California Licenses ‘Unavoidably Delayed’ Thanks to Need for Changes to Background Checks: DFPI

The California Department of Financial Protection and Innovation sent out an update yesterday, announcing that the issuance of licenses to companies that applied for debt collection licenses has been “unavoidably delayed” because of changes that need to be made when requesting federal background checks. The DFPI did not provide a timeline for when this “unforeseen delay” would be rectified.

Companies were required to obtain licenses to collect debts in California starting on January 1, 2022. The DFPI allowed any company that submitted a completed application before that date to continue collecting while their applications were being processed. Companies that did not submit applications prior to January 1 would have to wait until their applications were approved to begin collecting in California or from residents of The Golden State. The California legislature enacted a law in 2020 that established licensing requirements.

While the DFPI said it would continue to allow applicants to collect and that it would take any action for unlicensed activity against applicants, it did not make any comments about companies that filed applications after December 31, 2021. When communicating with consumers, applicants can say “license number pending” or use similar wording, the DFPI said.

The DFPI said it was notified by the Federal Bureau of Investigation that “changes are needed to state agency protocols for requesting federal background checks.”

Here is the full statement released by the DFPI yesterday:

Debt Collector Licensing – Update on Processing Delays

The Department of Financial Protection and Innovation is notifying license applicants and prospective license applicants that the issuance of licenses under the Debt Collection Licensing Act is unavoidably delayed at this time, because the Federal Bureau of Investigation has informed the Department that new changes are needed to state agency protocols for requesting federal background checks. The delay was unforeseen and is necessary to enable the Department to effectuate the licensing background check required under the Debt Collection Licensing Act.

Despite this unforeseen delay, the Department encourages prospective licensees to continue submitting applications through NMLS. The Department will reach out to applicants with instructions for the submission of fingerprints for background checks when the process becomes available. For purposes of including California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.11, an applicant who has filed its application through NMLS may indicate “license number pending” or similar verbiage until a license is issued.

During this delay, applicants may continue to engage in business, and the Department will not take action for unlicensed activity against applicants who filed their applications after December 31, 2021. We will notify applicants when we begin issuing licenses and we encourage applicants to visit the Department’s website for updates at www.dfpi.ca.gov.  We are frequently updating our website with answers to common questions.  The Department anticipates additional rulemaking, and we encourage interested parties to subscribe on our website through DFPI’s email subscription service  to receive notices of rulemaking actions.If you have any questions, please contact us at DCLA.inquiries@dfpi.ca.gov or (916) 327-7585.

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