Calif. AG pleased with legislation targeting debt buyers

Bryan Cohen Feb. 1, 2012, 1:33pm


SACRAMENTO, Calif. (Legal Newsline) - California Attorney General Kamala Harris announced on Tuesday her happiness that the state Senate has passed legislation that would protect consumers from unfair practices of debt collection.

The Fair Debt Buyers Practices Act will require that those who purchase consumer debt, or debt buyers, provide documentary evidence to consumers to make sure that their collection efforts are directed at the correct individual. Harris says debt buyers have inundated the courts in California with lawsuits that seek judgments on debts without proper documentation.

"Too often, a consumer can get ensnarled in a long and costly battle to prove they are not the ones responsible for debt," Harris said. "The Fair Debt Buyers Practices Act will put reasonable requirements on debt buyers and ensure consumers are not forced to pay the debts of others."

Consumer debt is routinely resold and purchased in bundles, which can include thousands of accounts with insufficient documentation. Because of this, efforts at debt collection can target the wrong amounts or the wrong consumers. The efforts may also seek payment on a debt that was discharged or has expired.

Senator Mark Leno, D-San Francisco, created Senate Bill 890. The bill would prohibit debt buyers from obtaining a judgment in a lawsuit for debt collection unless the buyer of the debt can show several key pieces of proper documentation.

That documentation includes their ownership of the debt, the balance of the debt, the date of the default or last payment, the name and the address of the debtor in the original creditor's records, and the identity of prior owners of the debt. The buyer of the debt must also have the original contract or a document the debtor was provided with while the account was active to show evidence of the debt.

"The passage of this legislation is a major breakthrough for consumer protection in California," Leno said. "Aggressive debt buyers are using deceptive tactics to collect funds when they cannot even prove they are targeting the right consumer for the correct debt amount. The Fair Debt Buyers Practices Act relieves consumers and courts from the burdens and costs associated with processing large volumes of unsubstantiated debts."

In August, the California Department of Consumer Affairs issued a report that concluded that a large portion of the debt purchased by debt buyers does not come with sufficient documentation to identify the debtor. Despite this, as many as 90 percent of some debt buyers claims resulted in a default judgment where no defendant appears to challenge the debt claim. In some cases, this is because the consumer has no awareness of the claim.

In 2010, the Federal Trade Commission received more than 33,000 complaints related to the validity of collection efforts and described the system for resolving disputes as "broken." SB 890 passed the Senate with a 22 to 14 vote and will now move on to the Assembly.

More News