DFPI Second Rulemaking Proposal on Debt Collection Licensing
On July 15, the California DFPI released draft text for a proposed second rulemaking under the Debt Collection Licensing Act (DCLA) relating to the scope, annual report, and bond amount increase provisions of the DCLA.
Some examples of the proposed amendments include:
a new definition of “engage in the business of debt collection” that expressly includes advertising or otherwise offering the service of debt collection;
an exclusion that employees of debt collectors are not required to be licensed if acting within the scope of their employment with a debt collector licensed in California;
conditions under which a creditor, in its own name, seeking repayment of a consumer debt arising from credit the creditor extended could be considered as engaging in the business of debt collection for purposes of licensure in California;
disclosure requirements for annual reports; and
recordkeeping requirements, including a requirement to maintain records of any contact with, or attempt to contact, anyone associated with a debtor account, regardless of who initiated the contact and whether the attempt is successful.
The DFPI Commissioner is inviting interested parties to submit comments on the proposed rulemaking, which must be submitted by Monday, August 29, 2022.
Putting It Into Practice: These proposed amendments appear to be part of the California regulator’s larger effort to address unlawful and deceptive acts and practices around debt collection. According to a consumer alert issued on July 21, the DFPI has recently seen an increase in complaints involving fake debt collectors attempting to collect on false debts. The DFPI also recently issued three enforcement actions against multiple debt collectors for unlawful and deceptive debt collection activity (see the complaints here, here and here). Given the recent regulatory focus on debt collection, businesses that are engaged in debt collection should ensure that their business practices are inline with California law.