as amended, Leno. Debt
begin delete buyers.end delete
(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 Buying Practices Act, which would regulate the activities of a person or entity that has bought charged-off consumer
begin delete loansend delete for collection purposes and the circumstances pursuant to which the person may bring suit. The bill would apply to consumer debt sold or resold on or after January 1, 2014. 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 or is authorized to assert the rights of all owners 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
(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
23 Setting specific documentation and process standards will
24protect consumers, provide needed clarity to courts, and establish
25clearer criteria for debt buyers and the collection industry.
Title 1.6C.5 (commencing with Section 1788.50) is
29added to Part 4 of Division 3 of the Civil Code, to read:
(a) As used in this
begin delete title, “debtend delete
34 buyer” means a person or entity that is regularly
35engaged in the business of purchasing charged-off consumer debt
36for collection purposes, whether it collects the debt itself, hires a
37third party for collection, or hires an attorney-at-law for collection
38litigation. “Debt buyer” does not mean a person or entity that
P4 1acquires a charged-off consumer debt incidental to the purchase
2of a portfolio predominantly consisting of consumer debt that has
3not been charged off.
7(b) The acquisition by a check services company of the right to
8collect on a paper or electronic check instrument, including an
9Automated Clearing House item, that has been returned unpaid to
10a merchant does not constitute a purchase of delinquent consumer
11debt under this title.
12(c) Terms defined in Title 1.6C (commencing with Section
131788) shall apply to this title.
14(d) This title shall apply to debt buyers with respect to all
15consumer debt sold or resold on or after January 1, 2014.
(a) A debt buyer shall not make any written statement
17to a debtor in an attempt to collect a consumer debt unless the debt
18buyer possesses the following information:
19(1) That the debt buyer is the sole owner of the debt at issue or
20has authority to assert the rights of all owners of the debt.
21(2) The debt balance at charge off and an explanation of the
22amount, nature, and reason for all post-charge-off interest and fees,
23if any, imposed by the charge-off creditor or any subsequent
24purchasers of the debt. This paragraph shall not be deemed to
25require a specific itemization, but the explanation shall identify
26separately the charge-off balance, the total of any post-charge-off
27 interest, and the total of any post-charge-off fees.
28(3) The date of default or the date of the last payment.
29(4) The name and an address of the charge-off creditor at the
30time of charge off, and the charge-off creditor’s account number
31associated with the debt. The charge-off creditor’s name and
32address shall be in sufficient form so as to reasonably identify the
34(5) The name and last known address of the debtor as they
35appeared in the charge-off creditor’s records prior to the sale of
36the debt. If the debt was sold prior to January 1, 2014, the name
37and last known address of the debtor as they appeared in the debt
38owner’s records on December 31, 2013, shall be sufficient.
39(6) The names and addresses of all persons or entities that
40 purchased the debt after charge off, including the debt buyer
P5 1making the written statement. The names and addresses shall be
2in sufficient form so as to reasonably identify each such purchaser.
3(b) A debt buyer shall not make any written statement to a debtor
4in an attempt to collect a consumer debt unless the debt buyer has
5access to a copy of a contract or other document evidencing the
6debtor’s agreement to the debt. If the claim is based on debt for
7which no signed contract or agreement exists, the debt buyer shall
8have access to a copy of a document provided to the debtor while
9the account was active, demonstrating that the debt was incurred
10by the debtor. For a revolving credit account, the most recent
11monthly statement recording a purchase transaction, last payment,
12or balance transfer shall be deemed sufficient to satisfy this
14(c) A debt buyer shall provide the
information or documents
15identified in subdivisions (a) and (b) to the debtor without charge
16within 15 calendar days of receipt of a debtor’s written request for
17information regarding the debt or proof of the debt. If the debt
18buyer cannot provide the information or documents within 15
19calendar days, the debt buyer shall cease all collection of the debt
20until the debt buyer provides the debtor the information or
21documents described in subdivisions (a) and (b). Except as
22provided otherwise in this title, the request by the debtor shall be
23consistent with the validation requirements contained in Section
241692g of Title 15 of the United States Code. A debt buyer shall
25provide all debtors with whom it has contact an active postal
26address to which these requests can be sent. A debt buyer may also
27provide an active email address to which these requests can be
28sent and through which information and documents can be
29delivered, if the parties agree.
30(d) (1) A debt buyer shall include with its first written
31communication with the debtor in no smaller than 12-point type,
32a separate prominent notice that provides:
34“You may request records showing the following: (1) that [insert
35name of debt buyer] has the right to seek collection of the debt;
36(2) the debt balance, including an explanation of any interest
37charges and additional fees; (3) the date of default or the date of
38the last payment; (4) the name of the charge-off creditor and the
39account number associated with the debt; (5) the name and last
40known address of the debtor as it appeared in the charge-off
P6 1creditor’s or debt buyer’s records prior to the sale of the debt, as
2appropriate; and (6) the names of all persons or entities that have
3purchased the debt. You may also request from us a copy of the
4contract or other document evidencing your agreement to the debt.
5“A request for these records may be addressed to: [insert debt
6buyer’s active mailing address and email address, if applicable].”
8(2) When collecting on a time-barred debt where the debt is not
9past the date for obsolescence provided for in Section 605(a) of
10the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681c):
12“The law limits how long you can be sued on a debt. Because
13of the age of your debt, we will not sue you for it. If you do not
14pay the debt, [insert name of debt buyer] may [continue to] report
15it to the credit reporting agencies as unpaid for as long as the law
16permits this reporting.”
18(3) When collecting on a time-barred debt where the debt is
19past the date for obsolescence provided for in Section 605(a) of
20the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681c):
22“The law limits how long you can be sued on a debt. Because
23of the age of your debt, we will not sue you for it, and we will not
24report it to any credit reporting agency.”
26(e) If a language other than English is principally used by the
27debt buyer in the initial oral contact with the debtor, the notice
28required by subdivision (d) shall be provided to the debtor in that
29language within five working days.
30(f) In the event of a conflict between the requirements of
31subdivision (d) and federal law, so that it is impracticable to comply
32with both, the requirements of federal law shall prevail.
(a) All settlement agreements between a debt buyer
34and a debtor shall be documented in open court or otherwise
35reduced to writing. The debt buyer shall ensure that a copy of the
36written agreement is provided to the debtor.
37(b) A debt buyer that receives payment on a debt shall provide,
38within 30 calendar days, a receipt or monthly statement, to the
39debtor. The receipt or statement shall clearly and conspicuously
40show the amount and date paid, the name of the entity paid, the
P7 1current account number, the name of the charge-off creditor, the
2account number issued by the charge-off creditor, and the
3remaining balance owing, if any. The receipt or statement may be
4provided electronically if the parties agree.
5(c) A debt buyer that accepts a payment as payment in full, or
6as a full and final compromise of the debt, shall provide, within
730 calendar days, a final statement that complies with subdivision
8(b). A debt buyer shall not sell an interest in a resolved debt, or
9any personal or financial information related to the resolved debt.
A debt buyer shall not bring suit or initiate an
11arbitration or other legal proceeding to collect a consumer debt if
12the applicable statute of limitations on the debt buyer’s claim has
In an action brought by a debt buyer on a consumer
16(a) The complaint shall allege all of the following:
17(1) That the plaintiff is a debt buyer.
18(2) The nature of the underlying debt and the consumer
19transaction or transactions from which it is derived, in a short and
21(3) That the debt buyer is the sole owner of the debt at issue, or
22has authority to assert the rights of all owners of the debt.
23(4) The debt balance at charge off and an explanation of the
24amount, nature, and reason for all post-charge-off interest and fees,
25if any, imposed by the charge-off creditor or any subsequent
26purchasers of the debt. This paragraph shall not be deemed to
27require a specific itemization, but the explanation shall identify
28separately the charge-off balance, the total of any post-charge-off
29interest, and the total of any post-charge-off fees.
30(5) The date of default or the date of the last payment.
31(6) The name and an address of the charge-off creditor at the
32time of charge off, and the charge-off creditor’s account number
33associated with the debt. The charge-off creditor’s name and
34address shall be in sufficient form so as to reasonably identify the
36(7) The name and last known address of the debtor as they
37appeared in the charge-off creditor’s records prior to the sale of
38the debt. If the debt was sold prior to January 1, 2014, the debtor’s
39name and last known address as they appeared in the debt owner’s
40records on December 31, 2013, shall be sufficient.
P8 1(8) The names and addresses of all persons or entities that
2purchased the debt after charge off, including the plaintiff debt
3buyer. The names and addresses shall be in sufficient form so as
4to reasonably identify each such purchaser.
5(9) That the debt buyer has complied with Section 1788.52.
6(b) A copy of the contract or other document described in
7subdivision (b) of Section 1788.52, shall be attached to the
9(c) The requirements of this title shall not be deemed to require
10the disclosure in public records of personal, financial, or medical
11information, the confidentiality of which is protected by any state
12or federal law.
(a) In an action initiated by a debt buyer, no default
14or other judgment may be entered against a debtor unless business
15records, authenticated through a sworn declaration, are submitted
16by the debt buyer to the court to establish the facts required to be
17alleged by paragraphs (3) to (8), inclusive, of subdivision (a) of
19(b) No default or other judgment may be entered against a debtor
20unless a copy of the contract or other document described in
21subdivision (b) of Section 1788.52, authenticated through a sworn
22declaration, has been submitted by the debt buyer to the court.
23(c) In any action on a consumer debt, if a debt buyer plaintiff
24seeks a default judgment and has not complied with the
25requirements of this title, the court shall not enter a default
26judgment for the plaintiff and may, in its discretion, dismiss the
28(d) Except as provided in this title, this section is not intended
29to modify or otherwise amend the procedures established in Section
30585 of the Code of Civil Procedure.
(a) In the case of an action brought by an individual
32or individuals, a debt buyer that violates any provision of this title
33with respect to any person shall be liable to that person in an
34amount equal to the sum of the following:
35(1) Any actual damages sustained by that person as a result of
36the violation, including, but not limited to, the amount of any
37judgment obtained by the debt buyer as a result of a time-barred
38suit to collect a debt from that person.
P9 1(2) Statutory damages in an amount as the court may allow,
2which shall not be less than one hundred dollars ($100) nor greater
3than one thousand dollars ($1,000).
4(b) In the case of a class action, a debt buyer that violates any
5provision of this title shall be liable for any statutory damages for
6each named plaintiff as provided in paragraph (2) of subdivision
7(a). If the court finds that the debt buyer engaged in a pattern and
8practice of violating any provision of this title, the court may award
9additional damages to the class in an amount not to exceed the
10lesser of five hundred thousand dollars ($500,000) or 1 percent of
11the net worth of the debt buyer.
12(c) (1) In the case of any successful action to enforce liability
13under this section, the court shall award costs of the action, together
14with reasonable attorney’s fees as determined by the court.
15(2) Reasonable attorney’s fees may be awarded to a prevailing
16debt buyer upon a finding by the court that the plaintiff’s
17prosecution of the action was not in good faith.
18(d) In determining the amount of liability under subdivision (b),
19the court shall consider, among other relevant factors, the frequency
20and persistence of noncompliance by the debt buyer, the nature of
21the noncompliance, the resources of the debt buyer, and the number
22of persons adversely affected.
23(e) A debt buyer shall have no civil liability under this section
24if the debt buyer shows by a preponderance of evidence that the
25violation was not intentional and resulted from a bona fide error,
26and occurred notwithstanding the maintenance of procedures
27reasonably adopted to avoid any error.
28(f) An action to enforce any liability created by this title shall
29be brought within one year from the date of the last violation.
30(g) Recovery in an
action brought under the Rosenthal Fair Debt
31Collection Practices Act (Title 1.6C (commencing with Section
321788)) or the federal Fair Debt Collection Practices Act (15 U.S.C.
33Sec. 1692 et seq.) shall preclude recovery for the same acts in an
34action brought under this title.
Any waiver of the provisions of this title is contrary
36to 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
401788.2 of the Civil Code, and as regulated under Title 1.6C.5
P10 1(commencing with Section 1788.50) of Part 4 of Division 3 of the
2Civil Code, if the defendant debtor appears for trial on the
3scheduled trial date, and the plaintiff debt buyer either fails to
4appear or is not prepared to proceed to trial, and the court does not
5find a good cause for continuance, the court may, in its discretion,
6dismiss the action with or without prejudice. Notwithstanding any
7other law, in this instance, the court may award the defendant
8debtor’s costs of preparing for trial, including, but not limited to,
9lost wages and transportation expenses.
Section 700.010 of the Code of Civil Procedure is
11amended to read:
(a) At the time of levy pursuant to this article or
13promptly thereafter, the levying officer shall serve a copy of the
14following on the judgment debtor:
15(1) The writ of execution.
16(2) A notice of levy.
17(3) If the judgment debtor is a natural person, a copy of the form
18listing exemptions prepared by the Judicial Council pursuant to
19subdivision (c) of Section 681.030, the list of exemption amounts
20published pursuant to subdivision (e) of Section 703.150, a copy
21of the form that the judgment debtor may use to make a claim of
22exemption pursuant to Section 703.520, and a copy of the form
23the judgment debtor may use to provide a financial statement
24pursuant to Section 703.530.
25(4) Any affidavit of identity, as defined in Section 680.135, for
26names of the debtor listed on the writ of execution.
27(b) Service under this section shall be made personally or by
Section 706.103 of the Code of Civil Procedure is
30amended to read:
(a) The levying officer shall serve upon the
32designated employer all of the following:
33(1) The original and one copy of the earnings withholding order.
34(2) The form for the employer’s return.
35(3) The notice to employee of earnings withholding order.
36(4) A copy of the form that the judgment debtor may use to
37make a claim of exemption.
38(5) A copy of the form the judgment debtor may use to provide
39a financial statement.
P11 1(b) At the time the levying officer makes service pursuant to
2subdivision (a), the levying officer shall provide the employer with
3a copy of the employer’s instructions referred to in Section
4706.127. The Judicial Council may adopt rules prescribing the
5circumstances when compliance with this subdivision is not
7(c) No earnings withholding order shall be served upon the
8employer after the time specified in subdivision (b) of Section
Section 706.104 of the Code of Civil Procedure is
11amended to read:
Any employer who is served with an earnings
13withholding order shall:
14(a) Deliver to the judgment debtor a copy of the earnings
15withholding order, the notice to employee of earnings withholding,
16a copy of the form that the judgment debtor may use to make a
17claim of exemption, and a copy of the form the judgment debtor
18may use to provide a financial statement within 10 days from the
19date of service. If the judgment debtor is no longer employed by
20the employer and the employer does not owe the employee any
21earnings, the employer is not required to make such delivery. The
22employer is not subject to any civil liability for failure to comply
23with this subdivision. Nothing in this subdivision limits the power
24 of a court to hold the employer in contempt of court for failure to
25comply with this subdivision.
26(b) Complete the employer’s return on the form provided by
27the levying officer and mail it by first-class mail, postage prepaid,
28to the levying officer within 15 days from the date of service. If
29the earnings withholding order is ineffective, the employer shall
30state in the employer’s return that the order will not be complied
31with for this reason and shall return the order to the levying officer
32with the employer’s return.
Section 706.108 of the Code of Civil Procedure is
34amended to read:
(a) If a writ of execution has been issued to the county
36where the judgment debtor’s employer is to be served and the time
37specified in subdivision (b) of Section 699.530 for levy on property
38under the writ has not expired, a judgment creditor may deliver
39an application for issuance of an earnings withholding order to a
P12 1registered process server who may then issue an earnings
3(b) If the registered process server has issued the earnings
4withholding order, the registered process server, before serving
5the earnings withholding order, shall deposit with the levying
6officer a copy of the writ of execution, the application for issuance
7of an earnings withholding order, and a copy of the earnings
8withholding order, and shall pay the fee provided by Section 26750
9of the Government Code.
10(c) A registered process server may serve an earnings
11withholding order on an employer whether the earnings
12withholding order was issued by a levying officer or by a registered
13process server, but no earnings withholding order may be served
14after the time specified in subdivision (b) of Section 699.530. In
15performing this function, the registered process server shall serve
16upon the designated employer all of the following:
17(1) The original and one copy of the earnings withholding order.
18(2) The form for the employer’s return.
19(3) The notice to the employee of the earnings withholding
21(4) A copy of the
form that the judgment debtor may use to
22make a claim of exemption.
23(5) A copy of the form the judgment debtor may use to provide
24a financial statement.
25(6) A copy of the employer’s instructions referred to in Section
26706.127, except as otherwise prescribed in rules adopted by the
28(d) Within five court days after service under this section, all
29of the following shall be filed with the levying officer:
30(1) The writ of execution, if it is not already in the hands of the
32(2) Proof of service on the employer of the papers listed in
34(3) Instructions in writing, as required by the
36(e) If the fee provided by Section 26750 of the Government
37Code has been paid, the levying officer shall perform all other
38duties required by this chapter as if the levying officer had served
39the earnings withholding order. If the registered process server
40does not comply with subdivisions (b), where applicable, and (d),
P13 1the service of the earnings withholding order is ineffective and the
2levying officer is not required to perform any duties under the
3order and may terminate the order and may release any withheld
4earnings to the judgment debtor.
5(f) The fee for services of a registered process server under this
6section shall be allowed as a recoverable cost pursuant to Section
Section 706.122 of the Code of Civil Procedure is
9amended to read:
The “notice to employee of earnings withholding
11order” shall contain a statement that informs the employee in
12simple terms of the nature of a wage garnishment, the right to an
13exemption, the procedure for claiming an exemption, and any other
14information the Judicial Council determines would be useful to
15the employee and appropriate for inclusion in the notice, including
16all of the following:
17(a) The named employer has been ordered to withhold from the
18earnings of the judgment debtor the amounts required to be
19withheld under Section 706.050, or such other amounts as are
20specified in the earnings withholding order, and to pay these
21amounts over to the levying officer for transmittal to the person
22 specified in the order in payment of the judgment described in the
24(b) The manner of computing the amounts required to be
25withheld pursuant to Section 706.050.
26(c) The judgment debtor may be able to keep more or all of the
27judgment debtor’s earnings if the judgment debtor proves that the
28additional earnings are necessary for the support of the judgment
29debtor or the judgment debtor’s family supported in whole or in
30part by the judgment debtor.
31(d) If the judgment debtor wishes a court hearing to prove that
32amounts should not be withheld from the judgment debtor’s
33earnings because they are necessary for the support of the judgment
34debtor or the judgment debtor’s family supported in whole or in
35part by the judgment debtor, the judgment debtor shall file with
36the levying officer an original and one copy of the “judgment
37debtor’s claim of exemption” and an original and one copy of the
38“judgment debtor’s financial statement.”
The provisions of this act are severable. If any
40provision of this section or its application is held invalid, that
P14 1invalidity shall not affect other provisions or applications that can
2be given effect without the invalid provision or application.