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Frequently Asked Questions – Debt Collector Licensing Act (DCLA)

All application requirements described in the frequently asked questions beneath are subject to completion of the proposed rulemaking under the Administrative Procedure Act. For data and updates regarding such rulemaking meet Laws and Regulations – Debt Collection Licensing Act.

1. Why are debt collectors operating in California now required to get a license?

In 2020, the California legislature passed SB 908, the Debt Collection Licensing Human activity (DCLA), which provides for the licensure, regulation, and oversight of California debt collectors by the Department of Financial Protection and Innovation.

The new debt collection law becomes effective Jan 1, 2022.  Nether the new constabulary a person engage in the business of debt collection must utilise for a license to continue to operate in California awaiting the denial or approval of their application.

2. Tin can I continue doing business in California while my application is pending blessing or denial?

Yep. Licenses under the Debt Collection Licensing Human action have been unavoidably delayed at this time, considering the Federal Agency of Investigation has informed the Department that new changes are needed to state agency protocols for requesting federal background checks. During this delay, applicants may continue to engage in concern, and the Department will not take action for unlicensed activity against applicants who filed their applications after Dec 31, 2021.

3. What business operations constitute a 'debt collector' and who is required to apply for a license?

A "debt collector" is "any person who, in the ordinary course of business, regularly, on the person'south own behalf or on behalf of others, engages in debt collection. The term includes any person who composes and sells or offers to etch and sell, forms, letters, and other collection media used or intended to be used for debt collection. The term 'debt collector' includes 'debt heir-apparent.'" Affiliates who engage in the business of debt collection are required to use for a license.

"Debt collection" means any act or practice in connection with the drove of consumer debt. A "debt heir-apparent" means a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection or hires an attorney-at-constabulary for collection litigation. "Debt heir-apparent" does not mean a person or entity that acquires a charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of consumer debt that has non been charged off. "Charged-off consumer debt" means a consumer debt that has been removed from a creditor'due south books as an nugget and treated as a loss or expense.

4. Where tin can I detect the application?

The application is available electronically on the Nationwide Multistate Licensing System and Registry (NMLS) website at: https://nationwidelicensingsystem.org/.

5. Tin I receive an alert or discover when the DFPI updates the Debt Collector Licensing Program or proposed regulation changes?

To receive email updates, alerts, and important notices from the DFPI about licensing you may subscribe to the DFPI's electronic mail subscription service.

7. When volition I become my license number?

The license number volition be sent when the application is approved. For purposes of including California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.eleven, an applicant who has filed its application through NMLS may signal "license number pending" or like verbiage until a license is issued.

8. Who needs to submit an application?

All debt collectors and debt buyers operating in California are required to utilize for a license with the Section. A license is required for the licensee's principal place of business concern and cannot be transferred or assigned. Please annotation that a dissever license is not required for each individual branch office.  Nevertheless, your branch offices must exist registered in the NMLS.

ix. Are there whatever exemptions to licensing?

There are exemptions for depository institutions such every bit FDIC-insured banks, credit unions, DFPI-licensed finance lenders and brokers, DFPI-licensed mortgage lenders and servicers, Department of Real Estate licensed agents, persons subject area to the Karnette Rental-Purchase Act, a trustee for a nonjudicial foreclosure, and debt collections regulated nether the Educatee Loan Servicing Act.

For a listing of exemptions please refer to Fin. Lawmaking § 100001(b)(ane) and (c) . For a list of actions that may be taken confronting a person for violations of Ceremonious Code sections 1788 et seq. or 1788.50 et seq. regardless of licensure please refer to Fin. Code § 100005. For more than definitions, including "debt collector," "consumer debt," "debt," and others, delight refer to Fin. Code § 100002.

x. Has any person/activity been adamant to not be in the business of debt drove?

The Section has adamant that routine HOA assessments do non establish a "consumer credit transaction" as defined under the DCLA, and therefore practice non establish "consumer debt" under the Human activity. Since the collection of routine HOA assessments is not considered to be drove of "consumer debt," such activity would not constitute beingness engaged in the business concern of debt drove and does not require licensure under the DCLA.

11. Does the awarding cost annihilation? If and so, how much?

There is an application fee of $350 and an investigation fee of $150 per bidder. Fees will need to be paid through the Nationwide Multistate Licensing System and Registry (NMLS) for manual to the Commissioner. The NMLS fees for obtaining credit reports, annual processing fees, and any other NMLS fees shall be paid by applicants and licensees to NMLS through NMLS. Fees are not refundable.

You may apply for a single license that includes all your affiliates engaged in the business of debt collection and pay a unmarried application fee of $350. Notwithstanding, each chapter will however need to pay the investigation fee of $150 and consummate a New Company application (Class MU1).

The application fee of $350 is invoiced through NMLS after the application is submitted.

12. Where do I find the instructions for filling out the application?

There is a checklist on the NMLS website with the instructions to file an application.

13. What is the fingerprinting process?

Once an awarding is filed, detailed fingerprinting instructions for individuals in and outside of California volition be provided to the Main Company Contact. Due to the volume of applications expected to exist filed you tin anticipate an extended period of time earlier y'all receive the instruction electronic mail. The fingerprinting process is considered function of the review process for the application. It is non part of the initial submission requirement and is NOT due with the NMLS submission of the application.

Fingerprinting in California
For individuals who reside in California, fingerprints must be submitted through the California Department of Justice'due south Live Scan.

Fingerprinting Outside California
Individuals who reside outside California must have their fingerprints taken at a law enforcement bureau or FBI-approved fingerprint location using the standard FD 258 Menu Stock. The fingerprint bill of fare volition exist mailed out to the Master Company Contact when we start the review of the application.

xv. Tin I submit the application in newspaper form?

No. The Commissioner requires applicants to file electronically through the Nationwide Multistate Licensing System & Registry (NMLS). In addition, the Commissioner may crave fees, supporting documents, changes of address, and whatever other information, and amendments or modifications thereto, to exist submitted past applicants and licensees through NMLS.

The Commissioner has designated NMLS to receive and shop filings, obtain credit reports, and collect related fees and assessments from applicants and licensees on behalf of the Commissioner. All applications, amendments, surety bonds, notices, related filings, supporting documents, renewals, authorizations, assessments, and fees required to be filed with the Commissioner will demand to be filed electronically with and transmitted to NMLS.

16. How long is the application review process?

Per legislation, all debt collectors need to apply for a license to continue to operate in California. That means we will take a large volume of applications to review. The licensing squad is diligently working to review them as apace as possible; however, the process is anticipated to take identify throughout 2022 and 2023. Do non exist concerned if you do not get a response from us regarding your awarding for an extended menstruum of time.

17. When does the status of my awarding change in NMLS?

All applications default to "Pending-Incomplete" when submitted. Your application will stay in this status until information technology has been assigned and is being reviewed by the licensing squad. At that fourth dimension the status will alter to "Pending-Review". Due to the book of applications expected to be filed you tin can anticipate an extended period of time before the status of your awarding changes. Once the awarding is approved the status will modify to "Approved".

eighteen. I just received approval of a license, now what?

In general, a licensee's duties can be institute in Fin. Code §§ 100018 – 100023 of the Debt Collection Licensing Act (Fin. Code § 100000 et seq.) (DCLA). For information regarding pending regulations delight visit: Laws and Regulations – Debt Collection Licensing Act. Yous are responsible for complying with the police, including but not limited to the California Consumer Financial Protection Police force (Fin. Code § 90000 et seq.) (CCFPL) and the DCLA.

19. What could cause a debt collector to lose its license?

The Commissioner may suspend or revoke a license if the licensee does whatever of the following: violates the DCLA, the Rosenthal Fair Debt Collections Practices Act, or Civ. Lawmaking § 1788.l et seq. The Commissioner can also suspend or revoke a license for other reasons.

The Commissioner may suspend or revoke the license of a debt collector if it does not cooperate with an examination or investigation; is insolvent, suspends payment of its obligations, or makes a general assignment for the benefit of its creditors, a receiver, liquidator, or if a conservator has been appointed for a licensee; or any fact or condition exists that, if it had existed at the time that the licensee applied for a license, would have been grounds for denying the application.

xx. What else could happen if a debt collector violates the police?

The Commissioner may result a desist and refrain social club to keep a company or private from engaging in the business as a debt collector without a license or from violating the DCLA or the Rosenthal Fair Debt Collections Practices Act or Civ. Code § 1788.fifty et seq. The Commissioner may also order the person or licensee to pay ancillary relief, including simply not limited to refunds, restitution, disgorgement, and payment of damages on behalf of a person injured by the behave or practices constituting the violation.

Under the CCFPL, information technology is unlawful for a covered person or service provider, which includes debt collectors and debt buyers, to engage in any unlawful, unfair, deceptive, or abusive act or exercise with respect to consumer financial products or services, offering or provide to a consumer whatsoever financial product or service non in conformity with any consumer financial law or otherwise commit any deed or omission in violation of a consumer financial law, or neglect or turn down, as required by a consumer financial law or any rule or gild issued by the Department, to practice any of the following: (A) permit the Department access to or copying of records; (B) institute or maintain records; or (C) make reports or provide information to the Section.

A covered person or service provider shall not end or in whatever other way discriminate against any or any authorized representative of covered employees by reason of the fact that they (1) filed a proceeding nether whatever consumer fiscal police or (2) objected to or refused to participate in any activity, policy, or do they believed to exist in violation of any police force, rule, or order.

If a person violates the CCFPL, rule, or final order or condition imposed in writing by the Department, the Commissioner may bring a civil action in superior courtroom for a preliminary or permanent injunction, restraining lodge, writ of mandate, or order appointing a receiver.

If a person engages, has engaged, or proposes to engage in any activity prohibited by Financial Code sections 90003 or 90004, or an activeness that violates a law, rule, social club, or any condition imposed in writing by the Department, the Department may issue a desist and refrain club including a claim for coincident relief as set forth in Financial Code section 90012(b).

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Source: https://dfpi.ca.gov/debt-collection-licensee/

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