Inc., said she was going to be the “guinea pig” when applying for a license in California through the Nationwide Multistate Licensing System (NMLS).

The licensing application is now available on NMLS and is due by Dec. 31, 2021.

The Debt Collection Licensing Act (DCLA), which takes effect Jan. 1, 2022, requires any person engaging in the business of debt collection in California to be licensed by the California Department of Financial Protection and Innovation (DFPI).

Last week, the commissioner of the DFPI posted a checklist of requirements for the state’s debt collection licensing application on the NMLS website.

Yaklin, who also serves on California’s new Debt Collection Advisory Committee, is licensed nationwide and said the process in California may be cumbersome initially for companies that need to set up branch licenses and individual licenses. She hopes any kinks get worked out as the DFPI implements regulations from the DCLA.

ACA International’s licensing team has resources to help members navigate the licensing process.

“We’ve known this has been coming for some time and can walk members through the steps to apply for their license and make sure they know the DFPI’s requirements,” said Licensing Manager Angela Butera.

There are also opportunities for stakeholders to comment on licensing rules.

In fact, on April 8, 2021, the commissioner of the DFPI initiated a rulemaking to adopt regulations related to the requirements for licensure under the DCLA. The commissioner is now considering a second rulemaking to adopt regulations related to other provisions of the DCLA, including its scope, annual reports and bond amounts, ACA International previously reported.

The commissioner invites interested parties to provide input in developing regulations related to these topics and has formulated questions to assist such parties in providing this input. The commissioner also invites interested parties to provide example language for regulations related to these topics.

The DCLA (S.B. 908), from California State Sen. Bob Wieckowski, D-Fremont, was signed into law by Gov. Gavin Newsom in September 2020, as was legislation to create the DFPI—essentially a state version of the Consumer Financial Protection Bureau. The DFPI includes oversight of debt collectors and emerging financial technology products.

The CAC, which worked closely with Wieckowski and his staff to amend S.B. 908 and subsequently supported the bill, is now advocating for changes to align proposed collection agency licensing requirements with the new state law.

The CAC responded to the DFPI’s proposals on the definition and registration of a branch office, working with vendors and surety bonds, among others, in comments filed with the agency earlier this month.

The CAC expressed concerns in its comments about how the DFPI will incorporate debt collection agencies with employees working from home into the branch location definition and the proposed rule.

“As a result of the COVID-19 pandemic, employers (including the members of CAC) were compelled to have [a] substantial segment of their workforce work from home,” Yaklin states in the comments. “As California has begun to emerge from the restrictions imposed as a result of the pandemic, many employers are considering (for a variety of reasons) having at least a portion of their workforce continue to work from home.”

Regarding the bond requirement, which guarantees compliance and payment, the CAC expressed in its comments that the surety bond should be based on the sums collected from California consumers, not all consumers nationwide. This is also outlined in S.B. 908, according to the CAC.

DFPI Plans

“The new law also authorizes the DFPI to take in borrowers’ complaints and enforce violations. It will give consumers a single location to check whether companies are licensed, and whether they have been subject to any enforcement actions, including license suspensions or revocations,” according to a news release from the DFPI.

“This is a win for California consumers and positions us alongside a growing number of states who offer direct oversight of the industry,” DFPI Senior Deputy Commissioner of the Consumer Financial Protection Division Suzanne Martindale said in the news release. “The department will now have the authority to review financial information from prospective licensees, conduct formal examinations, and pursue legal action against those whose engage in unfair, deceptive, or abusive acts or practices or violate California’s fair debt collection laws.”

California is one of 16 states that does not currently license debt collectors. The recently enacted law aligns California with dozens of other states requiring licensing and examination.

The DFPI is expecting to license thousands of entities over the next two years, according to the news release. To avoid missing important updates, interested parties are encouraged to check the DFPI website periodically and subscribe to the DFPI’s email subscription service

Applicants may continue operating as a debt collector in California while applications are pending. If you apply after Dec. 31, 2021, you will be required to wait for the issuance of a license before you can operate in California, according to the DFPI.

Failure to apply by the deadline and continued operation without a license may result in enforcement actions.

Visit the DFPI’s Debt Collectors web page and FAQ for more information.

To submit comments on the licensing inquiry:

  • Email [email protected] and include “PRO 05-21” in the subject line; or
  • Mail to Department of Financial Protection and Innovation Attn: Sandra Sandoval, Legal Division 300 S. Spring Street, Suite 15513 Los Angeles, CA 90013.

The deadline to submit comments is Monday, Oct. 5, 2021.

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.