In an announcement to its subscribers sent electronically on May 23, 2022, the California Department of Financial Protection and Innovation (“DFPI”) notified applicants – and potential applicants – for a license under California Debt Collections Licensing Act (the “Act”) that changes imposed by the Federal Bureau of Investigation (“FBI”) to state agency protocols for requesting federal background checks have caused “unforeseen” and unavoidable processing delays.
For your information, the Act entered into force on September 25, 2020, with a licensing element that entered into force on January 1, 2022.
The law requires that anyone engaged in debt collection business in California be licensed annually by the DFPI.
The DFPI previously announced that it would allow applicants who submitted a completed application prior to the effective date to continue to engage in licensed activity while their applications are being processed, even if the DFPI had not approved or refused such requests. Likewise, candidates who have not submitted an application before December 31, 2021 will have to wait for their applications to be approved in order to be able to carry out a licensed activity.
The law requires that a person applying for a license submit to, among other things, a criminal background check by the Department of Justice. In its relevant part, the law expressly provides that
[w]Once received, the Department of Justice will forward fingerprint images and related information received under this section to the Federal Bureau of Investigation for the purpose of obtaining a federal criminal background check. The Department of Justice will review the information returned by the Federal Bureau of Investigation and will compile and distribute a response to the commissioner.
Cal. Fin. Code 100008(b).
According to the announcement, the FBI informed the DFPI that “modifications are needed to state agency protocols for requesting federal background checks.” The announcement did not specify the nature or scope of those changes, or provide a timeline for resolving delays in processing debt collection license applications.
Above allthe DFPI clarified in its press release that it will adopt a position of non-intervention for candidates who submitted their application after December 31, 2021, allowing such persons to continue to engage in otherwise licensed activities without a license. However, the DFPI recommended that for the purposes of complying with provisions of the law that require the display of a license number when contacting or communicating with debtors, license applicants “may indicate “pending license number” or similar verbiage until a license is issued”.
The DFPI encouraged potential licensees to continue submitting applications through the NMLS and said it will contact applicants with instructions for submitting fingerprints for background checks when the process becomes available.