When the road to hell is paved with good intentions. The passage of Senate Bill No. 908

Last year Governor Gavin Newsom approved the Debt Collection Licensing Act, otherwise known as Senate Bill No. 908.  It ‘sounds’ reasonable on the surface. After all, shouldn’t debt collectors be regulated and licensed so they don’t take advantage of embattled debtors?

To a large extent, they already are. In addition to remedies under California’s Civil Code, there are a myriad of laws in place that control the collection industry, e.g.: The Fair Debt buying Practices Act, the FTC’s Rosenthal Fair Debt Collection Practices Act and the Graham Leach Bliley Act, to name a few.

Apparently this is not enough for politicians keen on government bloat and ‘legislating’. Thus effective January 1, 2022, the Act would mandate the licensing, regulation and ‘oversight’ by the ‘Commissioner of Business Oversight’. Debt collectors must comply with reporting, examination, annual fees, criminal background checks and ‘other oversight’ by the commissioner. 

In addition, licensees must file an annual report, disclosing sensitive business information, such as the number of accounts and the total dollar amount collected. Moreover, not only will this confidential trade information be made public, the commission may, at any time and without probable cause, examine the books, records and documents of the licensee. 

Agency records subject to inspection typically contain social security numbers, skiptracing background reports, banking information and credit reports, giving rise to privacy concerns. As if that wasn’t enough, the commission will invoice the licensee for the cost of this massive privacy invasion. Fearing reprisals from powerful financial lobbies, however, legislators have taken care to carve out an exception for banks and other special interests….no surprise there.  

California Judicial Recovery Specialists does not collect ‘consumer debts’ as defined under 15USC 1692a(5): “…any obligation of a consumer to pay money arising out of a transaction in which money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes….” As such we are not directly affected by this invasive and redundant legislative wreck. Plenty of other collection agencies are affected, however. The result? Some agencies will vote with their feet, moving to less oppressive states which welcome business and do not engage in micromanaging. For those that remain, the cost of compliance has just gone up in the middle of pandemic. For still others, it will be the final nail in the coffin. 

But the real losers are those who have already been victimized – the landlord whose property was trashed, the doctor who provided medical services, the beautician who accepted a bouncing check. After jumping through hoops and finally obtaining a court judgment, now there is yet another obstacle to overcome. Oppressive regulations will discourage collection agencies from accepting these types of debts after 2022.  California’s business-killing machine just keeps on trucking….. one bad law at a time.