California DFPI Faces Class Action on Debt Collection Licensing Regime

On April 7, two trade associations and a licensed debt collector filed a putative class action in the California Superior Court for the County of San Francisco alleging that the California DFPI’s annual debt-collector licensing assessments violate the Debt Collection Licensing Act, Proposition 26, and the California Administrative Procedure Act. The complaint also alleges that the assessment scheme fails to provide a clear, adequately disclosed formula for calculating annual fees.

The class action challenges DFPI’s 2025 annual assessments for licensed debt collectors and seeks relief on behalf of a proposed class of about 1,243 licensees statewide. Specifically, the suit alleges that DFPI’s fee regime is unlawful because:

• The annual assessments exceed reasonable regulatory costs. The complaint alleges the fees constitute unlawful taxes in violation of Proposition 26, which requires that state-imposed charges not exceed the reasonable cost of regulation and bear a fair relationship to each payor’s burden on, or benefit from, the regulatory scheme. The suit alleges those charges are disproportionate and materially higher than comparable charges in other states.
• The assessment formula was not adequately disclosed. The suit alleges DFPI did not clearly explain the calculation methodology in its regulations or rulemaking materials.
• The advisory process was deficient. The complaint alleges DFPI did not meaningfully consult the Debt Collection Advisory Committee regarding the proposed fee schedule or the mechanics of implementation.

Putting It Into Practice: Recent California enforcement developments have continued to focus on whether companies are properly licensed to operate in the state’s consumer financial services market (previously discussed here, here, and here). The outcome of this case could affect how California structures licensing fees and assessments for debt collectors and other licensees going forward. Companies operating in the state should monitor the litigation and consider whether changes to licensing costs or related requirements could affect compliance planning.