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PRENOVOST, NORMANDIN, DAWE & ROCHA
CA Debt Collection Licensing Act (“DCLA”)
Location: Hotel Del Coronado, San Diego, California

California passed the Debt Collection Licensing Act in September 2020 (SB 908). Beginning on January 1, 2022, the law provides for licensure, regulation, and oversight of all debt collectors by the California Department of Financial Protection and Innovation (“DFPI”) commissioner. Please join Karel Rocha, Esq. as he provides an update and guidance on the law’s requirements and debt collection industry ramifications.

Book by Phone: 1-800-HOTEL-DEL
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Group Room Rate: $280 per night
Resort Fee: Waived for attendees
Group Name: Joseph A. McDonald Credit Union Attorney Conference
Reservation Deadline: Tuesday, November 16
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Karel Rocha will be a featured panelist at the Educational Summer Seminar being held at The Venetian, Las Vegas from Friday August 23 to 25, 2019. The subject of the Seminar will be the Fair Debt Collection Practices Act (“FDCPA”), vendor compliance and various legal updates relating to these topics. The event is open to credit unions. Please contact Karel Rocha at (714) 547-2444 or at krocha@pnbd.com if you are interested in attending.

It is important as collectors that we are aware of what we are allowed to do and not do when attempting to collect on that delinquent loan. Mr. Rocha will be discussing the Consumer Financial Protection Bureau’s recent updates to the FDCPA in detail. Karel Rocha represents credit unions, escrow companies, banks and financial institutions in all manner of civil litigation, including consumer finance and real estate matters. Click the image below to access the flyer.

Karel Rocha, Esq., will provide a legal update affecting your collections and risk management departments. Karel will discuss recent California, Federal 9th Circuit and US Supreme Court legal decisions pertaining to the FDCPA, TCPA and also provide a CFPB update that pertains to first-party and third party collections practices.

These proposed rules will have a significant impact on debt collections practices in the industry (both for third party debt collectors and first parties that employ them).

Per the CFPB, the proposed rules would:

(1) Establish a clear, bright line rule limiting call attempts (no more than 7 per week, per debt),

(2) Clarify consumer protection requirements for certain consumer-facing debt collection disclosures,

(3) Clarify how debt collectors can communicate with consumers,

(4) Prohibit lawsuits and threats of lawsuits on time-barred debt, and

(5) Require communication with the debtor before engaging in credit reporting.

The proposed rules are 538 pages long and are meant to amend Regulation F, 12 CFR part 1006, which implements the Fair Debt Collection Practices Act (FDCPA) and currently contains the procedures for State application for exemption from the provisions of the FDCPA.

The CFPB has established a 90-day comment period for the proposed rules. Please contact us if you would like to discuss the potential impact of these new and wide-ranging proposed rules to your organization.

The CFPB Notice of Proposed Rulemaking can be found here.

In a unanimous decision, the Court ruled that a business engaged in no more than non-judicial foreclosure proceedings is NOT subject to all of the requirements and prohibitions applicable to “debt collectors” under the FDCPA.

Specifically, the Court held that the defendant, McCarthy & Holthus, (an agent for a foreclosing bank) was only subject to the FDCPA’s prohibitions under 15 USC 1692f(6) which regulates activity relating to enforcement of security interests.

Section 1692f(6) sets forth a prohibition against taking or threatening to take any non-judicial action to effect dispossession or disablement of property if:

(A) There is no present right to possession of the property claimed as collateral through an enforceable security interest;

(B) There is no present intention to take possession of the property; or

(C) The property is exempt by law from such dispossession or disablement.

The Court further ruled that the other FDCPA prohibitions would not apply to the defendant unless it also engaged in other qualifying “debt collector” activity. The Plaintiff had been attempting to expand the application of all of the FDCPA prohibitions to non-judicial foreclosure activity.

The case is Obduskey v. McCarthy & Holthus and a copy of the US Supreme Court decision can be accessed here.

Please contact us if you would like to discuss how this new legal decision may affect your business.

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On August 22, 2018, the California legislature amended the Rosenthal Fair Debt Collection Practices Act (Assembly Bill 1526 submitted by Assemblymember Ash Kalra) which will now impose strict notice requirements pertaining to written demands sent by debt collectors (which includes original creditors in California) relating to time-barred debt.

This law specifically prohibits debt collectors from sending an initial written communication to any debtor attempting to collect a time-barred debt without providing specified written notices.

Amended California Civil Code Section 1788.14 will require that the first written communication to a debtor (which includes communications sent via fax or email) include one of the following notices:

(1.)“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt collector] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.” (Sent if the debt can still be reported on a debtor’s credit report); OR

(2.)“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.” (Sent if the debt can no longer be reported on a debtor’s credit report.)

Assembly Bill 1526 also amended California Civil Code 337 which codifies the 4-year statute of limitations for lawsuits alleging breach of contract and/or book account claims. Amended Section 337 now sets forth that a debt collector may not initiate a lawsuit alleging these claims if the statute of limitations has expired.

Previously, California law allowed such lawsuits to be filed (so long as you were not a “debt buyer”) and required the debtor to allege the passing of the statute of limitations as an affirmative defense.

The amended statutes will become effective on January 1, 2019 if Governor Jerry Brown approves them (which is expected).

Please contact us if you want to discuss how these new laws may affect your business. The text of the amended California laws can be found here.

On June 21, 2018 a federal judge in the US District Court for the Southern District of New York issued a ruling finding that the Consumer Financial Protection Bureau (“CFPB”) was unconstitutionally structured and that the federal agency should be eliminated.

The ruling (written by Chief Judge Loretta A. Preska – appointed to the federal bench by President George H.W. Bush) was issued in the case of CFPB v. RD Legal Funding (Case No. 1:17-cv-00890). The CFPB had brought the action against RD Legal in 2017 alleging the company had “scammed” retired NFL players and 9/11 first responders in connection with anticipated monetary settlements. The legal action was also being prosecuted by the New York State Attorney General.

Finding in favor of RD Legal, Judge Preska ruled that because the CFPB structure was unconstitutional, it lacked the authority to bring the action against RD Legal. The Court specifically found that a prior federal appellate decision (PHH Corp. v. CFPB – which did not find the CFPB unconstitutional) was not binding in New York.

Instead, Judge Preska respectfully disagreed with the PHH ruling and adopted the PHH Dissent (written by Judge Brett Kavanaugh – D.C. Federal Circuit) ruling that based upon considerations of history, liberty, and presidential authority, the CFPB was unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director. While PHH resolved this issue by making the CFPB Director an “at will” employee removable at the President’s discretion, Judge Preska found the entire CFPB was unconstitutional.

Our office will be monitoring developments in this case and will provide updates as they occur. Please contact us if you would like to discuss this new case.