The California legislature has approved SB 531, a measure that will require collectors to have proof they have authority to collect a debt prior to doing so, and gives consumers the right to request that proof and other basic information about the debt. The bill now heads to the desk of California Gov. Gavin Newsom for his signature or veto.
The bill, which was sponsored by state Sen. Bob Wieckowski, passed in the Senate in May by a vote of 29 to nine before heading to the state Assembly, where an amended version was passed on Monday by a vote of 68 to one. The Senate had to pass the amended bill, which it did yesterday by a vote of 38 to nothing.
“SB 531 will raise the standards for collectors working with assigned debt and make them more accountable to consumers, just as we do with collectors working with debt that is sold,” said Wieckowski, a member of the Senate Judiciary Committee, in a statement. “It will eliminate the lax oversight of collectors who do not operate under the Fair Debt Buying Practices Act. Abusive collection tactics must be eliminated and providing consumers with more transparency about their debt will address the complaints about collectors that legal service providers are hearing from their clients.”
If signed into law, the bill would go into effect on July 1, 2022.
Collectors would be prohibited from sending any written statement to a consumer unless it possesses a copy of the contract or some other document proving the consumer agreed to the debt, unless no signed contract exists, in which case the collector will need some document proving the account was active and the debt was incurred, a copy of the most recent monthly statement.
When so requested by a consumer, collectors will have to provide the following information:
- The debt balance and an explanation of the amount, nature, and reason for all interest and fees, if any, imposed by the creditor or any subsequent entities to which the debt was assigned. The explanation required shall identify separately the balance, the total of any interest, and the total of any fees.
- The date the debt became delinquent or the date of the last payment.
- The name and an address of the creditor and the creditor’s account number associated with the debt. The creditor’s name and address shall be in sufficient form so as to reasonably identify the creditor.
- The name and last known address of the debtor as they appeared in the creditor’s records before the assignment of the debt to the debt collector.
- The names and addresses of all persons or entities other than the debt collector to which the debt was assigned. The names and addresses shall be in sufficient form so as to reasonably identify each assignee.
- The California license number of the debt collector.
Collectors, in their first written communication with consumers, will also need to include the following disclosure:
“You may request records showing the following: (1) that [insert name of debt collector] has the right to seek collection of the debt; (2) the debt balance, including an explanation of any interest charges and additional fees; (3) the date the debt became delinquent or the date of the last payment; (4) the name of the creditor and the account number associated with the debt; (5) the name and last known address of the debtor as it appeared in the creditor’s records prior to assignment of the debt; and (6) the names of all persons or entities other than the debt collector to which the debt has been assigned, if applicable. You may also request from us a copy of the contract or other document evidencing your agreement to the debt.
A request for these records may be addressed to: [insert debt collector’s active mailing address and email address, if applicable].”
Consumer advocates praised the bill’s passage.
“It will allow debtors to better understand the debt collection process,” said Leigh Ferrin, director of litigation and pro bono at the Public Law Center. “It is common for hospital and medical debts to be assigned to a third party collector rather than sold. But unfortunately for consumers, the protections of the Fair Debt Buying Practices Act do not apply and the collector is not required to give them basic information about their debt. SB 531 will change that and give people the information they need to resolve their debt issues more quickly.”