insideARM previously wrote about both California's legislation to create debt collection licensing requirements as well as the state's efforts to create a state consumer protection agency (affectionately dubbed the "Mini-CFPB"). These two efforts are now a reality, as California's Governor Gavin Newson signed and approved both pieces of legislation on September 25, 2020. Here's what you need to know about each.
Debt Collection Licensing
The Debt Collection Licensing Act (SB 908)calls for the licensure, regulation, and oversight of debt collectors by the Commissioner of Business Oversight from the Department of Business Oversight (DBO). It would require debt collectors located in California and those who collect debts from California residents, regardless of office location, to obtain a license. It would also require such businesses to comply with regulatory oversight, including examination and reporting, of DBO.
According to the Legislative Council's Digest:
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.
The Act prohibits certain acts and practices. Some of these are nothing new to debt collectors, such as not using profane language, annoying consumers by causing their phones to ring repeatedly, or communicating so frequently with consumers to the point where it constitutes harassment.
A new addition to the prohibitions includes sending communications--either written or digital--without displaying the California license number in at least 12-point type.
The good news for debt collectors is that the Act requires DBO to create a Debt Collection Advisory Committee to advise the Commissioner on matters related to debt collection. The committee would consist of 7 members, one of which must be a consumer advocate. Committee members shall be appointed by the Commissioner and shall serve 2-year terms.
The Act also gives authority to the Commissioner to adopt regulations necessary for the DBO to be prepared to perform its regulatory duties by January 1, 2022. This means that we very well may see proposed rulemaking within the next year.
State Consumer Protection Agency
California Consumer Financial Protection Law (AB 1864)is a piece of legislation introduced by Assemblymember Monique Limón, who has been a long-standing advocate for a mini-CFPB in California. Back in April 2019, Asm. Limón appeared in a press conference with Richard Cordray, former director of the Consumer Financial Protection Bureau, discussing the need for such a state agency.
According to the Legislative Digest for the legislation:
This bill would rename the “Department of Business Oversight” as the “Department of Financial Protection and Innovation,” which would be charged with execution of the above-specified laws. The bill would also put this department in charge of various other laws relating to providing financial products and services in this state.
. . .
he bill would require the department to regulate the provision of various consumer financial products or services and to exercise nonexclusive oversight and enforcement authority under California consumer financial laws and, to the extent permissible, under the federal consumer financial laws. The bill would make it unlawful for covered persons or service providers, as defined, to, among other acts, engage in unlawful, unfair, deceptive, or abusive acts or practices with respect to consumer financial products or services, or offer or provide a consumer a financial product or service that is not in conformity with any consumer financial law.
. . .
The bill would grant the department, among other duties, the power to bring administrative and civil actions, issue subpoenas, promulgate regulations, hold hearings, issue publications, conduct investigations, and implement outreach and education programs. The bill would also require the department to promulgate specified regulations and to promulgate rules regarding registration requirements applicable to a covered person within certain timeframes and subject to specified conditions.
There you have it, folks. Now we wait to see how both of these new laws are put into practice by the state.