On September 22, 2021, the California Department of Financial Protection and Innovation (DFPI) issued a press release announcing its first enforcement action against a debt collector and debt buyer for violating the California Consumer Financial Protection Law (CCFPL).
Finding that F & F Management Inc. (F & F) is a “covered person” under the CCFPL since it collects debt related to a consumer financial product or service, the enforcement action assesses F&F with $375,000 in penalties. According to the allegations, F&F's activities violated the CCFPL, the Fair Debt Collection Practices Act (FDCPA), and multiple state laws, by:
- Leaving lengthy voicemails for consumers indicating that if the consumer did not call back within 24 hours, legal action would be taken, the consumer’s employer would be notified about the debt, and consumers would be served legal papers at their doorstep. F&F failed to send initial demand notices to consumers and never took any of these actions.
- Reporting the debt to credit bureaus but failing to notify consumers that their debt was being reported.
- Refusing or failing to provide consumers information about the debt when they contacted F&F to request the creditor’s name or other validation information.
“The DFPI will not tolerate any unlawful, unfair, deceptive or
abusive acts or practices in collecting debts,” said DFPI Senior Deputy
Commissioner of the Consumer Financial Protection Division Suzanne Martindale.
“Debt collection is one of the DFPI’s top complaint types. This action
highlights just some of the unlawful and unfair acts that can cause enormous
harm to consumers and plague the debt collection industry, and the ways the
DFPI can address them.”
What’s notable here isn’t that the DFPI pursued this debt collector for this conduct. An actual reading of the enforcement action indicates this debt collector was not particularly interested in compliance (to put it nicely).
However, what is notable is that the CA DFPI has made it clear they consider third-party debt collectors to be “covered person” under the CCFPL. The definitions in the CCFPL are not super clear, so there has been quite a bit of debate on this topic amongst ARM entities. Within the enforcement action though, the DFPI tied several sections of the CCFPL together to show why third-party debt collectors are, in its view, “covered persons,” and ARM entities collecting debt in CA should take note.