DFPI Finalizes Debt Collection Licensing Regulations, Effective July 1

On March 4, the California DFPI finalized regulations under the Debt Collection Licensing Act (DCLA). The final regulations, which take effect July 1, 2025, clarify key licensing and reporting requirements.

Under the DLCA, debt collectors operating in California must be licensed by the DFPI. The law also requires licensed debt collectors to submit annual reports and pay a pro rata assessment to fund DFPI’s oversight of the industry. The final regulations provide critical definitions and reporting requirements to ensure compliance with these obligations.

The DFPI’s final regulations make several key clarifications, including:

• Definition of “Net Proceeds”. The regulations establish how debt collectors must calculate net proceeds generated by California debtor accounts, which determines their annual pro rata assessment
  • Debt Buyers: Net proceeds equal the amount collected minus the prorated amount paid for the purchased debt.
  • Debt Owners (excluding Debt Buyers): Net proceeds equal fees and charges collected from debtors that would not have been received if the debt had been paid on time.
  • Other Debt Collectors: Net proceeds equal the total amount received from clients (the companies on whose behalf the debt collectors have been contracted to collect on an account), regardless of fee structure.
  • For all three categories, net proceeds are calculated before deducting costs and expenses.
• Annual Reporting Requirements. Licensees must report (1) the total number of California debtor accounts collected in full or in part, (2) the total number of California debtor accounts where collection was attempted but no payments were received, and (3) the total number of California debtor accounts in the licensee’s portfolio at year-end.

Putting It Into Practice: The DFPI’s final regulations align with the CFPB’s recent push for states to expand regulatory oversight, as outlined in its January 2025 roadmap (previously discussed here). By increasing reporting requirements and clarifying assessment obligations, California is reinforcing its role as a leader in consumer financial protection. Other states may follow suit, signaling a broader trend toward enhanced debt collection oversight at the state level.

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