RMAI, in conjunction with ACA International and a collection operation based in California this week filed a lawsuit against California’s Department of Financial Protection & Innovation challenging the licensing fees being assessed by the regulator. The case, filed in California state court, seeks to invalidate the fee structure under the state’s Debt Collection Licensing Act, arguing that the assessments imposed on licensed businesses are excessive, unpredictable, and unconstitutional.
The complaint, brought as a class action on behalf of licensed debt collectors in the state, takes direct aim at how the DFPI calculates and allocates its annual licensing fees. According to the filing, the fees “are an unlawful tax imposed in violation of Proposition 26” and have been structured in a way that places disproportionate burdens on certain segments of the industry.
The background: California enacted its Debt Collection Licensing Act in 2020, creating a comprehensive licensing and oversight framework for debt collectors operating in the state. The law requires licensees to pay annual fees intended to cover the cost of administering and enforcing the regulatory program. These fees are calculated on a pro rata basis tied to a company’s financial activity in California.
- However, tensions escalated after the regulator issued its first annual assessments in late 2025. Those assessments ranged widely, with some companies facing significantly higher costs than anticipated and, in some cases, higher than fees imposed in other states.
- The plaintiffs argue that the regulator initially budgeted for approximately 7,000 licensees but ultimately licensed closer to 1,200, and failed to adjust its fee structure accordingly. As a result, the total fees collected allegedly exceed the reasonable cost of regulation.
The claims: The lawsuit centers on three primary arguments. First, the plaintiffs assert that the total amount collected through licensing fees surpasses what is necessary to operate the program, making it an unconstitutional tax rather than a permissible regulatory fee. The complaint states that the regulator “set unreasonable and disproportionate fees based on inaccurate information,” even after recognizing the discrepancy in the number of licensees.
- Second, the plaintiffs challenge the methodology used to allocate fees, arguing that basing assessments on gross receipts bears little relationship to the actual cost of regulating a business. The complaint notes that “costs simply do not scale with revenues” and that gross receipts measure a company’s ability to pay, not its regulatory burden.
- Third, the suit raises concerns about audit-related costs, which it describes as unpredictable and subject to the regulator’s discretion. According to the filing, the structure creates a system where “doing business in California [becomes] a lottery with a potentially significant, negative payoff.”
- The plaintiffs are seeking a court order to halt enforcement of the current fee structure, declare the fees invalid, and require refunds for amounts already paid. They also warn that the current framework could reduce the number of collection agencies operating in California, potentially increasing the cost of credit and limiting access for consumers.
- In a statement, RMAI Executive Director Mike Becker said the organization remains open to working with regulators but emphasized the stakes: the group has “a responsibility to protect and defend our members from what we view as an unworkable and burdensome fee structure.”
