SACRAMENTO – Consumers struggling with debt scored a big win today when Governor Gavin Newsom signed SB 908 by Senator Bob Wieckowski (D-Fremont), a bill to require the licensing of debt collectors and debt buyers operating in California. The legislation is strongly supported by a large group of consumer organizations and legal service providers.
“The Governor has stepped up on behalf of consumers and families who are incurring more debt as a result of the COVID-19 pandemic and to fill the vacuum in the wake of weak oversight at the federal level,” said Wieckowski, one of the Legislature’s strongest advocates for consumer protection laws. “By giving Californians a department to enforce our consumer laws rather than relying on individuals to sue the debt collectors, we can root out the bad actors and reduce the abuse and harassment of families.”
With consumer debt at an all-time high, the lack of a licensing requirement was a big hole in oversight of the collection industry.
Under SB 908, the state Department of Financial Protection and Innovation, formerly the Department of Business Oversight, will field complaints from borrowers and enforce violations. Consumers will now be able to go to 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 will 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 money to take such action. This allows companies to continue collecting against the wrong person, inflating the amount of money owed and other bad practices.
“We are grateful for Sen. Wieckowski’s leadership on this common sense and urgently needed protection against unscrupulous debt collectors,” said Jenna Miara, directing attorney, Impact, Litigation& Policy for Bet Tzedek, a non-profit organization that provides a range of legal services to clients. “The increased oversight and enforcement authority provided by SB 908 will be crucially important to individuals and to our state as the pandemic forces more and more Californians into debt and financial distress.”
SB 908 also requires collection attorneys to be licensed by the Department of Financial Protection and Innovation. Some law firms operate as collection mills, sending out thousands of notices on their letterhead, which often frightens and intimidates consumers.
SB 908 is supported by California Low-Income Consumer Coalition, Consumer Reports, Center for Responsible Lending, Consumer Federation of California, Bay Area Legal Aid, East Bay Community Law Center, Courage California, Western Center on Law and Poverty, California Advocates for Nursing Home Reform, California Indian Legal Services, Office of Kat Taylor, Consumers for Auto Reliability and Safety, California Association of Collectors, and the Receivables Management Association International.
Senator Wieckowski represents the 10th District, which includes southern Alameda County and parts of Santa Clara County.