Calif. Gov. Signs Licensing Bill, State CFPB Bill Into Law

The Governor of California has signed into law a pair of bills that will impact the future of collections in The Golden State — one bill will require collectors to obtain licenses in order to operate and the other will create a state equivalent of the Consumer Financial Protection Bureau.

The licensing bill — SB 908 — will officially go into effect on Jan. 1, 2022. California will become the 35th state to require collectors to obtain licenses in order to collect. Licenses will be required for anyone collecting debts who is located in California, or anyone, regardless of where they are located, who is attempting to collect from an individual who is located in California.

“The Governor has stepped up on behalf of consumers and families who are incurring more debt as a result of the COVID-19 pandemic and to fill the vacuum in the wake of weak oversight at the federal level,” said state Sen. Bob Wieckowski, the architect of the licensing bill, in a statement. “By giving Californians a department to enforce our consumer laws rather than relying on individuals to sue the debt collectors, we can root out the bad actors and reduce the abuse and harassment of families.”

Along with requiring licenses, the law will prohibit collectors from using any of the following tactics:

  • Using obscene or profane language.
  • Placing a telephone call without disclosing the caller’s identity, provided that an employee of a licensed collection agency may identify oneself by using their registered alias name if they correctly identify the agency that they represent. A debt collector shall provide its California debt collector license number upon the consumer’s request.
  • Causing expense to any person for long distance telephone calls, telegram fees, or charges for other similar communications, by misrepresenting to the person the purpose of the telephone call, telegram or similar communication.
  • Causing a telephone to ring repeatedly or continuously to annoy the person called.
  • Communicating, by telephone or in person, with the debtor with such frequency as to be unreasonable, and to constitute harassment of the debtor under the circumstances.
  • Sending written or digital communication to the person that does not display the California license number of the collector in at least 12-point type.

Separately, Gov. Gavin Newsom also signed AB 1864 into law, creating the Department of Financial Protection and Innovation. Among the investigatory powers that have been bestowed upon the department are those to look into the use of engaging in unfair, deceptive, or abusive acts or practices with respect to consumer financial products and services, which could include debt collection activities.

“While the federal government is getting out of the financial protection business, California is leaning into it,” said Gov. Gavin Newsom, in a statement. “It’s at this moment especially – when so many Californians are strapped for cash and struggling to pay their bills – that families are likely to fall victim to predatory and abusive financial products. These bills ensure that financial predators are subjected to alert oversight and agile enforcement.

The law will allow the state to hire “dozens” of investigators and attorneys to oversee and investigate the financial services companies that will be regulated by the DFPI.

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