Governor Newsom has signed into law three legislative bills which will have a significant impact on any business within the receivables industry that engages with California consumers, regardless if the base of operations for the business is outside of California. The three new laws establish: (1) licensing for debt collectors; (2) the creation of the Department of Financial Protection and Innovation with authority to prosecute unfair, deceptive, or abusive acts or practices; and (3) increases in the homestead exemption. RMAI recommends that you share this Member Alert with your legal counsel, compliance department, and operational staff to ensure the broadest level of knowledge of these new requirements.
The following are summaries of the three laws with hyperlinks to their bill text:
California SB 908 – This law requires collection agencies, debt buyers, and collection law firms that are either located in California or that collect from California residents to be licensed as debt collectors by the Department of Business Oversight (DBO). The bill generally contains requirements similar to other states that license debt collectors, including bonding requirements, the filing of reports, and compliance with state and federal law. The new law takes effect on January 1, 2021, but licenses will not be required until January 1, 2022. [RMAI and the California Association of Collectors (CAC) engaged in an extensive eight-month negotiation with the bill’s author and was able to obtain a number of concessions, including among other things: (1) eliminating language that would have granted consumers access to bond funds; (2) eliminating language which would have required all summons and complaints involving licensees to be served upon DBO; (3) preventing minor FDCPA violations from impacting a license; (4) allowing a family of companies to share a license and examination; (5) preempting local governments from licensing; (6) ensuring no branch license requirements; (7) eliminating a mandatory state audit every two years; (8) creating an advisory committee to review rules and fees prior to publishing them for comment; (9) delaying the licensure date until January 1, 2022; and (10) allowing businesses to operate without a license until DBO accepts or denies their application provided the application was submitted no later than December 31, 2021.]
California AB 1864 – This law changes the name of the Department of Business Oversight to the Department of Financial Protection and Innovation (DFPI) while giving the department new authorities that mirror the federal Consumer Financial Protection Bureau. Among the new authorities is to regulate unfair, deceptive, or abusive acts or practices (UDAAP) in connection with any transaction with a consumer for a consumer financial product or service. The new law takes effect on January 1, 2021. [Understanding this was a Governor’s budget bill and passage was virtually guaranteed, RMAI and CAC successfully focused all of our energy on obtaining a single amendment that placed parameters on the UDAAP authority by stating DFPI “shall consider the relative harm to the consumer, the frequency of the act or practice in question, and whether such act or practice is unintentional or stems from a technical, clerical, or nonmaterial error.”]
California AB 1885 – This law increases the homestead exemption for personal residences to a baseline of $300,000 with a cap not to exceed $600,000. The degree that the exemption can exceed $300,000 will be based on the median sale price of homes within a county. The new homestead amounts will be indexed against inflation. The new law takes effect January 1, 2021. The prior homestead exemptions were $75,000, $100,000 or $175,000 and were based on the martial status, age, status as the head of household, and/or physical or mental disability of the property owner. [This bill was introduced three days prior to the end of the legislative session which prevented any organized lobbying efforts to negotiate a compromise or prevent its passage. RMAI and CAC issued a memo in opposition.]
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The reach of RMAI’s advocacy efforts extends to state and federal regulatory and legislative activity, like these efforts in California. You can get information about the Legislative Fund and make your contribution at https://rmaintl.org/advocacy/contribute-now/
This alert is intended for members of the Receivables Management Association International and is for informational purposes only and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.