California law provides for the Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”), which prohibits debt collectors from engaging in abusive, unfair, or deceptive practices to collect debts. Similarly, the Fair Debt Buying Practices Act (“FDBPA”) requires those who purchase delinquent or charged-off consumer debt to maintain and provide certain documentation upon request. These laws offer a private right of action for violations.

To further enhance consumer protection, Governor Newsom signed SB-908 on September 25, 2020, creating a licensing law for debt collectors and debt buyers. The law, effective January 1, 2022, is administered by the Department of Business Oversight (“DBO”) and provides for regulation, oversight, definitions, application requirements, background checks, surety bonds, and related changes. The bill draws on the Rosenthal Act and FDBPA.

SB-908 aims to add a new layer of regulatory oversight over debt collectors and debt buyers already subject to state law but not yet subject to licensure. By requiring these entities to obtain a license, California can better ensure compliance with existing laws. Debt collectors and debt buying entities must apply for and be approved for a license by the Commissioner of Business Oversight.

SB-908 contains a limited set of administrative remedies, including desist and refrain authority, ancillary relief orders, and suspension and revocation of licenses. While the Rosenthal Act and FDBPA authorize private rights of action for violations, SB-908’s lack of civil and administrative penalty authority and citation and fine authority aims to prevent duplicative penalties for the same violation.

The adoption of SB-908 has implications for HOAs. The new licensing requirement applies to various entities, including law firms and management companies involved in the collection of debt, such as delinquent assessments. Thus, this bill affects which entities may manage the HOA’s assessment collections.