CA Legislature Passes Debt Collector Licensing Bill

FREMONT, CA — California would require debt collectors and buyers operating in the state to be licensed under a bill approved Tuesday by the state Legislature that now goes to Gov. Gavin Newsom for consideration.

State Sen. Bob Wieckowski (D-Fremont) authored SB 908 with support from a coalition of consumer organizations and legal service providers as a protection for consumers from unfair or dishonest practices, particularly during current perilous economic conditions due to the novel coronavirus pandemic.

"Unfortunately, we know from history that when times are tough, the bad actors come out in force to take advantage of people experiencing financial hardship," Wieckowski, a member of the Senate Judiciary Committee, said in a statement.

"Relying on victims to enforce our consumer laws through litigation is a weak approach that leaves too many of our most vulnerable residents at risk of plunging into deeper debt."

The legislation requires licensing through the state Department of Business Oversight, creating a means for proper supervision of the debt collection industry that consumers can turn to, he said.

The bill calls for the DBO to take borrowers' complaints and enforce violations. It would provide consumers with a single location to see whether or not companies are licensed, and any actions taken against companies, including suspension or revocation.

Funding would come from licensing fees on the industry.

"For too long, the scales of justice have tipped favorably to the debt collectors' advantage," Wieckowski said. "By more vigorously enforcing our laws, we can bring real justice to consumers and eliminate the misconduct and financial abuse that exists."

If enacted, California would join 34 states requiring a license to collect on consumer debt.

Currently, enforcement of the state's 1977 fair debt collection law relies on a consumer suing the collection company, which many people do not have the time or resources to undertake, licensing supporters say, which leaves collectors free to continue unscrupulous practices.

Collection attorneys would also be licensed by the DBO.

"Some law firms operate as collection mills and send out thousands of notices on their letterhead, which often frightens and intimidates consumers," according to Wieckowski's office.

Organizations supporting the legislation include the California Low-Income Consumer Coalition, Consumer Reports, Consumer Federation of California, Bay Area Legal Aid, East Bay Community Law Center, Bet Tzedek, Courage California, Western Center on Law and Poverty, California Advocates for Nursing Home Reform, California Indian Legal Services, and Consumers for Auto Reliability and Safety, among other groups.

"The passage of SB 908 means that we are one step closer to providing meaningful protections for consumers across California," said Leigh E. Ferrin, director of Litigation and Pro Bono for the Public Law Center. "Now, as more consumers are likely to be unable to pay their debts because of the pandemic, all consumers, but particularly low-income consumers and their advocates, will have a place to turn for complaints and enforcement."

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