California Passes Fair Debt Buying Practices Act

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The California General Assembly Monday unanimously passed a bill that requires debt buyers in the state to have in their possession a long list of account information before debt collection efforts can begin.  The new law also mandates specific disclosure language debt buyers must use in collection communications.

Titled the Fair Debt Buying Practices Act, California SB 233 passed the Assembly Monday on a 72-0 vote. In late May, the bill passed the state’s Senate on a 36-0 unanimous vote. The measure now goes to California Governor Jerry Brown for his signature. Its provisions would take place on January 1, 2014.

Most significantly, the bill places a long list of requirements on purchasers of charged-off consumer debt that must be met before collection efforts can begin. Debt buyers must have in their possession proof that they are the sole owner of the debt, the account balance at chargeoff, date of default or last payment, name and address of both the creditor and debtor, and a complete chain of title on the account if bought and sold multiple times.

There is also a long list of requirements for initial communications with a debtor. In addition to explicitly stating that the consumer has the right to request the information outlined above, debt buyers must disclose certain rights to consumers regarding time-barred debt.

If a debt is too old to file suit, but still within credit reporting thresholds, the debt buyer must use the following language in its first written communication:

“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt buyer] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.”

If the debt is beyond both the reporting and legal statute of limitations, the following must be included in the letter:

“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.”

The Fair Debt Buying Practices Act also sets formal requirements for the information presented as evidence in a debt collection lawsuit and bars a debt buyer from selling an account that has been settled for less than the full amount owed.

 

Continuing the Discussion

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  • avatar mike kaufmann says:

    This kind of legislation is easy for politicians to support and helps them pander to the electorate. It will not be long before every state in the union adopts similar measures. In the end our elected officials are basically supporting borrower’s who either cannot or choose not to pay their debts. I’m glad that my father is not around to see how our society has turned from a take responsibility for your actions stance to a dont worry about it and everything will be fine stance.

  • avatar mike kaufmann says:

    Still proud to be an American….Happy Independence Day tomorrow!!!

  • avatar john -hilsmeyer says:

    Finally. The irresponsibility of shady consumer collection agencies needs to be regulated as much as possible, and there needs to be accountability for buyers of cheap paper. Collecting on debts that have been discharged in bankruptcy, or paid already will limit liability for the collection agents.
    I can’t wait until they raise the statutory FDCPA from a measly $1,000. It’s not 1978 anymore.

  • avatar Commercial Guy says:

    Of course this was going to happen, and it almost certainly will cover the rest of the country soon. The unscrupulous entities that sued on time-barred debt, utilized sewer service, sued without proof of the debt, etc. brought us to this point. The only surprising thing is it took this long.

    Some of this can be laid at the feet of the agencies, but most of it, in my opinion, falls on the collection attorneys. When they sign off on a complaint, they are essentially stating that they have reviewed all of the documents, and the complaint is justified. When you have attorneys that are filing 100, 200 or 300 cases in a single day, you will never convince me that they upheld their responsibilities.

  • avatar john -hilsmeyer says:

    Commercial Guy nailed it!

    Next we need to see stricter guidelines for “process servers” who like to throw Summons/Complaints in the dumpsters at McDonald’s.

  • avatar Ameripay says:

    Only 100-300 complaints a day? Where are you encountering these lazy collection attorneys CG? Someone should have told them about this great invention called a signature stamp ;-).

  • avatar jessie-gomez says:

    john -hilsmeyer,

    It look like you are a consumer troll.

  • avatar jessie-gomez says:

    Number one the Governor have not sign it yet.

  • avatar john -hilsmeyer says:

    Looks like Jessie Gomez is going to get laid off in January. Happy Holidays!

  • avatar Robert Stempler says:

    As long overdue and needed as this new California law is, unfortunately it implementation will be delayed far too long. The law delays implementation for currently owned debts and debts still yet to be acquired. It has no affect on collection practices until they start collecting debts acquired after Jan. 1, 2014. Thus, we should not expect the collection industry to change its collection behavior in California, until well into 2014. I would also expect a few extra transactions before the end of the year, so that those debts also will squeak through the waiting period.

    Robert Stempler, http://www.StopCollectionLawsuits.com

  • avatar casey says:

    This is a great start now they need to do something about restaurants, I can’t tell you how many times wait staff (aka collectors for the greedy restaurants) make me pay for food I Allegedly ate. Every time I demand that they prove that I ordered and ate any food they can’t provide anything. They always suspiciously have washed all the plates. it’s only after they harass me and threaten to call the police that I’m forced to pay, and to make matters worse when I go back most of them refuse to serve me. Help me big government!!!!!!!

  • avatar Commercial Guy says:

    LOL…now, that was funny

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