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SB-750 Debt collection agencies: licensure and regulation.(2019-2020)

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Date Published: 03/27/2019 09:00 PM
SB750:v98#DOCUMENT

Amended  IN  Senate  March 27, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 750

Introduced by Senator Wieckowski

February 22, 2019

An act to add Chapter 10.5 (commencing with Section 7450) to Division 3 of the Business and Professions Code, relating to debt collection.


LEGISLATIVE COUNSEL'S DIGEST


SB 750, as amended, Wieckowski. Debt collection. collection agencies: licensure and regulation.
Existing state and federal law defines and regulates debt collectors. Existing law prohibits a debt collector from attempting to collect a debt by means of various false representations. Existing law regulates various professions and vocations in the Business and Professions Code. law, the Collateral Recovery Act, licenses and regulates the activities of repossession agencies. Existing law defines a repossession agency as any person who engages in business or accepts employment to locate or recover collateral, whether voluntarily or involuntarily, for consideration.
This bill would state the intent of the Legislature to enact legislation that would add a new division to the Business and Professions Code that would require debt collection companies in California to be licensed and bonded. authorize the Commissioner of Business Oversight to license and regulate collection agencies. The bill would define a “collection agency” as a business entity through which a debt collector or association of debt collectors engage in debt collection. The bill would prohibit a collection agency from engaging in the business of debt collection, directly or indirectly, without first obtaining a license, which would not be transferable or assignable. The bill would except from this requirement a financial institution that collects its own debt in its own name. The bill would prescribe various informational requirements for a collection agency license application and require that an applicant, for purposes of licensure, maintain at least one office in the state that is open to the public during normal business hours, staffed by at least one full-time employee with access to specified records, and which accepts consumer payments made at that location. The bill would require a collection agency license to be renewed annually.
The bill would authorize the Commissioner of Business Oversight to promulgate rules and regulations and issue orders consistent with its authority to administer the bill’s provisions and would prescribe a nonexclusive list of the functions, powers, and duties of the commissioner. The bill would specifically grant the commissioner the authority to conduct investigations and examinations of applicants and licensees and, in this regard, to access, receive, and use any books, accounts, and records relating to the intent to engage in, or the practice of, collecting consumer debt and to obtain criminal history information and independent consumer credit reports. For the purposes of investigating violations or complaints, the bill would authorize the commissioner to direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required about the debt or account of the consumer. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 Chapter 10.5 (commencing with Section 7450) is added to Division 3 of the Business and Professions Code, to read:
CHAPTER  10.5. Collection Agencies
Article  1. General Provisions

7450.
 For the purposes of this chapter:
(a) “Applicant” means a person that submits an application for a collection agency license.
(b) “Collection agency” means a business entity through which a debt collector or association of debt collectors engage in debt collection.
(c) “Commissioner” means the Commissioner of Business Oversight.
(d) “Consumer credit transaction” means a transaction between a natural person and another person in which property, services, or money is acquired on credit by that natural person from the other person primarily for personal, family, or household purposes.
(e) “Consumer debt” or “consumer credit” mean money, property, or their equivalent, due or owing or alleged to be due or owing, from a natural person by reason of a consumer credit transaction. The term “consumer debt” includes “charged-off consumer debt” as defined in Section 1788.50 of the Civil Code. “Consumer debt” does not include mortgage debt.
(f) “Creditor” means a person who extends consumer credit to a debtor.
(g) “Debt” means money, property, or their equivalent that is due or owing or alleged to be due or owing from a natural person to another person.
(h) “Debt collection” means any act or practice in connection with the collection of consumer debts.
(i) “Debt collector” means any person who, in the ordinary course of business, regularly, on behalf of that person or 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” as defined in Section 1788.50 of the Civil Code.
(j) “Debtor” means a natural person from whom a debt collector seeks to collect a consumer debt that is due and owing or alleged to be due and owing from such person.
(k) “Department” means the Department of Business Oversight.
(l) “Licensee” means a person licensed pursuant to this chapter.
(m) “Person” means a natural person, partnership, corporation, limited liability company, trust, estate, cooperative, association, or other similar entity.

Article  2. Licensure

7454.
 (a) (1) A collection agency shall not engage in the business of debt collection, directly or indirectly, without first obtaining a license pursuant to this chapter. A collection agency license shall not be transferable or assignable.
(2) The requirement of paragraph (1) does not apply to a financial institution that collects its own debt in its own name.
(b) An applicant for a collection agency license shall submit an application providing all the following information in the form and manner the commissioner shall designate, including, but not limited to:
(1) The location, ownership, and, if applicable, the previous history of the collection agency.
(2) The name of at least one employee who is employed as the collections manager of the agency.
(3) A verified financial statement for the previous year.
(4) If a corporation, the name of the shareholder and the number of shares held by any shareholder owning 10 percent or more of the stock.
(5) For any collections manager of the applicant:
(A) A description of any conviction for a felony or the acceptance by a court of competent jurisdiction of a plea of guilty or nolo contendere to any felony.
(B) A description of any denial, revocation, or suspension of any license issued to any collection agency that employed or was owned by any principal or collections manager, in whole or in part, directly or indirectly, and a statement of the person’s position and authority at the collection agency for any license issued pursuant to this chapter or any other comparable license issued in another jurisdiction.
(C) A description of any other disciplinary or adverse action not described subparagraph (A) or (B), or the existence of any outstanding complaints against any collection agency that employed the collections manager, or was owned, in whole or in part, directly or indirectly, by the collections manager, and a statement of the person’s position and authority at the collection agency for either of the following:
(i) For any license issued pursuant to this chapter.
(ii) For an action that was taken by another jurisdiction or a complaint that exists in another jurisdiction, whether or not a license was issued by that jurisdiction.
(c) An applicant, for purposes of licensure, shall maintain at least one office in the state that is open to the public during normal business hours, staffed by at least one full-time employee with access to consumer payment records, client account records, and which accepts consumer payments physically made at that location.
(d) At the time the application is submitted, the applicant shall pay a nonrefundable investigation fee in an amount to be determined by the commissioner, not to exceed the reasonable costs of processing the application.
(e) If the commissioner approves the application, the applicant shall pay a nonrefundable license fee in an amount to be determined by the commissioner, not to exceed the reasonable costs of regulation.
(f) A collection agency shall obtain a license for its principal place of business, provided that any branch office is not required to obtain a separate license. A collection agency with a branch office shall notify the commissioner in writing of the location of each branch office within 30 days after the branch office commences business.
(g) A collection agency license shall be renewed annually.

Article  3. Administration

7458.
 (a) The commissioner shall administer the provisions of this chapter and may promulgate rules and regulations and issue orders consistent with that authority.
(b) Without limitation, the functions, powers, and duties of the commissioner include all of the following:
(1) To issue or refuse to issue a license as provided by this chapter.
(2) To revoke or suspend for cause any license as provided by this chapter.
(3) To keep records of licenses issued under this chapter.
(4) To receive, consider, investigate, and act upon complaints made in connection with a licensee.
(5) To prescribe the forms of, and receive applications for, licenses and reports, books, and records required to be made by a licensee under this chapter, including annual audited financial statements.
(6) To subpoena documents and witnesses and compel their attendance and production, to administer oaths, and to require the production of books, papers, or other materials relevant to any inquiry authorized by this chapter.
(7) To require information with regard to an applicant that the commissioner may deem necessary, with regard for the paramount public interest in ascertaining the experience, background, honesty, truthfulness, integrity, and competency of an applicant for collecting consumer debt, and if an applicant is an entity other than an individual, in ascertaining the honesty, truthfulness, integrity, and competency of an officer or director of the corporation, association, or other entity, or the members of a partnership.
(8) To enforce by order any provision of this chapter.
(9) To levy fees, fines, and charges in an amount sufficient to cover the cost of the services performed in administering this chapter.
(10) To appoint examiners, attorneys, supervisors, experts, and special assistants as needed to effectively and efficiently administer this chapter.

Article  4. Investigations and Examinations

7462.
 (a) The commissioner shall have the authority to conduct investigations and examinations of an applicant or licensee as follows:
(1) For purposes of determining whether an applicant is eligible for a license, or that a licensee is complying with the provisions of this chapter or any regulation or order of the commissioner, the commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence, including, but not limited to, any of the following relating to the intent to engage in, or the practice of, collecting consumer debt:
(A) Criminal, civil, and administrative history information.
(B) Personal history and experience information, including, but not limited to, independent credit reports obtained from a consumer reporting agency.
(C) Any other documents, information, or evidence that the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of those documents, information, or evidence.
(2) For the purposes of investigating violations or complaints arising under this chapter, the commissioner may direct, subpoena, or order the attendance of, and examine under oath, any person whose testimony may be required about the debt or account of the consumer.
(b) In making any examination or investigation authorized by this section, the commissioner may control access to any documents and records of the licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, a person shall not remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of a licensee have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of this chapter, the licensee shall have access to the documents or records as necessary to conduct its ordinary business affairs.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 1.

It is the intent of the Legislature to enact legislation that would add a new division to the Business and Professions Code that would require debt collection companies in California to be licensed and bonded.