By: Laurie C. Keating, Attorney at Law, Fiore Racobs & Powers, A PLC, Orange County Office

If debt collection was not already exciting enough, effective January 1, 2022, debt collectors will now need to obtain licenses due to SB 908. A “debt collector” is defined in the Rosenthal Act, and includes anyone who, in the ordinary course of business, regularly collects a debt on behalf of themselves or another party. Collection of assessments is considered to be “debt collection,” and so self-managed associations and management companies will now need to obtain a debt collection license.

In order to enforce the new requirements, this bill allows the Commissioner of the California Department of Business Oversight to establish a licensing scheme, adopt rules, and investigate violations of the Rosenthal Act (which is the California – specific debt collection legislation). The new licensing regulations require an application and a fee, imposes reporting and examination requirements, and requires the maintenance of a surety bond of at least $25,000 by debt collectors. There is also an annual fee that debt collectors must pay, which will be a pro-rata share of the cost of administering the licensing and oversight program, with a minimum fee of $250. If debt collectors are investigated, the commissioner may also charge them for the time spent on the investigation.

Obviously this is intended to increase oversight of debt collectors, though debt collectors were already subject to civil lawsuits for alleged violations of the Rosenthal Act. Disgruntled debtors, regardless of whether they have a legitimate complaint, will now have the ability to both file a complaint with the commissioner and pursue a civil lawsuit. This would potentially cause the association and/or management to incur significant expense defending such claims. Those costs will then be passed along to the association and ultimately to the delinquent homeowners.

In addition to the more broad-strokes requirements, this bill also adds a couple of smaller requirements. This includes a requirement that debt collectors identify themselves when they make a phone call, and include their license number in 12-point type on written communications with debtors.

While consumer rights advocates will likely cheer for this new bill, it is not as beneficial as it might seem for debtors, as the increased costs will ultimately be passed along to and harm debtors.

Reprinted from OC View, copyright by CAI, Orange County Regional Chapter, all rights reserved.