On February 9, 2024, the Commissioner of the California Department of Financial Protection and Innovation (“DFPI” or “Department”) announced a proposed rulemaking limited to certain requirements related to reporting and assessments under the Debt Collection Licensing Act (“DCLA”). It has not yet responded to the comments it received in connection with a separate proposed rulemaking regarding the scope of the DCLA and its application to creditors (persons who extend consumer credit to a debtor).
With regard to assessments made by licensees, the DCLA requires a licensee to pay the Department annually its pro rata share of all costs and expenses reasonably incurred in the administration of the DCLA, with the first assessment to be imposed in 2024. The calculation of the pro rata share is based, in part, on the amount of net proceeds generated by California debtor accounts in the preceding year. The term “net proceeds” is not currently defined by statute. The proposed regulation seeks to amend the definitions found in Cal. Code Reg. Tit. 10 § 1850 to define net proceeds generated by California debtors accounts:
“‘Net proceeds generated by California debtor accounts’ means the amount retained by a debt collector from its California debt collection activity. (1) For a debt buyer as defined in Civil Code section 1788.50, this is equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses. (2) For a purchaser of debt that has not been charged off or debt that is not in default, this is equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses. (3) For a third-party collector, this is equal to the amount a collector receives from its clients, regardless of fee structure, before deducting costs and expenses. For purposes of this section, “client” means the company on whose behalf the third-party collector has been contracted to collect on an account. (4) For a first-party collector, this is equal to the amount it receives in fees and other charges from debtors that it would not have received had the debt been paid on time, before deducting costs and expenses. For purposes of this section, a first-party collector means a person or entity that collects a debt owed directly to it.”
With regard to annual reporting, the DCLA requires a licensee to file an annual report with the Commissioner and sets forth certain information that must be disclosed in the report. This rulemaking clarifies terms and establishes additional annual reporting requirements, such as a requirement to submit reports electronically. The rule clarifies that companies must report the total number of California debtor accounts collected on in the preceding year, which means “the sum of the following: (1) The total number of California debtor accounts collected in full. (2) The total number of California debtor accounts collected on that were resolved for less than the full amount of the debt. (3) The total number of California debtor accounts collected on where less than the full amount of the debt was collected, and a balance remains due.” The proposed rule also includes detail on reporting purchased accounts, portfolio accounts, and unsuccessful collection attempts.
The DFPI’s notice of proposed rulemaking activity can be found here. Any interested party may submit comments to the DFPI until March 27, 2024.