SB 233, as amended, Leno. Debt buyers.
(1) Existing state and federal law regulate the practice of debt collection. Existing state law prohibits a debt collector from engaging in specified conduct, including the use of threats or causing a telephone to ring repeatedly to annoy the person called. Existing law prohibits a debt collector from obtaining an affirmation from a debtor of a consumer debt that has been discharged in bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, the fact that the debtor is not legally obligated to make such affirmation.
This bill would enact the Fair Debt
begin delete Buyersend delete Practices Act, which would regulate the
activities of a person or entity that has bought consumer begin delete debtend delete and the circumstances begin delete inend delete which the person may bring suit. The bill would prohibit a debt buyer, as defined, from making any written statement in an attempt to collect a consumer debt unless the debt buyer possesses
information that the debt buyer is the sole owner of the specific debt at issue, the debt balance, as specified, and the name and address of the creditor at the time the debt was charged off, among other things. The bill would require the debt buyer to make certain documents available to the debtor, without charge, upon receipt of a request, within 15 days. The bill would require that a specified notice be included with the debt buyer’s first written communication with the debtor. The bill would require all settlement agreements between a debt buyer and a debtor to be documented in open court or otherwise in writing and would require a debt buyer who receives a payment on a debt to provide a receipt or statement containing certain information. The bill would prohibit a debt buyer from initiating a suit to collect a debt if the statute of limitations
on the cause of action has expired. The bill would prescribe penalties for each violation of the act and would provide that its provisions may not be waived. The bill would require a debt buyer bringing an action on consumer debt to include certain information in his or her complaint. The bill would prohibit an entry of judgment in favor of a plaintiff debt buyer unless business records authenticated through a sworn declaration and relating to the debt and ownership of it, among other things, are submitted by the debt buyer to the court, and would permit a court to dismiss a debt buyer’s action to collect with prejudice if this information is not provided or if the debt buyer fails to appear or is not prepared on the date scheduled for trial.
(2) Existing law establishes a process for the enforcement of money judgments and requires a levying officer to provide certain documents and information to a judgment debtor and to a designated employer in connection with wage garnishment. Existing law permits a process server also to serve an earnings withholding order on an employer and requires that the process server also serve certain documents at this time. Existing law requires an employer who is served with an earnings withholding order to provide certain documents to an employee who is a judgment debtor.
This bill would require, in the circumstances described above, that a copy of the form that the judgment debtor may use to make a claim of exemption and a copy of the form used to provide a financial statement also be provided.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
The Legislature finds and declares the following:
2(a) The collection of debt purchased by debt buyers has become
3a significant focus of public concern due to the adequacy of
4documentation required to be maintained by the industry in support
5of its collection activities and litigation.
6(b) State law does not currently prescribe the specific nature of
7documentation that a debt buyer must maintain and produce in a
8legal action on the debt.
9(c) Documentation used to support the collection of a debt must
10be sufficient to prove that the individual who is being asked to pay
11the debt is in fact the individual associated with the original
12contract or agreement, and that the amount of indebtedness is
14(d) It is important to create documentation and process standards
15for the collection of consumer debt that all interested parties can
17(e) Setting specific documentation and process standards will
18protect consumers, provide needed clarity to courts, and establish
19clearer criteria for debt buyers and the collection industry.
Title 1.6C.5 (commencing with Section 1788.50) is
21added to Part 4 of Division 3 of the Civil Code, to read:
(a) As used in this title, “debt buyer” means a person
27or entity that is regularly engaged in the business of purchasing
begin delete loans, consumer credit accounts, or other debt for collection purposes, whether it
29delinquent consumerend delete
30collects the debt itself, hires a third party for collection, or hires
31an attorney-at-law for collection litigation.
35(b) “Debt buyer” includes any parent, subsidiary, or other
36affiliate that exercises direct control over the person or entity
37described in subdivision (a).
P4 1 The acquisition by a check services company of the right to
2collect on a paper or electronic check instrument, including an
3Automated Clearing House item, that has been returned unpaid to
4a merchant does not constitute a purchase of delinquent consumer
5debt under this title.
7 Terms defined in Title 1.6C (commencing with Section
81788) shall apply to this title.
(a) A debt buyer shall not make any written statement
12to a debtor in an attempt to collect a consumer debt unless the debt
13buyer possesses the following information:
14(1) That the debt buyer is the sole owner of the debt at issue
begin delete,end delete or
15has authority to assert the rights of all owners of the debt.
16(2) The debt balance at charge off and an explanation of the
17amount, nature, and reason for all post-charge-off fees
begin delete and chargesend delete, imposed by the charge-off creditor or any
19subsequent purchasers of the debt. This paragraph shall not be
20deemed to require a specific
begin delete itemization of each chargeend delete.
24(3) The date of default or the date of the last payment.
25(4) The name and an address of the charge-off
creditor at the
26time of charge off, and the charge-off creditor’s account number
27associated with the debt. The charge-off creditor’s name and
28address shall be in sufficient form so as to reasonably identify
begin delete itend delete
30(5) The name and last known address of the debtor as they
31appeared in the charge-off creditor’s records prior to the sale of
begin delete Whereend delete the debt was sold prior to January 1, 2014, the
33name and last known address as they appeared in the
34debt owner’s records on December 31, 2013, shall be sufficient.
35(6) The names and addresses of all persons or entities that
36purchased the debt after charge off, including the
begin delete plaintiffend delete debt
37buyer. The names and addresses
begin delete of shall be in sufficient form so as to
38these persons or entitiesend delete
begin delete themend delete.
P5 1(b) A debt buyer shall not make any written statement to a debtor
2in an attempt to collect a consumer debt unless the debt buyer has
3access to a copy of a contract or other document evidencing the
4debtor’s agreement to the debt. If the claim is based on debt for
5which no signed contract or agreement exists, the debt buyer shall
6have access to a copy of a document provided to the debtor while
7the account was active, demonstrating that the debt was incurred
8by the debtor. For a revolving credit account, the most recent
9monthly statement recording a purchase transaction, last payment,
10or balance transfer shall be deemed sufficient to satisfy this
12(c) A debt buyer shall provide the information or documents
13identified in subdivisions (a) and (b) to the debtor without charge
14within 15 calendar days of receipt of a debtor’s written request for
15information regarding the debt or proof of the debt. If the debt
16buyer cannot provide the information or documents within 15
17calendar days, the debt buyer shall cease all collection of the debt
18until the debt buyer provides the debtor the information or
19documents described in subdivisions (a) and (b). Except as
20provided otherwise in this title, the request by the debtor shall be
21consistent with the validation requirements contained in Section
221692g of Title 15 of the United States Code. A debt buyer shall
23provide all debtors with whom it has contact
begin delete withend delete an active postal
begin delete and an active e-mail addressend delete to which these requests can
25be sent. A debt buyer may also provide an active email address to
26which these requests can be sent and
begin delete fromend delete which
27information and documents can be delivered, if the parties agree.
28(d) (1) A debt buyer shall include with its first written
29communication with the debtor in no smaller than 12-point type,
30a separate prominent notice that provides:
32“You may request records showing the following: (1) that [insert
33name of debt buyer] has the right to seek collection of the debt;
34(2) the debt balance, including
begin delete any additional fees and chargesend delete; (3) the
36 date of default or the date of the last payment; (4) the name of the
37 creditor and the account number associated with the
38debt; (5) the name and last known address of the debtor as it
39appeared in the creditor’s or debt buyer’s records prior
40to the sale of the debt, as appropriate; (6) the names of all
P6 1persons or entities that have purchased the debt. You may also
2request from us a copy of the contract or other document
3evidencing your agreement to the debt.
4“A request for these records may be addressed to: [insert debt
5buyer’s active mailing address].”
7(2) When collecting on a time-barred debt where the debt is not
8past the date for obsolescence provided for in Section 605(a) of
9the Fair Credit Reporting Act (15 U.S.C. Sec. 1681c):
11“The law limits how long you can be sued on a debt. Because
12of the age of your debt, we will not sue you for it. If you do not
13pay the debt, [insert name of debt buyer] may [continue to] report
14it to the credit reporting agencies as unpaid.”
17(3) When collecting on a time-barred debt where the debt is
18past the date for obsolescence provided for in Section 605(a) of
19the Fair Credit Reporting Act (15 U.S.C. Sec. 1681c):
21“The law limits how long you can be sued on a debt. Because
22of the age of your debt, we will not sue you for it, and we will not
23report it to any credit reporting agency.”
25(e) If a language other than English is principally used by the
26debt buyer in the initial oral contact with the debtor,
begin delete aend delete notice
27 shall be provided to the debtor in that
28language within five working days.
29(f) In the event of a conflict between the requirements of
30subdivision (d) and federal law, so that it is impracticable to comply
31with both, the requirements of federal law shall prevail.
(a) All settlement agreements between a debt buyer
33and a debtor shall be documented in open court or otherwise
34reduced to writing. The debt buyer shall ensure that a copy of the
35written agreement is provided to the debtor.
36(b) A debt buyer that receives payment on a debt shall provide,
37within 30 calendar days, a receipt or monthly statement, to the
38debtor. The receipt or statement shall clearly and conspicuously
39show the amount and date paid, the name of the entity paid, the
40current account number, the name of the charge-off creditor, the
P7 1account number issued by the charge-off creditor, and the
2remaining balance owing, if any. The receipt or statement may be
3provided electronically if the parties agree.
4(c) A debt buyer that accepts a payment as payment in full, or
5as a full and final compromise of the debt, shall provide, within
630 calendar days, a final statement that complies with subdivision
7(b). A debt buyer shall not sell an interest in a resolved debt, or
8any personal or financial information related to the resolved debt.
A debt buyer shall not bring suit or initiate an
10arbitration or other legal proceeding to collect a consumer debt if
11the applicable statute of limitations on the debt buyer’s claim has
In an action brought by a debt buyer on a consumer
15(a) The complaint shall allege all of the following:
16(1) That the plaintiff is a debt buyer.
17(2) The nature of the underlying debt and the consumer
18transaction or transactions from which it is derived, in a short and
20(3) That the debt buyer is the sole owner of the debt at issue, or
21has authority to assert the rights of all owners of the debt.
begin deleteThe debt balance at charge off and an explanation of the
23amount, nature, and reason for all post-charge-off fees and charges,
24imposed by the charge-off creditor or any subsequent purchaser
25of the debt. This paragraph shall not be deemed to require a specific
26itemization of each charge. end delete
34(5) The date of default or the date of the last payment.
35(6) The name and an address of the charge-off creditor at the
36time of charge off, and the charge-off creditor’s account number
37associated with the debt. The charge-off creditor’s name and
38address shall be in sufficient form so as to reasonably identify
begin delete itend delete
P8 1(7) The name and last known address of the debtor as they
2appeared in the creditor’s records prior to the sale of
3the debt. If the debt was sold prior to January 1, 2014, the debtor’s
4name and last known address as they appeared in the debt owner’s
5records on December 31, 2013, shall be sufficient.
6(8) The names and addresses of all persons or entities that
7purchased the debt after charge off, including the plaintiff debt
8buyer. The names and addresses
begin delete of these persons or entitiesend delete shall
9be in sufficient form so as to reasonably identify
begin delete themend delete.
11(9) That the debt buyer has complied with Section 1788.52.
12(b) A copy of the contract or other document described in
13subdivision (b) of Section 1788.52, shall be attached to the
15(c) The requirements of this
title shall not be deemed to require
16the disclosure in public records of personal, financial, or medical
17information, the confidentiality of which is protected by any state
18or federal law.
(a) In an action initiated by a debt buyer, no default
20or other judgment may be entered against a debtor unless business
21records, authenticated through a sworn declaration, are submitted
22by the debt buyer to the court to establish the facts required to be
23alleged by paragraphs (3) to (8), inclusive, of subdivision (a) of
25(b) No default or other judgment may be entered against a debtor
26unless a copy of the contract or other document described in
27subdivision (b) of Section 1788.52, authenticated through a sworn
28declaration, has been submitted by the debt buyer to the court.
29(c) In any action on a consumer debt, if a debt buyer plaintiff
30seeks a default judgment and has not complied with the
31requirements of this title, the court shall not enter a default
32judgment for the plaintiff and may, in its discretion, dismiss the
34(d) Except as provided in this title, this section is not intended
35to modify or otherwise amend the procedures established in Section
36585 of the Code of Civil Procedure.
begin deleteA end deletedebt buyer that violates any provision
39of this title with respect to any person shall be liable to that person
40in an amount equal to the sum of the following:
P9 1(1) Any actual damages sustained by that person as a result of
2the violation, including, but not limited to, the amount of any
3judgment obtained by the debt buyer as a result of a time-barred
4suit to collect a debt from that person.
5(2) Statutory damages in an
amount as the court may allow,
6which shall not be less than one hundred dollars ($100) nor greater
7than one thousand dollars ($1,000)
begin delete per violationend delete.
8(b) In the case of a class action, a debt buyer that violates any
9provision of this title shall be liable for any statutory damages for
10each named plaintiff as provided in paragraph (2) of subdivision
11(a). If the court finds that the debt buyer engaged in a pattern and
12practice of violating any provision of this title, the court may award
13additional damages to the class in an amount not to exceed the
14lesser of five hundred thousand dollars ($500,000) or 1 percent of
15the net worth of the debt buyer.
16(c) (1) In the case of any successful action to enforce liability
17under this section, the court shall award costs of the action, together
18with reasonable attorney’s fees as determined by the court.
19(2) Reasonable attorney’s fees may be awarded to a prevailing
20debt buyer upon a finding by the court that the plaintiff’s
21prosecution of the action was not in good faith.
22(d) In determining the amount of liability under subdivision (b),
23the court shall consider, among other relevant factors, the frequency
24and persistence of noncompliance by the debt buyer, the nature of
25the noncompliance, the resources of the debt buyer, and the number
26of persons adversely affected.
27(e) A debt buyer shall have no civil liability under this section
28if the debt buyer shows by a preponderance of evidence that the
29violation was not intentional and resulted from a bona fide error,
30and occurred notwithstanding the maintenance of procedures
31reasonably adopted to avoid any error.
32(f) An action to enforce any liability created by this title shall
33be brought within one year from the date of the last violation.
34(g) Recovery in an action brought under the Rosenthal Fair Debt
35Collection Practices Act (Title 1.6C (commencing with Section
begin delete 1788)end delete or the federal Fair Debt Collection Practices Act (15
37U.S.C. Sec. 1692 et
begin delete seq.))end delete shall preclude recovery for the
38same acts in an action brought under this title.
Any waiver of the provisions of this title is contrary
40to public policy, and is void and unenforceable.
Section 581.5 is added to the Code of Civil Procedure,
In a case involving consumer debt, as defined in Section
41788.2 of the Civil Code, and as regulated under Title 1.6C.5
5(commencing with Section 1788.50) of Part 4 of Division 3 of the
6Civil Code, if the defendant debtor appears for trial on the
7scheduled trial date, and the plaintiff debt buyer either fails to
8appear or is not prepared to proceed to trial, and the court does not
9find a good cause for continuance, the court may, in its discretion,
10dismiss the action with or without prejudice. Notwithstanding any
11other law, in this instance, the court may award the defendant
12debtor’s costs of preparing for trial, including, but not limited to,
13lost wages and transportation expenses.
Section 700.010 of the Code of Civil Procedure is
15amended to read:
(a) At the time of levy pursuant to this article or
17promptly thereafter, the levying officer shall serve a copy of the
18following on the judgment debtor:
19(1) The writ of execution.
20(2) A notice of levy.
21(3) If the judgment debtor is a natural person, a copy of the form
22listing exemptions prepared by the Judicial Council pursuant to
23subdivision (c) of Section 681.030, the list of exemption amounts
24published pursuant to subdivision (e) of Section 703.150, a copy
25of the form that the judgment debtor may use to make a claim of
26exemption pursuant to Section 703.520, and a copy of the form
27the judgment debtor may use to provide a financial statement
28pursuant to Section 703.530.
29(4) Any affidavit of identity, as defined in Section 680.135, for
30names of the debtor listed on the writ of execution.
31(b) Service under this section shall be made personally or by
Section 706.103 of the Code of Civil Procedure is
34amended to read:
(a) The levying officer shall serve upon the
36designated employer all of the following:
37(1) The original and one copy of the earnings withholding order.
38(2) The form for the employer’s return.
39(3) The notice to employee of earnings withholding order.
P11 1(4) A copy of the form that the judgment debtor may use to
2make a claim of exemption.
3(5) A copy of the form the judgment debtor may use to provide
4a financial statement.
5(b) At the time the levying officer makes service pursuant to
6subdivision (a), the levying officer shall provide the employer with
7a copy of the employer’s instructions referred to in Section
8706.127. The Judicial Council may adopt rules prescribing the
9circumstances when compliance with this subdivision is not
11(c) No earnings withholding order shall be served upon the
12employer after the time specified in subdivision (b) of Section
Section 706.104 of the Code of Civil Procedure is
15amended to read:
Any employer who is served with an earnings
17withholding order shall:
18(a) Deliver to the judgment debtor a copy of the earnings
19withholding order, the notice to employee of earnings withholding,
20a copy of the form that the judgment debtor may use to make a
21claim of exemption, and a copy of the form the judgment debtor
22may use to provide a financial statement within 10 days from the
23date of service. If the judgment debtor is no longer employed by
24the employer and the employer does not owe the employee any
25earnings, the employer is not required to make such delivery. The
26employer is not subject to any civil liability for failure to comply
27with this subdivision. Nothing in this subdivision limits the power
28 of a court to hold the employer in contempt of court for failure to
29comply with this subdivision.
30(b) Complete the employer’s return on the form provided by
31the levying officer and mail it by first-class mail, postage prepaid,
32to the levying officer within 15 days from the date of service. If
33the earnings withholding order is ineffective, the employer shall
34state in the employer’s return that the order will not be complied
35with for this reason and shall return the order to the levying officer
36with the employer’s return.
Section 706.108 of the Code of Civil Procedure is
38amended to read:
(a) If a writ of execution has been issued to the county
40where the judgment debtor’s employer is to be served and the time
P12 1specified in subdivision (b) of Section 699.530 for levy on property
2under the writ has not expired, a judgment creditor may deliver
3an application for issuance of an earnings withholding order to a
4registered process server who may then issue an earnings
6(b) If the registered process server has issued the earnings
7withholding order, the registered process server, before serving
8the earnings withholding order, shall deposit with the levying
9officer a copy of the writ of execution, the application for issuance
10of an earnings withholding order, and a copy of the earnings
11withholding order, and shall pay the fee provided by Section 26750
12of the Government Code.
13(c) A registered process server may serve an earnings
14withholding order on an employer whether the earnings
15withholding order was issued by a levying officer or by a registered
16process server, but no earnings withholding order may be served
17after the time specified in subdivision (b) of Section 699.530. In
18performing this function, the registered process server shall serve
19upon the designated employer all of the following:
20(1) The original and one copy of the earnings withholding order.
21(2) The form for the employer’s return.
22(3) The notice to the employee of the earnings withholding
24(4) A copy of the
form that the judgment debtor may use to
25make a claim of exemption.
26(5) A copy of the form the judgment debtor may use to provide
27a financial statement.
28(6) A copy of the employer’s instructions referred to in Section
29706.127, except as otherwise prescribed in rules adopted by the
31(d) Within five court days after service under this section, all
32of the following shall be filed with the levying officer:
33(1) The writ of execution, if it is not already in the hands of the
35(2) Proof of service on the employer of the papers listed in
37(3) Instructions in writing, as required by the
39(e) If the fee provided by Section 26750 of the Government
40Code has been paid, the levying officer shall perform all other
P13 1duties required by this chapter as if the levying officer had served
2the earnings withholding order. If the registered process server
3does not comply with subdivisions (b), where applicable, and (d),
4the service of the earnings withholding order is ineffective and the
5levying officer is not required to perform any duties under the
6order and may terminate the order and may release any withheld
7earnings to the judgment debtor.
8(f) The fee for services of a registered process server under this
9section shall be allowed as a recoverable cost pursuant to Section
Section 706.122 of the Code of Civil Procedure is
12amended to read:
The “notice to employee of earnings withholding
14order” shall contain a statement that informs the employee in
15simple terms of the nature of a wage garnishment, the right to an
16exemption, the procedure for claiming an exemption, and any other
17information the Judicial Council determines would be useful to
18the employee and appropriate for inclusion in the notice, including
19all of the following:
20(a) The named employer has been ordered to withhold from the
21earnings of the judgment debtor the amounts required to be
22withheld under Section 706.050, or such other amounts as are
23specified in the earnings withholding order, and to pay these
24amounts over to the levying officer for transmittal to the person
25 specified in the order in payment of the judgment described in the
27(b) The manner of computing the amounts required to be
28withheld pursuant to Section 706.050.
29(c) The judgment debtor may be able to keep more or all of the
30judgment debtor’s earnings if the judgment debtor proves that the
31additional earnings are necessary for the support of the judgment
32debtor or the judgment debtor’s family supported in whole or in
33part by the judgment debtor.
34(d) If the judgment debtor wishes a court hearing to prove that
35amounts should not be withheld from the judgment debtor’s
36earnings because they are necessary for the support of the judgment
37debtor or the judgment debtor’s family supported in whole or in
38part by the judgment debtor, the judgment debtor shall file with
39the levying officer an original and one copy of the “judgment
P14 1debtor’s claim of exemption” and an original and one copy of the
2“judgment debtor’s financial statement.”
The provisions of this act are severable. If any
4provision of this section or its application is held invalid, that
5invalidity shall not affect other provisions or applications that can
6be given effect without the invalid provision or application.