California Legislature passes landmark bill to license debt collectors

August 31, 2020

SACRAMENTO – With an eye toward shielding consumers from unscrupulous debt collectors preying on California families during the COVID-19 induced economic crisis, the state Legislature today approved a bill by Senator Bob Wieckowski (D-Fremont) to license debt collectors and debt buyers operating in California.  The bill, SB 908, now heads to Governor Newsom for his consideration.  It is supported by a large coalition of consumer organizations and legal service providers.

“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,” said Wieckowski, a member of the Senate Judiciary Committee. “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. SB 908 provides a licensing requirement within the Department of Business Oversight to give consumers an agency they can rely on to provide the proper supervision of this industry. For too long, the scales of justice have tipped favorably to the debt collectors’ advantage. By more vigorously enforcing our laws, we can bring real justice to consumers and eliminate the misconduct and financial abuse that exists.”

Under SB 908, the DBO would field complaints from borrowers and enforce violations. The bill would provide consumers a single location to see what companies are licensed, are operating without a license, and any actions taken against companies, including suspension or revocation. Funding would be derived from licensing fees on the industry.

Thirty-four states require a license in order to collect on consumer debt.

California passed fair debt collection laws in 1977, but their enforcement relies on individuals to sue the debt collection companies. Often, consumers do not have the time or resources to take such action. This allows companies to continue collecting against the wrong person, inflating the amount of money owed and other bad practices.

“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.”

SB 908 would also require collection attorneys to 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.

With consumer debt at an all-time high, the lack of licensing is a gaping hole in oversight of this industry. 

SB 908 is supported by 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.

Senator Wieckowski represents the 10th District, which includes southern Alameda County and parts of Santa Clara County.