SB 1131: Debt collection.

This division shall be known, and may be cited, as the Debt Collector Licensing Act.

A county, city, or other political subdivision within this state shall not require a debt collector to be licensed or to register as a debt collector.

(a)(1)A person shall not operate as a debt collector in this state without first obtaining a license pursuant to this division.

(2)For purposes of paragraph (1), to the extent permitted by federal law, a person is acting in this state if the person is located in this state and is seeking to collect from a debtor that resides inside or outside the state, or is located outside of the state and is seeking to collect from a debtor that resides in this state.

(3)A single license shall be obtained for the licensee’s business and shall not be transferred or assigned.

(4)A separate license is not required for each individual branch office, facility, affiliate, or subsidiary of the licensee.

(b)(1)Except as provided in paragraph (2), this division shall not apply to any of the following:

(A)A depository institution, as defined in Section 1420, or any regulated affiliate or subsidiary of that institution.

(B)A person licensed pursuant to Division 9 (commencing with Section 22000).

(C)A person licensed pursuant to Division 20 (commencing with Section 50000).

(D)A person licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.

(E)A person who is subject to the Karnette Rental-Purchase Act (Title 2.96 (commencing with Section 1812.620) of Part 4 of Division 3 of the Civil Code).

(F)A trustee performing acts in connection with a nonjudicial foreclosure pursuant to Article 1 (commencing with Section 2920) of Chapter 2 of Title 14 of Part 4 of Division 3 of the Civil Code.

(G)A person described in Section 1692a(6)(F) of Title 15 of the United States Code.

(H)A person or entity licensed pursuant to or subject to the State Bar Act (Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code).

(2)The commissioner may use the authority described in Section 100005 in connection with a court-adjudicated violation of Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code by a person described in paragraph (1).

(c)This division shall not apply to any of the following:

(1)Debt collection regulated pursuant to Division 12.5 (commencing with Section 28100).

(2)The collection of covered commercial debt or covered commercial credit, as those terms are defined in Section 1788.2 of the Civil Code.

(3)Debt collection regulated pursuant to Section 6077.5 of the Business and Profession Code.

For purposes of this division, the following terms have the following meanings:

(a)“Applicant” means a person, including a natural person, partnership, corporation, limited liability company, trust, estate, cooperative, association, or other entity, who applied for a license pursuant to this division.

(b)“California debtor accounts” means accounts that are owned by consumers who reside in California at the time that the consumer makes a payment on the account.

(c)“Commissioner” means the Commissioner of Financial Protection and Innovation.

(d)“Consumer credit transaction” means a transaction between a natural person and another person in which property, services, or money is acquired on credit by that natural person from the other person primarily for personal, family, or household purposes.

(e)“Consumer debt” or “consumer credit” means money, property, or their equivalent, due or owing, or alleged to be due or owing, from a natural person by reason of a consumer credit transaction. The term “consumer debt” includes a mortgage debt. The term “consumer debt” includes “charged-off consumer debt” as defined in Section 1788.50 of the Civil Code.

(f)“Creditor” means a person who extends consumer credit to a debtor.

(g)“Debt” means money, property, or their equivalent that is due or owning or alleged to be due or owing from a natural person to another person.

(h)“Debt collection” means any act or practice in connection with the collection of consumer debt.

(i)“Debt collector” means any person who, in the ordinary course of business, regularly, on the person’s own behalf or on behalf of others, engages in debt collection. The term includes any person who composes and sells, or offers to compose and sell, forms, letters and other collection media used or intended to be used for debt collection. The term “debt collector” includes “debt buyer” as defined in Section 1788.50 of the Civil Code.

(j)“Debtor” means a natural person from whom a debt collector seeks to collect a consumer debt that is due or owing or alleged to be due or owing from the person.

(k)“Department” means the Department of Financial Protection and Innovation.

(l)“Fund” means the Debt Collection Licensing Fund established pursuant to Section 100006.5.

(m)“Licensee” means a person licensed, conditionally or unconditionally, pursuant to this chapter.

(n)“Nationwide Multistate Licensing System & Registry” means a system of record, created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, for nondepository, financial services licensing or registration in participating state agencies, the District of Columbia, Puerto Rico, the United States Virgin Islands, and Guam.

(o)“Person” means a natural person, partnership, corporation, limited liability company, trust, estate, cooperative, association, or other similar entity.

(a)The commissioner shall administer this division and may adopt rules and regulations, and issue orders, consistent with that authority.

(b)Without limitation, the functions, powers, and duties of the commissioner include all of the following:

(1)To issue or to refuse to issue a license as provided in this division.

(2)To allow affiliated companies to be under a single license. The commissioner shall adopt regulations specifying what constitutes an affiliated company for these purposes.

(3)To revoke or suspend any license for a violation of this division or a court-adjudicated violation of Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code.

(4)To keep records of licenses issued under this division.

(5)To receive, consider, investigate, and act upon a complaint made in connection with a licensee.

(6)To prescribe the form of and to receive applications for licenses and reports, books, and records required to be made or retained by a licensee.

(7)To subpoena documents and witnesses, and to compel their attendance and production, to administer oaths, and to require the production of books, papers, or other materials relevant to any inquiry authorized by this division.

(8)To require information with regard to an applicant that the commissioner may deem necessary, with regard for the paramount public interest in ascertaining the experience, background, honesty, truthfulness, integrity, and competency of an applicant for collecting consumer debt, and if an applicant is an entity other than an individual, in ascertaining the honesty, truthfulness, integrity, and competency of officers, directors, or managing members of the corporation, association, or other entity, or the general patters of a partnership.

(9)To enforce by order any provision of this division.

(10)To levy fees, fines, and charges in an amount sufficient to cover the cost of the services performed in administering this division. The fees collected pursuant to this division shall not exceed the costs of administering this division.

(a)Notwithstanding any law the commissioner shall have the authority to conduct investigations and examinations of an applicant or licensee as follows:

(1)For purposes of determining whether an applicant is eligible for a license, or that a licensee is complying with the provisions of this division or any regulation or order of the commissioner, the commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence that relates to debt collection, including, but not limited to, any of the following relating to the intent to, or the practice of, collecting consumer debt:

(A)Criminal, civil, and administrative history information.

(B)Personal history and experience information, including, but not limited to, independent credit reports obtained from a consumer reporting agency.

(C)Any other documents, information, or evidence that the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of those documents, information, or evidence.

(2)For the purposes of investigating violations or complaints arising under this division, the commissioner may direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required about the consumer debt or account of the debtor.

(b)In making any examination or investigation authorized by this section, the commissioner may control access to any documents and records of the licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, a person shall not remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of a licensee have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of this division, the licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct their ordinary business affairs.

(c)The commissioner may permit affiliated companies to be subject to a single examination. The department shall list all affiliated company names on the license and shall post them on the department’s internet website.

(a)If, in the opinion of the commissioner, a person who is required to be licensed under this division is operating as a debt collector without a license from the commissioner, or a person or licensee has violated any provision of this division, an order, or a regulation adopted pursuant to this division, or Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code, the commissioner may do any of the following:

(1)After notice and an opportunity for a hearing, order the person or licensee to desist and to refrain from engaging in the business of further continuing the violation.

(2)After notice and an opportunity for a hearing, order the person or licensee to pay ancillary relief. The ancillary relief may include, but need not be limited to, refunds, restitution, disgorgement, and payment of damages, as appropriate, on behalf of a person injured by the conduct or practice that constitutes the subject matter of the assessment. A person or licensee may dispute an order to pay ancillary relief for an individual violation of Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code, if the same injured person brought an action for the same violation against the same person or licensee in court, the action resulted in a final judgment on the merits, and all damages, penalties, or fees have been paid to the injured person.

(b)If, in the opinion of the commissioner, a depository institution, as defined in Section 1420, a person licensed pursuant to Division 9 (commencing with Section 22000) or Division 20 (commencing with Section 50000), or a person licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code, has violated Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code, the commissioner may take the actions described in paragraphs (1) and (2) of subdivision (a).

(c)If, within 30 days after an order issued pursuant to subdivision (a) or (b) is served, a written request for a hearing is filed and no hearing is held within 30 days thereafter, the order shall be deemed rescinded.

An applicant shall apply for a license by submitting both of the following to the commissioner:

(a)A completed application for a license in a form prescribed by the commissioner and signed under penalty of perjury. An application shall include the location of the applicant’s principal place of business and all branch office locations.

(b)(1)An application fee, of one thousand dollars ($1,000), and an investigation fee, the amount of which shall be determined by the department, to cover any costs incurred in processing an application, including a fingerprint processing and criminal history record check under Section 100009. The investigation fee, including the amount for the criminal history record check, and the application fee are not refundable if an application is denied or withdrawn.

(2)The fees assessed pursuant to this subdivision shall be billed and collected by the commissioner at the time of initial application.

(a)A licensee shall notify the commissioner, in writing, of any change in the information provided in the application for a license, as applicable, not later than 30 days after the occurrence of the event that results in the information becoming inaccurate or incomplete.

(b)(1)If a licensee seeks to change its place of business to a street address other than that designated in its license, the licensee shall provide written notice to the commissioner at least 10 days prior to the change.

(2)A licensee shall not operate as a debt collector at a new location in a name other than a name approved by the commissioner.

(3)A licensee that opens a new branch office or changes the location of an existing branch office shall notify the commissioner in writing of the new or changed branch office location within 30 days after the branch office begins business.

(a)(1)Each licensee shall pay to the commissioner an annual pro rata fee for all costs and expenses reasonably incurred in the administration of this division by December 31 of each year, as determined pursuant to paragraph (2).

(2)(A)Subject to subparagraph (B), the annual pro rata share shall be divided into three tiers based on the total number of California debtor accounts in active collection in the preceding year, as follows:

(i)Tier 1 shall be one thousand dollars ($1,000).

(ii)Tier 2 shall be four thousand dollars ($4,000).

(iii)Tier 3 shall be seven thousand dollars ($7,000).

(B)A fee charged pursuant to subparagraph (A) shall not exceed the reasonable costs to the department to administer this division.

(C)The commissioner, with the advice of the Debt Collection Advisory Board, shall determine the threshold number of California debtor accounts in active collection for each tier described in subparagraph (A) by June 30 of each year for the amount due by December 31 of that year.

(b)If payment is not made by December 31, the commissioner shall assess and collect a penalty, in addition to the fee, of 5 percent of the assessment for each month or part of a month that the payment is delayed or withheld.

(c)Annual fees are independent of fees associated with investigations and examinations.

(d)If a licensee fails to pay the annual fees on or before December 31, the commissioner may by order summarily suspend or revoke the license issued to the licensee within 30 days. If, after an order is made, a request for hearing is filed in writing within 30 days, and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when the license is revoked or suspended, a licensee shall not operate as a debt collector in this state pursuant to this division except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a license shall not affect the powers of the commissioner as provided in this division.

(e)Notwithstanding subdivisions (a) to (d), inclusive, the commissioner may by rule require licensees to pay annual fees through the Nationwide Multistate Licensing System & Registry.

(a)A licensee shall file an annual report with the commissioner, on or before March 15, that contains all relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee in the state during the preceding calendar year, including information regarding collection activity. The report shall, at minimum, require disclosure of all of the following information:

(1)The total number of California debtor accounts in active collections in the preceding year.

(2)Whether or not the licensee is acting as a debt collector, debt buyer, or both.

(3)The case number of any action in which the licensee was held liable by final judgment under Title 1.6C (commencing with Section 1788) or Title 1.6C.5 (commencing with Section 1788.50) of Part 4 of Division 3 of the Civil Code.

(b)The individual annual reports filed pursuant to this section shall be made available to the public for inspection.

(c)The report shall be made under oath and in the form prescribed by the commissioner.

(d)A licensee shall make other special reports that may be required by the commissioner.