Advocates on DFPI Debt Collection Committee Make Suggestions to Reform Legal Collections

The two consumer advocates on the California Department of Financial Protection and Innovation’s Debt Collection Advisory Committee have come out and made two recommendations to protect Californians “from illegal collection practices and lawsuits.”

The two advocates — Prasad Krishnamurthy, a professor of law at the UC Berkeley School of Law, and Emma Gonzalez, the directing attorney at the Public Law Center in Orange County, made one “modest” and one “ambitious” recommendation to try and help individuals who are sued in California for unpaid debts. Noting that legal protections that were put in place during the COVID-19 pandemic are about to expire and that collectors have been active in filing lawsuits in recent years — largely because individuals do not respond to letters or phone calls — more needs to be done to ensure that the validity and ownership of debts are established prior to filing a lawsuit.

The modest recommendation that was made is for the DFPI to declare that filing lawsuits with insufficient documentation to be an abusive practice. “Using electronic court records, regulators could obtain a random sample of every debt collector’s filings and determine whether they are abusing the legal process through insufficient or inaccurate filings,” the pair suggest. “Abusive filing practices should result in the loss of a license if they are not corrected.”

The ambitious recommendation would be to make California the first state in the nation to guarantee legal representation in civil cases, much as it is guaranteed in criminal cases. At least 20 countries in Europe are already providing such representation, the advocates note. California already provides representation in some civil cases, and should consider doing so in all cases.

“Whether it’s to buy a home, a car or an appliance, attend college, or cope with sickness and unemployment, debt is a part of life for most Californians,” the advocates write. “California borrowers deserve a system in which creditors follow the law, not one in which they obtain faulty judgments against absent defendants.”

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