California Debt Collectors File Class Action Over Licensing Fees

Debt collectors have filed a class action challenging California's annual licensing fee structure.

Debt collectors and two trade associations lodged a putative class action lawsuit on April 7, 2026, accusing the California Department of Financial Protection and Innovation (DFPI) of unlawful practices in its annual licensing fee structure. The case was filed in the San Francisco Superior Court.

• Under the Debt Collection Licensing Act (DCLA), California began requiring debt collectors to obtain licenses in 2020, with annual fees intended to cover regulatory costs.
• The plaintiffs claim DFPI's assessments “are actually unconstitutional taxes because they exceed the reasonable cost of regulation and are not fairly related to each licensee's regulatory burden, in violation of Proposition 26.”
• DFPI allocated roughly $10.2 million in fees for fiscal year 2025, with costs distributed based on each licensee's net proceeds.
• The agency expected more than 7,000 applications but only received about 1,200, allegedly amplifying the per-firm cost and leading some companies to leave the California market.

The suit asserts four causes of action: writ of mandate under California statute, declaratory relief for due process and Proposition 26 violations, relief under the Administrative Procedures Act, and a claim for a refund of what are alleged to be unconstitutional taxes.

The court’s ruling could influence not only fee structures, but also the legal standards for regulatory charges statewide. Practitioners should track this litigation as any changes may affect compliance costs and debt collection strategy in California.