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DFPI Second Rulemaking Proposal On Debt Collection Licensing – Financial Services



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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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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