In late September of 2020, Governor Gavin Newsom signed two new pieces of legislation into law that could have a lasting impact on the way that commercial debt collection agencies are able to operate here in the state of California.
After spending years discussing the possibility, the state will now begin issuing licenses for any collection agency operating in California, as well as for anyone attempting to collect from California residents, regardless of the location of their office.
In addition to the new licensing requirement, California is also creating its own version of the Consumer Financial Protection Bureau to ensure that residents of the state are afforded all of the rights and protections they deserve.
Let’s take a closer look at what each of these new laws is going to bring to the table and how it might impact life as we know it here in the Golden State.
Debt Collection Licenses
The Rosenthal Act has long been the standard that governs debt collection practices in the state of California, and it specifies many of the same regulations that are set forth nationally by the Consumer Fair Debt Collection Practices Act.
By adding a new licensing requirement, the courts that enforce the Rosenthal Act across the state will now have a way of punishing and restricting those individuals who feel the need to operate outside of the rules set forth by this existing legislation.
The new “mini-CFPB” law will rename the Department of Business Oversight as the Department of Financial Protection and Innovation. It will then task that department with executing the new licensing laws, as well as enforcing the existing regulations set forth by the Rosenthal Act and the federal FDCPA.
On top of investigating consumer complaints, the new department will also have the legal authority to conduct their own investigations into what they believe to be violations of the established regulations.
Impact on Collection Agencies
Like most of the laws that have been passed around the country involving debt collection practices, these new bills in California are designed to target and eliminate debt collection agencies that simply refuse to play by the rules and treat consumers with respect.
While licensing requirements will be difficult for the unethical agencies to maintain, they will only be a minor inconvenience or a small added step to doing business for agencies that intend to operate by the books.
Impact on Consumers
For consumers, these new bills could be game-changing in that they will severely limit the ability of those unethical debt collection agencies to violate established consumer protections that the federal and state governments have already put in place.
Requiring debt collection agencies to be licensed will also give the state the ability to revoke those licenses should an agency be caught violating any of the rules and regulations.
So while this could be a landmark change in the eyes of consumers and lawmakers across the great state of California, it should not be a major concern for any commercial debt collection agency that is already operating on the right side of the existing legislation.