California Emergency Declaration: Impact on Collection Operations
Credit & Collection e-newsletter of 1/9/25 at 11:59 pm suggests credit collection agencies may want to make accommodations for borrowers, such as payment accommodations, such as deferrals or extensions, and loan modifications to the rate or term, due to state of emergency declared in Los Angeles county due to wildfire damage, but it appears giving borrowers accommodations is not mandatory:
Gov. Gavin Newsom declared a state of emergency as wildfires rage. ACA members should have plans in place to modify consumer outreach strategies and monitor areas with disaster declarations.
The Los Angeles-area wildfires, expected to cause $50 billion in damages and economic loss, have forced 180,000 people to evacuate. NBC News reported that more than 350,000 energy customers lost power Thursday morning. The fires, first reported Tuesday, quickly spread to encompass thousands of acres.
California Gov. Gavin Newsom has declared a state of emergency, and President Biden has approved a Major Disaster Declaration.
The California Department of Financial Protection and Innovation issued guidance for financial institutions, lenders and servicers, but it does not specifically address the debt collection industry. In addition, it’s not a mandate and expressly notes that it “does not modify any existing law or regulation.”
The guidance states in pertinent part:
The Commissioner encourages financial institutions, lenders, and servicers to work constructively with their customers and propose solutions to meet their lending needs as the disaster conditions persist and recovery continues. Such solutions may include offering payment accommodations, such as deferrals or extensions, and loan modifications to the rate or term. Prudent efforts to modify or restructure the terms of loans will not be criticized by Department examiners.
(Emphases added.)
ACA International is not yet aware of any state-imposed collections-specific (or calling-specific) restrictions triggered by these actions.
Still, ACA recommends members proceed with caution when collecting from consumers in affected areas. Collection attempts during declared disasters could potentially violate the Fair Debt Collection Practices Act, and even without explicit regulatory restrictions, consumer lawsuits remain possible. Members should evaluate their compliance management systems and consider modifying consumer outreach strategies in affected areas.
Federal Government Resources
The Consumer Financial Protection Bureau has information for consumers affected by a natural disaster, with suggestions on how to handle their finances and get financial help.
Within the guide are resources to help consumers recover, such as contacting your auto loan lender if your ability to make your payments is affected by the disaster and contacting your student loan servicer to request “disaster forbearance.”
The U.S. Department of Education has resources for students, families, and student loan borrowers impacted by a disaster.
The CFPB notes: “If you are a federal student loan borrower, contact your lender or loan servicer. The Department of Education has more information. If you don’t have a federal student loan, you should contact your student loan servicer to see if they have a forbearance or hardship program.”
Here are additional resources that may be helpful as you evaluate your communication strategies for consumers in the affected areas:
- USPS Mail disruption notices
- CFPB statement on supervisory practices for consumers affected by a major disaster or emergency
Reminder on Communication Procedures During Disasters and Emergencies
ACA members should review their communication plans to help consumers impacted by this natural disaster.
To view any disaster declarations, visit the FEMA website. If you click into a particular declaration, you can then scroll down to see the “Designated Areas” along with a map of the affected counties. Here is information on the California wildfires.
It’s crucial to stay informed about temporary changes to debt collection laws and any local moratoriums on collection activities. Staff should be thoroughly trained on disaster-specific protocols and how to handle calls with distressed consumers. It may be helpful to prepare disaster relief resource information to provide to affected consumers when contact is made.