On July 1, 2013, the California General Assembly unanimously passed the Fair Debt Buying Practices Act, California SB 233. The bill will create more constraints for debt buyer debt collectors in California as well as require more documentation from debt buyers throughout the debt collection practice. Under this bill, debt buyers in California will be required to possess a long list of account information before debt collection can begin. The new law also mandates specific disclosure language debt buyers must use in collection communications.
The Fair Debt Buyers Practices Act will require purchasers of consumer debt, debt buyers, to provide documentary evidence to consumers to ensure that debt buyer collection efforts involve the proper individual. Typically, debt buyers purchase bulk defaulted consumer debt by the thousands for pennies on the dollar. Debt buyers then frequently file a large portion of lawsuits on the alleged debts and claim to be the assignee of the debts. These debt buyer, debt collectors, prey on uninformed and/or unrepresented consumers and proceed with these lawsuits in the hopes that the consumer they have sued will not show up and allow a default judgment to be obtained against them. Once the default judgement is obtained, regardless of whether the debt collection efforts were directed at the wrong consumer, were for the wrong amounts, or beyond the applicable statue of limitations, these debt buyers can then seek enforcement of the default judgement by garnishing wages or other means of recovering from the consumer’s assets.
The Fair Debt Buyer Practices Act would prevent debt buyers from obtaining a judgment in a debt collection lawsuit unless the debt buyer provides documentation that they own the debt, of the alleged balance of the debt, of the date of the last payment or default, of the identity of previous owners of the debt, and the name and address of the debtor in the original creditor’s records. Additionally, the debt buyer must have the original contract, or a document provided to the debtor while the account was active, to show evidence of the debt.
The measure now goes to California Governor Jerry Brown for his signature. Once signed, the new law would take effect on January 1, 2014.