California Updates Debt Collectors on Processing Delays

On May 23, California’s Department of Financial Protection and Innovation (DFPI or Department) sent an email notifying license applicants and prospective license applicants that the issuance of licenses under the Debt Collection Licensing Act is unavoidably delayed at this time.

The original deadline for applicants was December 31, 2021; however, that deadline was extended to March 15 in mid-December. Two months later, and the Department still finds itself unable to process new applications.

The Federal Bureau of Investigation (FBI) has informed the DFPI that new changes are needed to state agency protocols — specifically fingerprinting — for requesting federal background checks. According to the Department, the delay was unforeseen, but is necessary to enable the DFPI to fully implement the licensing background check required under the Debt Collection Licensing Act.

The delay does not necessarily affect debt collectors doing business in the state. Per the DFPI, 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. 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.

The DFPI previously has stated that persons who file an application by March 15 would be deemed temporarily in compliance with California’s licensing requirement, pending the approval of the license application. That deadline was not impacted by this new statement. In other words, while the DFPI is not yet issuing licenses, it is taking the position that only collectors who have applied for licensure are authorized to collect in California.