California DFPI Releases Proposed Regulatory Update on …
California’s Commissioner of Financial Protection and Innovation (DFPI) Proposed Amendments to a Regulatory Notice to Adopt Debt Collection Licensing Act License Application and Debt Collection License Application Procedures .
The proposed changes are in response to stakeholder comments received earlier this month and further comments are expected on Monday, July 12.
Additions to proposed regulation are indicated in double underlined and deletions are indicated in single strikethrough.
The Debt Collection Licensing Act (SB 908), by California State Senator Bob Wieckowski, D-Fremont, was enacted by Governor Gavin Newsom in September 2020, as was the legislation creating the DFPI, essentially a state version of the Financial Protection Bureau. DFPI includes oversight of debt collectors and emerging fintech products, ACA International previously reported.
The California Association of Collectors Inc. (CAC), which worked closely with Wieckowski and his team to amend SB 908 and subsequently supported the bill, is now advocating for changes to align the proposed requirements. in matters of collection agency license on the new state law.
The ACC responded to DFPI’s proposals on defining and registering a branch, working with sellers and sureties, among others, in comments filed with the agency in June.
The CAC expressed concerns in its comments on how the DFPI will integrate debt collection agencies with employees working from home in the definition of the branch location and the proposed rule.
“Due to the COVID-19 pandemic, employers (including members of the CAC) have been forced to [have a] a significant portion of their workforce works from home, ”CAC President Cindy Yalkin said in the comments. “As California has started breaking out of restrictions imposed by the pandemic, many employers (for a variety of reasons) envision at least some of their workforce continuing to work from home.”
SB 908 states that a separate license would not be required for each branch. The CAC asked for confirmation whether the DFPI will consider the domicile of an employee of a home-based collection agent as a branch and whether the agency will need to file a separate form to register each branch.
There are no changes described in the proposed regulations for branches, but the Commissioner has proposed to delete some terms on the additional information that applicants must provide to the Commissioner, such as the total amount of debt collected from consumers used. to determine if a higher deposit the amount of the deposit may be required. (See page 13 of the draft regulation.)
Although a license is not required until 2022, the state has indicated that the application and its checklist should be submitted as soon as possible. The law allows the state to use the nationwide electronic licensing system for the licensing process. There will also be a bond requirement as part of the authorization process.
License applications will be due by December 31, 2021, and the DFPI plans to begin the licensing process in late summer or fall of this year. Debt collectors who apply for a license before the 2021 deadline will be allowed to operate pending approval or denial of the application.
Regarding the bond requirement, which guarantees compliance and payment, the CAC expressed in its comments that the bond should be based on money collected from California consumers, not all consumers nationwide. This is also described in SB 908, according to CAC.
The Commissioner also proposed to delete from the regulation the following wording on surety bonds (see page 34):
- The Commissioner may set a higher minimum bond amount for a licensee based on the total amount of consumer debt collected by the licensee. Upon notice from the commissioner of the new security amount, the license holder must deposit the new security with [the Nationwide Multistate Licensing System.]
- The Commissioner may periodically change the amount of a permit holder’s bond based on any change in the total amount of consumer debt collected by the permit holder.
The DFPI expects the final licensing rules, if passed, will come into effect on or around November 19, 2021. The Commissioner also plans to adopt additional regulations in 2022 in separate regulations that would specify, among others, the requirements for maintaining books and records, and bonds based on the volume of debt collection of a licensee, in accordance with the DFPI proposal.
To submit comments on the proposed settlement:
- Send to [email protected]
- Fax to (213) 897-8860, or
- Postal mail addressed to the Department of Financial Protection and Innovation; Attention: Sandra Sandoval; 300 S. Spring Street, Suite 15513, Los Angeles, CA 90013.