Debt Collectors

A debt collector is “any person who, in the ordinary course of business, regularly, on the person’s own behalf or on behalf of others, engages in “debt collection”. The term includes any person who composes and sells or offers to compose and sell, forms, letters, and other collection media used or intended to be used for debt collection.” The term debt collector includes ”debt buyer”. Affiliates who engage in the business of debt collection are also required to apply for a license.

“Debt collection” means any act or practice in connection with the collection of consumer debt. A “debt buyer” means a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether it collects the debt itself, hires a third-party for collection or hires an attorney-at-law for collection litigation.

“Debt buyer” does not mean a person or entity that acquires a charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of consumer debt that has not been charged off. “Charged-off consumer debt” means a consumer debt that has been removed from a creditor’s books as an asset and treated as a loss or expense. For more definitions, including “debt collector,” “consumer debt,” “debt,” and others, please refer to Financial Code § 100002.

All debt collectors and debt buyers operating in California are required to apply for a license with the Department. A license is required for the licensee’s principal place of business and cannot be transferred or assigned. Please note that a separate license is not required for each individual branch office. However, your branch offices must be registered in the NMLS.

There are exemptions for depository institutions such as FDIC-insured banks, credit unions, DFPI-licensed finance lenders and brokers, DFPI-licensed mortgage lenders and servicers, Department of Real Estate licensed agents, persons subject to the Karnette Rental-Purchase Act, a trustee for a nonjudicial foreclosure, and debt collections regulated under the Student Loan Servicing Act.

The license number will be sent via email and through NMLS when the application is approved. Licensees are required to include their California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.11.

In general, a licensee’s duties can be found in Fin. Code §§ 100018 – 100022 of the Debt Collection Licensing Act (Fin. Code § 100000 et seq.) (DCLA). Any change in the information you originally provided in your application (MU1, MU2, or MU3) should be updated in NMLS promptly as they occur.

For information regarding pending regulations please visit: Laws and Regulations – Debt Collection Licensing Act. You are responsible for complying with the law, including but not limited to the California Consumer Financial Protection Law (Fin. Code § 90000 et seq.) (CCFPL) and the DCLA.

The application is completed electronically on the Nationwide Multistate Licensing System and Registry (NMLS). Instructions for filing on online application can be found here.

Before you can file a debt collector application in NMLS, you must have a “Company Account” in NMLS.

If you do not have a Company Account in NMLS yet, you can request the Company Account request form here.

If you already have a Company Account in NMLS, you can find the instructions to file the application by using the CA-DFPI Debt Collection License New Application Checklist. The checklist has general information about the license, fees, required documents you need to upload to NMLS with the application, and required documents you may need to submit outside of NMLS.

There is an application fee of $350 and an investigation fee of $150 per applicant. Fees will need to be paid through the Nationwide Multistate Licensing System and Registry (NMLS) for transmission to the Commissioner. The $350 application will be invoiced through NMLS after the application is submitted. The NMLS fees for obtaining credit reports, annual processing fees, and any other NMLS fees shall be paid by applicants and licensees to NMLS through NMLS.  Fees are not refundable.

You may apply for a single license that includes all your affiliates engaged in the business of debt collection and pay a single application fee of $350.  However, each affiliate will still need to pay the investigation fee of $150 and complete a New Company application (Form MU1).

The fingerprinting process is a requirement of the application process.  Pursuant to the Debt Collection Licensing Act, every MU2 filer shall submit fingerprints in accordance with Financial Code 100008 through NMLS and authorize a background investigation.

Each MU2 filer must login to NMLS and authorize a background check, select whether to submit new prints or use existing prints, and grant agency access to view the background results. Instructions can be found at: Completing the CBC Process for MU2s  or Completing the CBC Process for MU2s – Company Perspective.

Note: Fingerprinting is still suspended for Branch Managers. Branches will be granted conditional registrations and asked to provide fingerprint background checks on managers at a later date.

Upon authorizing a background investigation, the results are typically provided within 48 hours. It is crucial to grant agency access to all relevant agencies before the background investigation results are returned. Failure to do so necessitates authorizing and paying for a new criminal background check.

No. The Commissioner requires applicants to file electronically through the Nationwide Multistate Licensing System & Registry (NMLS). In addition, the Commissioner may require fees, supporting documents, changes of address, amendments or modifications thereto, and any other information, to be submitted by applicants and licensees through NMLS.

The Commissioner has designated NMLS to receive and store filings, obtain credit reports, and collect related fees and assessments from applicants and licensees on behalf of the Commissioner. All applications, amendments, surety bonds, notices, related filings, supporting documents, renewals, authorizations, assessments, and fees required to be filed with the Commissioner will need to be filed electronically with and transmitted through NMLS.

The review process will take approximately ninety days from the date the application is submitted if you successfully meet all the licensing requirements to obtain your license. Failure to provide the required documentation and/or respond to requests for information will result in a prolonged process, which may ultimately result in your application being abandoned pursuant to Financial Code 100013 (b). For more information on licensing requirements, please refer to the NMLS Checklist Compiler.

All applications default to “Pending-Incomplete” when submitted. Once assigned to DFPI staff for initial review, the status will change to “Pending-Review.” Applications with outstanding documents or information will be placed in a “Pending-Deficient” status until satisfactorily resolved. The DFPI will notify you via email when the license request is approved, and your license status will be updated in NMLS.

The Debt Collection Licensing Act is in Division 25 sections 100000 – 100025. You can find the financial code here.

You can link to the regulation through the DFPI website’s Laws and Regulations page.

For a list of actions that may be taken against a person for violations of Civil Code sections 1788 et seq. or 1788.50 et seq. regardless of licensure, please refer to Fin. Code § 100005.

The Commissioner may issue a desist and refrain order to keep a company or individual from engaging in the business as a debt collector without a license or from violating the DCLA or the Rosenthal Fair Debt Collections Practices Act or Civ. Code § 1788.50 et seq. The Commissioner may also order the person or licensee to pay ancillary relief, including but not limited to refunds, restitution, disgorgement, and payment of damages on behalf of a person injured by the conduct or practices constituting the violation.

Under the CCFPL, it is unlawful for a covered person or service provider, which includes debt collectors and debt buyers, to engage in any unlawful, unfair, deceptive, or abusive act or practice with respect to consumer financial products or services, offer or provide to a consumer any financial product or service not in conformity with any consumer financial law or otherwise commit any act or omission in violation of a consumer financial law, or fail or refuse, as required by a consumer financial law or any rule or order issued by the Department, to do any of the following: (A) permit the Department access to or copying of records; (B) establish or maintain records; or (C) make reports or provide information to the Department.

A covered person or service provider shall not terminate or in any other way discriminate against any or any authorized representative of covered employees by reason of the fact that they (1) filed a proceeding under any consumer financial law or (2) objected to or refused to participate in any activity, policy, or practice they believed to be in violation of any law, rule, or order.

If a person violates the CCFPL, rule, or final order or condition imposed in writing by the Department, the Commissioner may bring a civil action in superior court for a preliminary or permanent injunction, restraining order, writ of mandate, or order appointing a receiver.

If a person engages, has engaged, or proposes to engage in any activity prohibited by Financial Code sections 90003 or 90004, or an activity that violates a law, rule, order, or any condition imposed in writing by the Department, the Department may issue a desist and refrain order including a claim for ancillary relief as set forth in Financial Code section 90012(b).

1. Click the link: Registration. Enter all required information.
2. “Are you currently licensed as a Debt Collector with the CA DFPI?”, must respond “Yes” then click “Submit Registration”.
3. The screen will show a “Sign Up Confirmation” stating your request will be reviewed within five (5) business days.
4. DFPI Debt Collector staff will approve the request.
5. You will receive an email confirming your account has been activated. You can now provide a designated email address.

1. The designated email must use a generic address, not an individual’s email. (Example: [email protected] or [email protected]).
2. The designated email address may be an address already in use by your company, but should not be an address provided to the public for general communications.
3. SPAM settings must be modified or confirmed to allow emails from the domains “@dfpi.ca.gov” and [email protected].
4. Security settings should also be modified or confirmed to allow for attachments to be received.
5. The designated email should not be an email address of a third-party representative. Licensees should review emails sent by the DFPI and then determine if they would like to forward the information to a third-party representative.

For specific guidelines, please refer to the Commissioner’s Order issued November 22, 2013.

1. Go to https://docqnet.dfpi.ca.gov/login and sign in using the Username and Password you created when you registered for the account. (For login issues, please contact [email protected].)
2. Once logged in, click “Designated Emails” on the left navigation menu.
3. Click “+ Create New”.
4. Enter the designated email address, select License Type Debt Collector, and click “Create”.
5. Designated email information for all license types will be disclosed. One designated email is allowed for each license type.

Per California Financial Code section 100021(a), debt collector licensees, licensed as of December 31, 20XX, of the preceding year are required to file an Annual Report with the Department. The Annual Report is due by March 15, 20XX of the current year.

The Annual Report MUST be filed via the Department’s Self-Service Portal.

1. Go to https://docqnet.dfpi.ca.gov/login and sign in using the Username and Password you created when you registered for the account. (For login issues, please contact [email protected])
2. Once logged in, from the welcome page, click on your name (top right) to open the drop-down menu and click the Annual, Liability & Industry Survey Reporting link.
3. Under “Your Reports” on the Annual, Liability & Industry Survey Reporting page, click on Debt Collection Annual Reports.
4. Optional: Click on “Download Blank Form” for a sample Annual Report with instructions.
5. To begin completing your report, click on “Start” and follow the prompts.

If you would like to edit and resubmit your Annual Report, follow steps 1-3 above, then click on “Re-Open” and follow the prompts.

A digital currency is defined the same as a digital financial asset per the Digital Financial Assets Law (DFAL). Digital financial asset means a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and that is not legal tender, whether or not denominated in legal tender. Digital financial asset does not include any of the following:

(A) A transaction in which a merchant grants, as part of an affinity or rewards program, value that cannot be taken from or exchanged with the merchant for legal tender, bank or credit union credit, or a digital financial asset.

(B) A digital representation of value issued by or on behalf of a publisher and used solely within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform.

(C) A security registered with or exempt from registration with the United States Securities and Exchange Commission or a security qualified with or exempt from qualifications with the department.

Net Proceeds is defined as the amount retained by a debt collector from its California debt collection activity.

1. For the California debt collection activity of a debt buyer as defined in Civil Code section 1788.50, this is equal to the amount the debt buyer collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses.
2. For the California debt collection activity of an owner of debt who is not a debt buyer in (1), this is equal to the amount the owner 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.
3. For all other California debt collection activity, this is equal to the amount a debt 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 debt collector has been contracted to collect on an account.
4. The total dollar amount of net proceeds required by (a)(5) of Financial Code section 100021 is the sum of the net proceeds for each category of California debt collection activity in 1 through 3.

1. The licensee used net income rather than gross income as a baseline to calculate Net Proceeds. Nothing should be deducted from gross income, other than what is expressly allowed in the regulations for debt buyers. Only those licensees that have had no gross income from any type of debt collection in the preceding year should be reporting “zero” Net Proceeds.
2. The licensee did not recognize all types of debt collection activities. “Debt Collection” means any act or practice in connection with the collection of consumer debt. That includes debt buyers (active or passive), call centers, composing letters and other activities, whether the entity is directly collecting payments from consumers or not. Any of these functions that generated income must be included in Net Proceeds.
3. The licensee that is part of a larger organization where all funds and accounting functions are aggregated through an affiliate or a holding company did not report any income aggregated through those affiliates or holding companies. Any income from the debt collection activities performed by the licensee must be reported.  If financial information is consolidated, then the licensee must obtain detailed subledgers from the affiliate or holding company to determine what the licensee must report.
4. The licensee did not use the appropriate methodology to calculate Net Proceeds. A single licensee may have to perform multiple calculations to obtain the final Net Proceeds amount. There are three ways to calculate Net Proceeds depending on the licensee’s business model, as explained below.

1. Debt Buyer

   Title 10, California Code of Regulations, section 1850, subdivision (p)(1), provides that for the California debt collection activity of a debt buyer as defined in Civil Code section 1788.50, Net Proceeds is equal to the amount the debt buyer collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses.

   This first methodology for calculating Net Proceeds is applicable to a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or hires an attorney for collection litigation.

2. Owner of Debt

   Title 10, California Code of Regulations, section 1850, subdivision (p)(2), provides that for the California debt collection activity of an owner of debt who is not a debt buyer, the Net Proceeds is equal to the amount the owner 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.

   This second methodology for calculating Net Proceeds is applicable to debt owners that are not engaged in the business of purchasing charged-off consumer debt.  Net Proceeds includes all additional fees and monies collected once a consumer’s payment is late.

3. All Other Debt Collectors

   Title 10, California Code of Regulations, section 1850, subdivision (p)(3), provides that for all other California debt collection activity, Net Proceeds is equal to the amount a debt collector receives from its clients, regardless of fee structure, before deducting costs and expenses.

   This third methodology for calculating Net Proceeds applies to all collectors that do not own the debt, including entities that are collecting for an affiliate. Net Proceeds must include all income related to California consumers and no expense deductions are allowed.

Any licensee who holds an active California Debt Collection License as of July 1 of the assessment year is subject to the payment of the assessment fee.

In accordance with California Financial Code §100020(a) and (c), all licensees are charged for a minimum of $250 fee to cover costs and expenses to operate this division. The remaining costs and expenses are allocated to each licensee for its pro rata share based on the proportion of Net Proceeds reported.

The annual assessment fee will be invoiced through NMLS by September 30 each year and the payment will be due in 30 days. Payments can be made using Credit Card or ACH (Automated Clearing House) in the NMLS system.

Though the Pro rata share is based on the proportion of net proceeds generated by California debtor accounts in the preceding year, any licensee who holds an active California Debt Collection License as of July 1 of the assessment year is responsible for its pro rata share of assessment fee that is no less than $250. 

If the payment is not made by due date, licensee will face disciplinary measures including suspension or revocation of the license and penalties.  It may also warrant close regulatory oversight and supervision.