A bill that would legally mandate licensure of debt collectors and debt buyers in the state faces hearings in the Assembly this week following passage in the Senate last week.
Increased regulations for debt collectors
In addition to requiring licenses, Senate Bill 908, authored by Senator Bob Wieckowski (D-Fremont), would also install limits on who can be debt collectors by adding a mandatory Department of Justice background check to all applicants. All debt collection calls, e-mails, and other communication will also need to firmly establish the debt collectors name and license number as warranted.
Licensees will also need a surety bond, file mandatory reports on their communications. The California Department of Business Oversight (DBO) would oversee the new regulations and licenses and would also be in charge of enforcement.
SB 908 was written largely as a consumer protection measure during a time where an economic downturn is increasing many people’s debts across the country. Senator Wieckowski personally has said that he wished to put a stop to abusive tactics used by debt collectors over the phone.
“Consumer debt is at an all-time high and without SB 908, more Californians will fall prey to the often abusive tactics of debt collectors,” said Senator Wieckowski in a statement during the weekend. “We license all sorts of professions in California that do not have the power to do the financial harm to individuals that debt collectors can do by garnishing wages and seizing people’s assets. It is a gaping loophole that needs to be closed to protect California consumers, especially when so many are struggling through this pandemic.”
Bankruptcy lawyer Henry Dawson also noted what SB 908 could do.
“It will not erase debt, and they can still seize assets, add liens, and other things,” noted Dawson. “It just adds another layer to people being hired. It’s basically acting as a filter to get those who are abusive or threatening out but leaving the responsible collectors who know the law and who know exactly what they can do in.
This is not forgiving debts, but neither is it like the UK where debt collectors can literally call a law enforcement branch to enter people’s homes and either demand money or start taking stuff to pay the debt. It’s just another layer of protection and ensures things are done on the level during this tough time. A lot of people are either in debt or going to be in debt soon, and this bill will help debt collection agencies from being punished from using abusive or illegal tactics and it helps debtors from being overly besieged and from being threatened from predatory collectors.”
Supporters, and those opposed to SB 908
Numerous consumer organizations, including the California Low-Income Consumer Coalition, Consumer Reports, the Public Law Center, and Western Center on Law and Poverty backed SB 908, as did the majority of Senators during it’s 29-4 passage on June 25th in the Senate.
Some notable opposition was formed, with many debt collection agencies saying that SB 908 would weaken their ability to collect debts.
“We need to make clear to people that they have to pay,” said debt collector Malcolm Friesling. “This will hurt our ability. It reduces the pool of people from whom we can hire, so that may mean the best collectors are left out. Then we become more restricted in what we can say or do.”
“These people are in debt. They’re in the wrong. They made the mistake and spent more money than they had. Why shouldn’t they get the hammer down over this?”
“I know with COVID and everything times are tough, but that should stop us from doing our job either.”
SB 908 is expected to go before the Assembly this week. If passed and signed by the Governor, the bill will come into effect starting in January 2022.