DFPI reminds debt collectors, mortgage lenders and agents of COVID-19 protections for tenants and landlords
SACRAMENTO – The California Department of Financial Protection and Innovation (DFPI) recently issued a reminder to prospective debt collectors and existing mortgage lenders and management agents regarding protections for California tenants and homeowners facing to economic difficulties under the COVID-19 pandemic.
Under California law, any “unpaid rent or other unpaid financial obligation of a tenant” that matured between March 1, 2020 and June 30, 2021, may qualify as COVID-19 rental debt and be subject to to certain protections, DFPI Commissioner, Manuel P. Alvarez noted in a message to debt collectors.
The COVID-19 tenant assistance law (SB 91) includes the following protections for COVID-19 rental debt:
- COVID-19 rental debt cannot be sold or transferred before July 1, 2021.
- As of July 1, 2021, COVID-19 rental debt cannot be sold or assigned if the debt relates to a person “who would have been entitled to housing assistance financing” under California Emergency Rental Assistance Program if “the person’s household income is equal to or less than 80% of the region’s median income for the calendar year 2020”.
- Creditors cannot charge or attempt to collect late fees for COVID-19 rental debt if the tenant has submitted a “COVID-19 Financial Distress Report”.
- With few exceptions, those who collect COVID-19 rental debt in court must submit documents showing that they have made “a good faith effort to determine if government rental assistance is available to the tenant, ask government assistance to the tenant or cooperate with the tenant. Renter’s efforts to obtain rental assistance from any government entity or other third party. “
- COVID-19 rental debt recovery actions cannot be initiated before August 1, 2021, and any COVID-19 rental debt recovery action that was in progress on January 29, 2021 is suspended until August 1, 2021.
Under California’s COVID-19 Rental Assistance Program, a landlord can receive 80% of unpaid rent due from April 1, 2020 through March 31, 2021 on government funds for an eligible tenant if they agree to forgive everything unpaid rent remaining for this period. . To comply with applicable laws, debt collectors must ensure that they do not collect rental debts that have been paid or canceled under the California Rental Assistance Program.
The DFPI also reminded debt collectors that the federal Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA) protect California consumers from unfair, false, misleading or deceptive representations, harassment or abusive conduct. in the collection of rental debts. For example, courts have held that mistakenly suggesting that a person or entity may take legal action to collect a debt when that person or entity does not have the intention or the ability to do so may be misleading or deceptive in under the FDCPA.
Under the DCLA, the Commissioner must investigate all applicants for a collection permit to determine whether there are facts that constitute grounds for refusal. DFPI will begin accepting applications for recovery licenses later this year. Grounds for license denial include “any act involving dishonesty, fraud or deception, if the crime or act is substantially related” to debt collection activities and violations of any similar regulatory regime. In addition, the Commissioner may revoke a license if the Commissioner determines that “there is a fact or condition which, if it had existed at the time the licensee applied for the license, would have resulted in the refusal of the application”.
The DCLA was enacted in 2020 to protect California consumers and provide DFPI with licensing and review power over debt collectors, including debt buyers, operating in California.
“The DFPI will take all necessary steps to ensure that debt collectors comply with the FDCPA, CFPA and the COVID-19 Tenant Relief Act,” the Commissioner’s message read.
The DFPI issued a similar notice to mortgage management licensees, reminding them of the requirements of the COVID-19 Small Homeowners and Homeowners Relief Act of 2020 and encouraging mortgage lenders and managers to work with customers and affected communities to avoid foreclosures.
“Mortgage managers can offer clients payment accommodations, such as payment deferrals or maturity date extensions, loan modifications to change the mortgage rate and term, or mortgage options. Loss mitigation described in HUD / FHA. updated tips,” DFPI advice declared.
In addition to regulating debt collectors, the DFPI licenses and regulates financial products and services, including state chartered banks and credit unions, student loan managers, commodities and financial advisers. investment, fund issuers, the offering and sale of securities and franchises, brokers. , non-bank installment lenders, payday lenders, mortgage lenders and managers, escrow companies, PACE administrators, capital lease contractors, credit repair companies, agencies consumer credit reporting, debt relief companies, and more.