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By: Mandy D. Hexom
Beginning January 1, 2022, pursuant to California’s new Debt Collection Licensing Act (DCLA), all consumer debt collectors who are collecting on their own account or the account of others, including debt buyers, must be licensed with the California Department of Financial Protection and Innovation (DFPI). To comply with this new law, consumer debt collectors must apply for a DFPI license no later than December 31, 2021. The following link will provide additional information about this new requirement: https://dfpi.ca.gov/debt-collection-licensee/. If you do not at least apply for a license by December 31, 2021, you will be precluded from continuing to operate in California until a license is issued, which may take up to a year or more. The DFPI will review applications and begin to issue licenses in 2022 and 2023.
A “debt collector” that must comply with this new licensing requirement is “any person who, in the ordinary course of business, regularly, on the person’s own behalf or on behalf of others, engages in [consumer] debt collection. The term includes any person who composes and sells or offers to compose and sell, forms, letters, and other collection media used or intended to be used for debt collection. The term ‘debt collector’ includes ‘debt buyer.’” Furthermore, affiliates who engage in the business of debt collection are required to apply for a license.
The new licensing law applies only to consumer debts which are debts incurred by individual persons in exchange for money, property, or their equivalent, due or owing, or alleged to be due or owing by reason of a consumer credit transaction for personal, family or household purposes. Typical examples of consumer debts are HOA dues or assessments, credit card debts, student loans, auto loans, payday loans, residential rental or lease debts, and other household debts. There are some exemptions to this new licensing requirement including those debt collectors licensed under the California Real Estate Law, Residential Mortgage Lending Act, foreclosure trustees, student loan servicers, and persons subject to the Karnette Rental-Purchase Act.
There are additional requirements that consumer debt collectors must comply with pursuant to this new law set forth in the California Finance Code section 100000 et seq. and changes to California Civil Code sections 1178.11 and 1788.52. For example, starting on January 1, 2022, debt collector licensees must provide their new license number during telephone calls if requested by the consumer and to display the licensing number in all digital and written communications, using a minimum 12-point font.