August 15, 2022

Volume XII, Number 227

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August 12, 2022

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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 herehere 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.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 209
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Associate

Pouneh Almasi is an associate in the Intellectual Property Practice Group in the firm's San Francisco office.  

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Pouneh’s practice focuses on intellectual property litigation with an emphasis on copyright and trademark issues.  She is also a member of the firm’s Blockchain Technology & Digital Currency Team.

During law school, Pouneh worked as a judicial extern to the Honorable Jacqueline Scott Corley at the Northern District of California in San Francisco...

415-774-3103
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