California Governor Gavin Newsom enacted Senate Bill 908, including the California Debt Collection Licensing Act, on September 25. The law, in particular, covers companies that collect debts on their behalf.
Several companies have started to use debt collectors, especially in debt collection. After all, dealing with clients who fail to meet their financial commitments can be annoying. They also work with debt buyers, lawyers and collection agencies as they have had no luck in collecting their unpaid bills.
Debt collectors are people who frequently carry out debt collection activities, either for themselves or on behalf of others. They can phone and email individuals to collect debt. However, they are prohibited from participating in unfair, illegal, deceptive or abusive activities or practices under the California Consumer Financial Protection law (CCFPL). In addition, the law requires debt collectors to have a debt collection license. Here’s how to get one if you don’t already have one.
California Debt Collection License Application
Before starting the licensing process, check if you are subject to the rule that requires you to obtain a license. Although collection companies require a license, credit unions and FDIC-insured banks, for example, can collect debts without. You must make a request to the DFPI to receive a California Debt Collection Licence. Applicants must, among other things, comply with the requirements of the Act, which include:
- For each owner, officer or governing member, submit a personal questionnaire form through the National Multi-State License System and Registry (NMLS).
- Attach the documents for your business entity.
- l Submit fingerprints using the California Department of Justice on-line scanning service for electronic fingerprint submission.
- Complete the ethical disclosure section of the application.
- Attach any documentation for similar business entities, subsidiaries, or parent companies. This may require the addition of additional documents.
- Provide a sworn statement about your collection methods.
- Submit to criminal background investigations and pay prorated shares of all charges and expenses legitimately incurred by the DFPI to license and regulate the industry.
- For the initial application, obtain a bond of $ 25,000.
Debt collectors must request a license by December 31, 2021, to be collected from consumers. The license application window will open in late summer or early fall 2021. Although license applications filed before January 1, 2022 will not be considered until after that date, any organization with the Intent to collect from California consumers must have submitted a full license application by that date to remain in compliance with the DCLA. In 2022, the DFPI plans to assess applications and licenses. Agencies, on the other hand, must have applied before 2022.
There are now many rules governing the debt collection industry and, as a result, clients are well informed of their rights. You can be sued if you violate their rights during the debt collection process. As a result, obtaining a debt collection license, which is required before operating as a collection company. To reduce the legal risks associated with debt collection, follow the steps outlined above to obtain a debt collection license.