Bill Introduced in California to Expand Definition of Collection Agency Under State Licensing Law

The Debt Collection Licensing Act in California has been in effect for a month and already changes are being proposed, in the form of expanding the definition of what constitutes a collection agency. A bill has been introduced in the state Assembly that would broaden the definition of a collection agency and make other nonsubstantive changes to the law.

A copy of the bill, AB 1754, can be accessed by clicking here.

The bill was introduced by Assembly Member Phillip Chen. If enacted, the law’s definition of a collection agency would expand to include “a business entity that acts as a broker, forwarder, intermediary, or middleman that sends or refers repossession assignments or repossession orders to repossession agencies or repossession agents in California.” The law currently defines a collection agency as “a business entity through which a debt collector or an association of debt collectors engage in debt collection.”

California enacted a debt collection licensing law in 2020, and it went into effect on January 1, 2022. Companies that applied for a license prior to the law going into effect are allowed to continue collecting debts in California while their applications are being processed. Companies that did not submit their applications prior to January 1 must wait for them to be approve by the state’s Department of Financial Protection & Innovation prior to collecting debts.

Assembly Member Chen is the Vice Chair of the Assembly’s Banking and Finance Committees and also serves on the Business and Professions Committee.

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