California Gov. Gavin Newsom, facing a Sept. 30 deadline, approved the Debt Collection Licensing Act and legislation to create the Department of Financial Protection and Innovation (DFPI)—essentially a state version of the Consumer Financial Protection Bureau—Friday. The DFPI will include oversight of debt collectors and emerging financial technology products.
It is welcome news for the accounts receivable management (ARM) industry and ACA International that the governor approved both these measures, allowing for a separate licensing process outside of the DFPI.
The Debt Collection Licensing Act (SB 908), from California State Sen. Bob Wieckowski, D-Fremont, makes California one of 35 states to require a license for debt collection.
The California Association of Collectors (CAC) advocated to ensure workable options for consumers and the ARM industry in the licensing bill.
With the governor’s signature on the licensing bill, starting Jan. 1, 2021, the commissioner of the Department of Business oversight shall take all actions necessary to prepare to be able to fully enforce the licensing and regulatory provisions of this division, including, but not limited to, adoption of all necessary regulations by Jan. 1, 2022.
Licenses will be required starting Jan. 1, 2022. Debt collectors that apply for a license before Jan. 1, 2022, would be allowed to operate pending the approval or denial of the application. Read more on requirements in the licensing bill in coverage from ACA here.
The CAC was involved in the negotiations regarding SB 908 from the start to do what it could to influence its final form and to soften its impact as much as possible, according to Tom Griffin, general counsel for the CAC.
“The CAC elected to take a seat at the table rather than simply oppose a bill that, in this legislature, was going to pass whether or not CAC was involved,” Griffin said.
California Consumer Financial Protection Law
Newsom’s approval of the California Consumer Financial Protection Law (AB 1864) creates a state consumer protection agency. The law also expands the state’s power to target unfair, deceptive and abusive acts and practices by financial service providers.
According to a news release from the governor’s office, the DFPI will:
- Significantly expand the state’s consumer protection capacity by adding dozens of investigators and attorneys to supervise financial institutions.
- Create a team to monitor markets to proactively identify emerging risks to consumers.
- Create a team dedicated to consumer education and outreach, listening and responding to consumers in specific communities, including veterans, immigrants and older Californians.
- Create a new Office of Financial Technology and Innovation, which will cultivate financial technology to serve consumers.
The California legislature passed the California Consumer Financial Protection Law 58-16 Aug. 30 and sent the bill to Newsom for approval.
Creation of the DFPI was a key component of the governor’s 2020/21 budget proposal, ACA previously reported.
The governor’s budget summary states the California consumer protection bureau is designed to “provide consumers greater protection from predatory practices while facilitating innovation and ensuring a level playing field for all companies operating responsibly in California.”
ACA is continuing to review both measures to provide additional updates for members.