On May 1, the DFPI announced in its May Monthly Bulletin that it had obtained its first administrative decision affirming a California Consumer Financial Protection Law (CCFPL) action. The desist and refrain order involved allegations that a debt collection and credit repair company violated the Rosenthal Fair Debt Collection Practices Act, the Fair Debt Collection Practices Act, the Debt Collection Licensing Act, and other federal and state consumer financial laws.
According to the DFPI, the administrative ruling confirmed that the CCFPL permits the agency to pursue violations of both California and federal consumer financial laws involving debt collection, debt settlement, and credit repair services, while also seeking penalties and ancillary relief. The desist and refrain order alleged that the company operated without a California debt collection license and used deceptive collection tactics tied to alleged payday loan debts.
Specifically, the DFPI alleged that the company:
- Made deceptive collection threats. The DFPI alleged the company falsely represented that consumers could face arrest, jail time, wage garnishment, lawsuits, or criminal charges if they failed to pay alleged debts.
- Collected allegedly time-barred debt without required notices. The order alleged the company sought payment on debts dating back to 2006 and 2009 without providing disclosures required under California law.
- Failed to provide debt validation information. According to the DFPI, consumers allegedly did not receive verification of the debts or evidence supporting purported lawsuits or judgments.
- Provided credit repair and debt settlement services without complying with applicable law. The DFPI alleged the company collected advance fees, failed to provide required disclosures, and operated without required California registrations and licenses.
The desist and refrain order required the company to cease the alleged conduct, rescind existing agreements with California consumers, provide refunds, and pay a $150,000 administrative penalty.
Putting It Into Practice: The DFPI has remained active in its oversight of nonbank financial services providers (previously discussed here and here). Debt collectors, credit repair organizations, and debt settlement providers operating in California should review their practices with these overlapping regimes in mind, including licensing, registration, disclosure, debt validation, and advance-fee requirements under applicable California and federal consumer financial laws.
