Earlier this month, the California Department of Financial Protection and Innovation (DFPI) sent an email with the catchy subject line, “Want to continue operating in California?” You need to apply for a license with us.
The message the post refers to is the California Debt Collection Licensing Act (DCLA), which was added to the California Financial Code by Senate Bill 908. a license from DFPI. There are exemptions for some people who are already subject to regulatory oversight, including banks and financial lenders licensed under the California Funding Act.
The DCLA defines “debt collection” as any act or practice relating to the collection of consumer debts, and defines the “debt collector” as any person who, in the normal course of business, regularly, “in his or her own right. own name ”or on behalf of third parties, engages in debt collection. Legislative history indicates that the scope of DCLA’s coverage is intended to be similar to that of the Rosenthal Act on Fair Debt Collection Practices (Rosenthal Act) (subject to the aforementioned exemptions), which generally extends to creditors as well as debts of third parties. collectors.
Based on the wording “on behalf of the person” and other terms defined in the DCLA, court rulings interpreting Rosenthal Law and the current state of DFPI guidelines, many retailers and other service providers of their own credit operations will likely be surprised to find that they may be required to have a license under the DCLA.
The license requirement comes into effect on January 1. In its post earlier this month, the DFPI said: “[i]If you are interested in continuing to operate as a debt collector in California from January 1, 2022, and have not yet applied for a license, you should review the Application Checklist and begin the application process now. Failure to submit an application by this deadline and continued unlicensed operation may result in enforcement action against you. Applications should be submitted using the NMLS.
The Manatt professionals identified in this bulletin advise clients regarding DCLA, including the threshold question of whether, based on their business, they may be covered and, if so, licensing options. , including in light of the rapid approach of the December 31 deadline.