Regulating debt collectors

Image by Teddy James via Flickr (CC BY-NC-SA 2.0)

By Nigel Duara

WHAT THE BILL WOULD DO

SB 908 would create the Debt Collection Licensing Act, which would license and regulate debt collectors, overseen by the Department of Business Oversight. The department would also license collections attorneys. The bill by Sen. Bob Wieckowski, a Fremont Democrat, builds on the 1977 national Fair Debt Collection Practices Act, which sought to eliminate abusive debt collection practices, but required debtors to file lawsuits themselves. 

WHO SUPPORTS IT? 

Consumer advocacy organizations, nonprofits that work with debtors and both the California Association of Collectors and the Receivables Management Association International, two trade organizations representing debt collectors. 

WHO’S OPPOSED?

Banks and credit unions oppose the bill unless it’s amended to remove them from being regulated by the Department of Business Oversight. The bill doesn’t require them to be licensed as debt collectors, but they could be subject to enforcement for violating debt collection laws. The California Creditors Bar Association opposes the licensure of collections attorneys.   

WHY IT MATTERS 

California is one of 16 states that doesn’t regulate debt collectors. The pandemic and accompanying recession has increased household debt of many Californians. The bill, supported by the debt collection industry, would compel debt collectors to undergo a background check by the state Department of Justice. 

GOVERNOR’S CALL 

The governor signed the bill on Sept. 25.

“There’s so many components to this bill that make this, we believe, the most significant consumer protection bill of its time anywhere in the nation,” Newsom said.