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If you purchase charged-off consumer debt in California, you need a California Debt Buyer License. This license, required since January 1, 2022, is regulated by the Department of Financial Protection and Innovation (DFPI) under the Debt Collection Licensing Act (DCLA). Operating without it can lead to serious consequences, including fines, lawsuits, and being barred from the market.
Failing to comply can result in penalties, license suspension, or revocation. The DFPI reviews applications within 90 days, so ensure all forms, fees, and background checks are completed accurately to avoid delays.
Under California law, a debt buyer is defined as any individual or entity that purchases charged-off consumer debt for the purpose of collection. This collection can be done directly, through a third-party agency, or via litigation. Charged-off debt refers to consumer debt that creditors have written off as a loss or expense and removed from their financial records.
The licensing requirement applies to all businesses - whether they are based in California or operate out of state - if they are collecting from California residents.
Affiliated debt collectors must also obtain a license. If multiple affiliates are involved, they can share one license as long as each affiliate submits Form MU1 and pays a $150 fee. Additionally, a one-time application fee of $350 applies to the entire group.
Certain entities are exempt from this licensing requirement. These include FDIC-insured banks, credit unions, finance lenders and brokers licensed by the DFPI, mortgage lenders and servicers, licensed real estate brokers, and trustees conducting nonjudicial foreclosures. If your business already holds a qualifying California license, it may exempt you from the DCLA requirements, so it's crucial to verify this before applying.
To meet regulatory obligations, ensure that all branch locations are properly registered with the NMLS.
Securing your primary license is just the first step. Proper branch registration is equally important. While you don’t need a separate license for each branch office, every branch must be registered in the NMLS using Form MU3. A branch office refers to any location other than the primary office where debt collection activities occur and that is listed as a business address.
"A separate license is not required for each individual branch office. However, your branch offices must be registered in the NMLS."
– California Department of Financial Protection and Innovation
A branch office must be registered if it handles debtor correspondence, interacts with the public, or is listed on business materials, regardless of whether its primary function is administrative. Be sure to update your NMLS registration whenever there are changes to your branch information.
California Debt Buyer License Application Process and Requirements
If you're ready to move forward with your California Debt Buyer License application, here's a detailed guide to completing the process through the Nationwide Multistate Licensing System & Registry (NMLS).
The entire application process happens online via the NMLS. Start by setting up a Company Account in the system. From there, you'll need to complete three primary forms:
Once these forms are completed, you'll need to gather and submit the required supporting documents.
Here’s a breakdown of the supporting documents you’ll need:
Additionally, you’ll need to file an "Appointment of the Commissioner of Financial Protection and Innovation as Agent for Service of Process" and include your registered agent details.
When authorizing background checks, ensure the California Department of Financial Protection and Innovation (DFPI) has access to the results within 48 hours. If fingerprints in the NMLS are older than three years, you’ll need to provide new ones.
Once your forms and documents are ready, it’s time to finalize your application and handle the fees.
The total state fees amount to $500, which includes a $350 application fee and a $150 investigation fee per applicant. If multiple affiliates are applying under one license, the $350 application fee covers all affiliates, but each must pay the $150 investigation fee and submit its own Form MU1.
"The $350 application will be invoiced through NMLS after the application is submitted." - California Department of Financial Protection and Innovation
Payment for the application fee is made through the NMLS portal, either by credit card or ACH (Automated Clearing House). Keep in mind, NMLS charges additional fees for processing, including credit reports and annual processing, and all fees are non-refundable.
"All applications, amendments, surety bonds, notices, related filings, supporting documents, renewals, authorizations, assessments, and fees required to be filed with the Commissioner will need to be filed electronically with and transmitted through NMLS." - California Department of Financial Protection and Innovation
The DFPI typically reviews applications within 90 days of submission. However, if you fail to address a deficiency notification within 60 days, your application may be considered abandoned. To avoid delays or a "Pending-Deficient" status, use the CA-DFPI Debt Collection License New Application Checklist to ensure you’ve uploaded all necessary documents.
Getting a California debt buyer license isn't just about filling out forms and paying fees. Applicants must also meet specific financial and background standards to ensure they’re qualified to operate responsibly in the state’s debt collection industry. These requirements work hand-in-hand with the document and fee submissions already discussed.
Applicants must post a minimum $25,000 surety bond. This bond acts as a financial safety net for California consumers and the state. If a debt buyer fails to comply with legal obligations, the bond can cover associated fines or expenses. Depending on factors like the number of affiliates being licensed or the total debt collected, the Department of Financial Protection and Innovation (DFPI) might require a higher bond amount. Keeping this bond active is critical - letting it lapse could lead to a suspended license.
"This bond acts as a form of financial security and can be used to pay for state expenses or fines if the business fails to follow the law." - LegalClarity
But financial security isn’t enough. Applicants also need to prove their integrity through detailed background and credit checks.
Beyond financial guarantees, California requires a thorough review of the individuals and entities behind the license application. This includes background checks on all MU2 filers - such as anyone owning 10% or more of the business, as well as principal officers, directors, trustees, and managing members. Fingerprints must be uploaded to the NMLS and must not be older than three years. If they are, updated prints will need to be submitted.
The process doesn’t stop there. Credit reports are pulled for all control persons, and any issues flagged - like derogatory credit marks - must be explained in writing. The DFPI also checks Social Security Numbers against state tax delinquency lists from the California Franchise Tax Board and the Department of Tax and Fee Administration. They also verify if there are any outstanding child support obligations. Typically, background check results are available within 48 hours of authorization.
Applicants must authorize DFPI access for background checks within this 48-hour window. Missing this deadline means paying for and authorizing a new check. For individuals who haven’t lived in the U.S. for at least 10 years, additional investigative reports are required along with fingerprinting.
"An application for a license as a debt collector is not deemed complete until all required fees, all required submissions, and all background and investigative reports are received by the Commissioner." - 10 CCR § 1850.7
To avoid delays, make sure all officers and owners have explanations ready for any credit issues, confirm fingerprints are up to date, and resolve any state tax or child support obligations. Taking these steps upfront can help your application move through the process without unnecessary hiccups.
Keeping your California debt buyer license active and in good standing requires ongoing attention. Unlike many business licenses that need annual renewal, a California debt buyer license stays valid indefinitely unless you choose to surrender it or the DFPI revokes or suspends it. However, maintaining compliance involves meeting specific requirements to ensure your license remains in good standing.
After completing the initial application process, your focus should shift to meeting these ongoing obligations to protect your license.
California follows a unique two-step renewal process instead of the typical yearly renewal. This process ensures you continue to meet the legal standards established during your initial application.
Here’s a quick breakdown of key deadlines:
| Requirement | Deadline | Platform |
|---|---|---|
| Annual Report Filing | March 15 (March 16 in 2026) | DFPI Self-Service Portal |
| Annual Assessment Invoice | Issued by September 30 | NMLS |
| Assessment Payment | Within 30 days of invoice; by Jan 1 | NMLS |
To stay on track, set reminders at least 60 days before each deadline. Also, ensure your DFPI portal email is a generic business address (e.g., compliance@company.com) and can accept attachments from "@dfpi.ca.gov" and "CDFPISubscriptions@Service.GovDelivery.com."
The DFPI has the authority to review your records at any time to ensure compliance with laws like the Rosenthal Fair Debt Collection Practices Act and the Fair Debt Buying Practices Act. You must keep detailed records of all collection activities, account balances, dates of last payments, and documentation verifying debts before contacting consumers.
Additionally, update your NMLS promptly for any changes in ownership, address, or key personnel. Remember, your license is tied to your principal place of business and cannot be transferred or assigned.
It’s also a good idea to regularly check your NMLS portal for any "deficiency" statuses, as the DFPI uses this system to notify you of outstanding document requirements. Lastly, display your license number in at least 12-point font on all written and digital communications with debtors.
You must maintain a surety bond of at least $25,000 at all times. Any lapse could result in license suspension. To stay compliant, confirm with your surety provider every quarter that your bond is active and meets the required minimum. If your debt collection volume or the number of affiliates changes, the DFPI may require a higher bond amount.
Recent enforcement actions by the DFPI highlight the importance of strictly adhering to these compliance obligations.
Getting and maintaining a California debt buyer license requires careful attention to both the application process and ongoing compliance requirements. The California Department of Financial Protection and Innovation (DFPI) handles licensing through the Nationwide Multistate Licensing System & Registry (NMLS), where you’ll need to submit your application and all necessary documentation.
But it doesn’t stop there. Staying compliant is just as important. For instance, you’re required to file an annual report by March 15 each year via the DFPI Self-Service Portal. Additionally, you must pay your annual assessment - starting at $250 - within 30 days of receiving the invoice, with full payment due by January 1 to avoid penalties. Make sure to display your license number in at least 12-point font on all written and digital communications with debtors. If there are changes to your business structure, ownership, or location, you’ll need to update your NMLS profile within 10 calendar days.
The DFPI keeps a close eye on compliance and may review your records. As they’ve warned:
"Licensees found to be engaging in, or hiring others to engage in, the unlawful service of process will be held accountable".
Non-compliance can lead to serious consequences, including desist and refrain orders, civil actions, refunds, restitution, and even public disclosure on the NMLS Consumer Access portal - potentially harming your reputation permanently.
To avoid delays during the application process, take the time to prepare properly. This includes gathering organizational charts, management charts, and detailed descriptions of your business activities ahead of time. Also, use a generic company email address for your DFPI portal account to maintain account continuity, even if personnel changes occur.
In California, purchasing debt through an affiliate does require a license if the affiliate is involved in activities related to debt collection that fall under the state's licensing laws. California law has clear requirements that anyone engaged in collecting consumer debt - including debt buyers and their affiliates - must obtain the appropriate licensure.
A surety bond exceeding $25,000 becomes necessary for a debt collection agency when specific conditions, such as heightened risk or stricter regulatory requirements, demand a stronger financial safeguard. Although precise thresholds may not always be explicitly defined, elements like the agency's operational risks or its need to meet compliance standards often play a role in determining this requirement.
Missing a DFPI deadline or receiving a deficiency notice can have serious consequences, including enforcement actions, fines, or even the suspension or revocation of your license. Since the DFPI holds the power to investigate and enforce compliance with licensing requirements, it’s essential to act quickly. Address any notices right away and ensure all deadlines are met to steer clear of these potential issues.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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