LEGAL UPDATE Debt Collection Licensing Act Inapplicable to the Collection of “Routine” HOA Assessments

In 2020, California SB 908 enacted the California Debt Collection Licensing Act (“DCLA”), which requires persons engaged in the business of collecting “consumer debt” to apply for and obtain a debt collector license from the newly created California Department of Financial Protection & Innovation (“CDFPI”).

In a recent posting on its website, the CDFPI determined the DCLA does not apply to the collection of “routine HOA assessments”: 

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. (FAQ No. 10)

This clarification by the CDFPI is good news for HOAs, management companies, and HOA law firms that previously faced uncertainty concerning debt collector license requirements imposed by the DCLA for the collection of delinquent assessments. The CDFPI’s June 2022 website posting specifically excludes “routine HOA assessments” from collection activities that constitute a “consumer credit transaction” or “consumer debt” without providing additional guidance as to what the CDFPI considers “non-routine” HOA assessments, leaving the matter to interpretation until a court of appeal or the CDFPI provides additional guidance. The CDFPI’s determination is solely limited to licensure requirements under the DCLA, and federal and state statutes (i.e., Federal Fair Debt Collection Practices Act, California Rosenthal Fair Debt Collection Practices Act, etc.) governing HOA debt collection practices still apply.

By: Mark Allen Wilson, Esq.

Community Legal Advisors Inc.