In July 2022, the California Department of Financial Institutions (DFPI) published proposed regulations that would impact licensing, reporting, and record retention. On August 29, 2022, the Consumer Relations Consortium (CRC) submitted comments to the DFPI to address the proposal's conflicts with other California laws, confusing definitions, and unreasonably burdensome requirements.
The CRC's comments were prepared by Legal Advisory Board (LAB) members Joann Needleman of Clark Hill, Brit Suttell of Barron and Newburger, along with Stefanie Jackman and Jonathan Floyd* of Troutman Pepper.
In its comments, the CRC asked the DFPI to modify its proposed regulations as follows:
- Update licensing requirement definitions to ensure they are not duplicative of other California laws. Duplicative licensing requirements place an unnecessary burden and expense on debt collectors. By clarifying the definition to reference other California licensing laws, the DFPI would resolve potentially duplicative requirements.
- Clarify that "goods sold" includes "services rendered." The proposed regulation requires licensees to calculate the "net proceeds generated by California debtor accounts." However, "goods sold" does not accurately reflect the services debt collectors perform for their clients. By clarifying the definition, the DFPI would more accurately reflect the variety of services that debt collectors provide to their clients.
- Reduce the proposed records retention requirement of seven years down to three years. Seven years is longer than any other state or federal requirement. This time period conflicts with other California record retention requirements and puts consumer data at risk long after an account is resolved.
- Update the records requirement with appropriate definitions to provide clarification and more accurately reflect the debt collection process. The proposed regulation requires licensees to maintain records regarding "direct" or "indirect" communication but fails to define either term. It also requires debt collectors to provide a summary of a contact or message that results in payment but fails to explain how a debt collector should determine which communication led to a payment or how to address scenarios where a payment is made after a string of several communications.
The complete comment filed by the CRC can be found here.