Senate Bill 908 created the Debt Collection Licensing Act (DCLA), which caused a lot of uncertainty in the HOA industry as to whether the licensing requirement would apply to management companies and law firms that assist HOAs in the collection of delinquent assessments. The California Department of Financial Protection & Innovation (DFPI), which oversees the debt collection licensing program, appears to have finally provided some clarity by stating that the collection of routine HOA assessments does not require licensure under the DCLA. Specifically, the DFPI website page (https://dfpi.ca.gov/debt-collection-licensee/#faq) has been updated to include the following under “Frequently Asked Questions”:
10. Has any person/activity been determined to not be in the business of debt collection?
The Department has determined that routine HOA assessments do not constitute a “consumer credit transaction” as defined under the DCLA, and therefore do not constitute “consumer debt” under the Act. Since the collection of routine HOA assessments is not considered to be collection of “consumer debt,” such activity would not constitute being engaged in the business of debt collection and does not require licensure under the DCLA.
Based on the position that the DFPI has taken on its website, this seems to be a good indication that management companies and law firms that assist HOAs in the collection of delinquent assessments are not subject to the burdensome new debt collection licensing requirements. We do note that, at this time, it appears that this position is only supported by a statement on the DFPI's website. It's important to keep in mind that the statement on the DFPI's website may be subject to change and does not reflect any court's interpretation of the underlying statutes contained in Senate Bill 908. We hope that the DFPI may issue a more formal bulletin confirming this position in the future or that the underlying debt collection licensing statutes and rules will be amended to expressly exclude the collection of HOA assessments from the licensing requirements. But, for now, we'll take the statement on the DFPI's website as good news!