BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                             Senator Noreen Evans, Chair
                              2013-2014 Regular Session


          SB 233 (Leno and Correa)
          As Amended April 22, 2013
          Hearing Date: May 7, 2013
          Fiscal: No
          Urgency: No
          BCP


                                        SUBJECT
                                           
                                     Debt Buyers

                                      DESCRIPTION  

          This bill, the Fair Debt Buying Practices Act, would regulate  
          the activities of a person or entity (debt buyer) that has  
          bought charged-off consumer loans for collection purposes.  
          Specifically, this bill would:
           prohibit a debt buyer from making any written statement in an  
            attempt to collect a consumer debt unless the debt buyer  
            possesses specified information;
           require the debt buyer to make that information available to  
            the debtor, without charge, upon receipt of a request, within  
            15 days; 
           require all settlement agreements between a debt buyer and a  
            debtor to be documented in open court or otherwise in writing;
           require a debt buyer who receives a payment on a debt to  
            provide a receipt or statement containing certain information;
           prohibit a debt buyer from initiating a suit to collect a debt  
            if the statute of limitations on the cause of action has  
            expired;
           require a debt buyer bringing an action on consumer debt to  
            include certain information in his or her complaint; and
           prohibit an entry of judgment in favor of a plaintiff debt  
            buyer unless business records, authenticated through a sworn  
            declaration and proving ownership of the debt, are submitted  
            by the debt buyer to the court.

          This bill would provide that a debt buyer who violates the  
          provisions of this bill is liable for specified damages,  
          including costs and reasonable attorney's fees, but permits a  
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          debt buyer to avoid liability for unintentional bona fide  
          errors.

          This bill would also require a claim of exemption, and related  
          financial statement form, to be provided to a judgment debtor by  
          a levying officer, as specified.

                                      BACKGROUND  

          Debt buyers are companies that purchase delinquent or  
          charged-off debts from a creditor for a fraction of the face  
          value of the debt.  Those companies have become subject to  
          increased scrutiny due to numerous complaints on behalf of  
          consumers.   The Federal Trade Commission (FTC) issued a report  
          in July 2010 examining debt collection litigation and  
          arbitration proceedings that concluded the "system for resolving  
          consumer debt collection disputes is broken" and recommended  
          significant reforms. (Repairing a Broken System (July 2010)  
          Federal Trade Commission  [as of May 3, 2013] at  
          p. i.) The FTC further noted that:

            The report finds very few consumers defend or otherwise  
            participate in debt collection litigation.  The Commission  
            therefore recommends state and local governments consider  
            making a variety of reforms to service of process, pleading,  
            and court rules and practices to increase the ability of  
            consumers to defend or otherwise participate in debt  
            collection litigation.  The report also finds 
            complaints and attachments in debt collection cases often do  
            not provide adequate information for consumers to answer  
            complaints or for judges to rule on motions for default  
            judgment.  The FTC therefore recommends that courts more  
            rigorously apply existing rules to require that collectors  
            provide adequate information and that jurisdictions consider  
            adopting rules mandating the information which must be  
            included in or attached to the complaint.  The report  
            additionally finds that state statutes of limitations on  
            filing actions to recover on debt are sometimes variable and  
            complex, and generally not understood by consumers.  The  
            Commission suggests that states consider modifying their  
            laws to make it simpler to determine the applicable statute  
            of limitations, and to require that collectors provide  
            consumers with important information about 
            their legal rights when collecting debt they know or should  
            know is time-barred. (Id. at p. 2.)
                                                                      



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          Additionally, on October 24, 2012, the federal Consumer  
          Financial Protection Bureau (CFPB) published a rule to allow the  
          agency to federally supervise the larger consumer debt  
          collectors.  The CFPB noted that:

            Approximately 30 million Americans have, on average, $1,500  
            of debt subject to collection.  Debt collectors often report  
            consumers' collection status to the credit bureaus.  If they  
            get the information wrong, this can be the difference  
            between getting approved or denied for such financial  
            products as a mortgage or a car loan.

            The consumer debt collection market covered by the rule  
            includes three main types of debt collection: first, firms  
            that may buy defaulted debt and collect the proceeds for  
            themselves; second, firms that may collect defaulted debt  
            owned by another company in return for a fee; and third,  
            there are debt collection attorneys that collect through  
            litigation.  A single company may be involved in any or all  
            of these activities.  By expanding the supervision program  
            to oversee the nonbanks that are larger participants in the  
            consumer debt collection market, the Bureau will now have a  
            window into every stage of the process - from the  
            origination of credit to debt collection.

            The CFPB's supervision authority over these entities will  
            begin when the rule takes effect on January 2, 2013.  Under  
            the rule, any firm that has more than $10 million in annual  
            receipts from consumer debt collection activities will be  
            subject to the CFPB's supervisory authority.  This authority  
            will extend to about 175 debt collectors, which account for  
            over 60 percent of the industry's annual receipts in the  
            consumer debt collection market.  (Consumer Financial  
            Protection Bureau to oversee debt collectors (Oct. 24, 2012)  
            Consumer Financial Protection Bureau   
             [as of May 1, 2013].)

          In further response to the above issues, this bill, sponsored by  
          Attorney General Kamala Harris, seeks to make numerous changes  
          relating to debt buyers, including prohibiting a debt buyer from  
          making a written statement to collect a consumer debt without  
          possessing specific information, requiring a complaint in an  
          action to collect on a consumer debt to include specific  
                                                                      



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          allegations, and prohibiting a debt buyer from bringing suit if  
          the applicable statute of limitations has expired.  

          This bill was approved by the Senate Committee on Banking &  
          Financial Institutions on April 17, 2013, by a vote of 8-0, and  
          is similar to SB 890 (Leno, 2011), which was approved by this  
          Committee but failed passage in the Assembly Committee on  
          Banking & Finance.

                                CHANGES TO EXISTING LAW
           
          1.    Existing federal law  generally regulates the collection of  
            debt through, among other things, the Fair Debt Collection  
            Practices Act, Fair Credit Reporting Act, and the  
            Gramm-Leach-Bliley Act.  
           
             Existing state law  , the Rosenthal Fair Debt Collection  
            Practices Act, generally prohibits deceptive, dishonest,  
            unfair, and unreasonable debt collection practices by debt  
            collectors, and regulates the form and content of  
            communications by collectors to debtors and others.  (Civ.  
            Code Sec. 1788 et seq.)
          
             This bill  would establish the Fair Debt Buying Practices Act  
            and prohibit a debt buyer from making any written statement to  
            a debtor in an attempt to collect a consumer debt unless the  
            debt buyer possesses the following information:
                 the debt buyer is the sole owner of the debt or has  
               authority to assert the rights of all owners of the debt;
                 the debt balance at charge off and an explanation for  
               all post-charge-off interest rates and fees, if any,  
               imposed by charge-off creditor or any subsequent purchasers  
               of the debt;
                 the date of default or date of the last payment;
                 the name and address of the charge-off creditor at the  
               time of charge off, and the charge-off creditor's account  
               number associated with the debt;
                 the name and last known address of the debtor as they  
               appeared in the charge-off creditor's records prior to the  
               sale of the debt; and
                 the names and addresses of all persons or entities that  
               purchased the debt after charge off, including the debt  
               buyer making the written statement;

             This bill  would prohibit a debt buyer from making any written  
            statement to a debtor in an attempt to collect a consumer debt  
                                                                      



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            unless the debt buyer has access to a copy of the contract or  
            other document evidencing the debtor's agreement to the debt.   
            If the claim is based on debt for which no signed contract or  
            agreement exists, the debt buyer shall have access to a copy  
            of a document provided to the debtor while the account was  
            active, demonstrating that the debt was incurred by the  
            debtor. 

             This bill  would require a debt buyer to provide the  
            information or documents identified above to the debtor  
            without charge within 15 calendar days of receipt of a  
            debtor's written request for information regarding the debt or  
            proof of debt.  If the debt buyer cannot provide the  
            information or documents within 15 calendar days, the debt  
            buyer shall cease all collection of the debt until the debt  
            buyer provides the information or documents.  A debt buyer  
            must provide an active postal address to which these requests  
            can be sent, and may provide an active email address to which  
            these requests can be sent and through which information and  
            documents can be delivered.

             This bill  would require a debt buyer to include a prominent  
            statutory notice with its first written communication with the  
            debtor that is in no smaller than 12-point type, as specified.

             This bill  would provide that when a debt buyer attempts to  
            collect on a time-barred debt where the debt is not past the  
            date for obsolescence, the buyer must provide the following  
            notice:  "The law limits how long you can be sued on a debt.   
            Because of the age of your debt, we will not sue you for it.   
            If you do not pay the debt, [insert name of debt buyer] may  
            [continue to] report it to the credit reporting agencies as  
            unpaid for as long as the law permits this reporting."  If the  
            debt is both time-barred and past the date for obsolescence,  
            the debtor shall provide the following notice:  "The law  
            limits how long you can be sued on a debt.  Because of the age  
            of your debt, we will not sue you for it, and we will not  
            report it to any credit reporting agency."

             This bill  would state that if a language other than English is  
            principally used by the debt buyer in the initial oral contact  
            with the debtor, the above-required notices shall be provided  
            to the debtor in that language within five working days.

             This bill  would require all settlement agreements between a  
            debt buyer and a debtor to be documented in open court or  
                                                                      



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            otherwise reduced to writing, and, the debt buyer shall ensure  
            that a copy of the written agreement is provided to the  
            debtor.

             This bill  would require a debt buyer that receives payment on  
            a debt to provide, within 30 calendar days, a receipt or  
            monthly statement to the debtor, as specified.  A debt buyer  
            that accepts a payment as payment in full, or as a full and  
            final compromise of the debt, shall provide, within 30  
            calendar days, a final statement to the debtor.  A debt buyer  
            shall not sell an interest in a resolved debt or any personal  
            or financial information related to the resolved debt.

             This bill  would prohibit a debt buyer from bringing suit or  
            initiating an arbitration or other legal proceeding to collect  
            a consumer debt if the applicable statute of limitations on  
            the debt buyer's claim has expired.

             This bill  would provide that in an action brought by a debt  
            buyer on a consumer debt, the complaint shall allege all of  
            the following:
                 that the plaintiff is a debt buyer;
                 the nature of the underlying debt and the consumer  
               transaction or transactions from which it is derived, in a  
               short and plain statement;
                 that the debt buyer is the sole owner of the debt at  
               issue, or has authority to assert the rights of all owners  
               of the debt;
                 the debt balance at charge off and an explanation of the  
               amount, nature, and reason for all post-charge-off interest  
               and fees, as specified;
                 the date of default or date of the last payment;
                 the name and an address of the charge-off creditor at  
               the time of charge off, and the charge-off creditor's  
               account number associated with the debt;
                 the names and addresses of all persons or entities that  
               purchased the debt after charge off; and
                 that the debt buyer has complied with specified  
               requirements of this bill.

             This bill  would require a copy of the contract or other  
            document that evidences the debtor's agreement to the debt to  
            be attached to the complaint.

             This bill  would provide that the above requirements shall not  
            be deemed to require the disclosure in public records of  
                                                                      



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            personal, financial, or medical information, the  
            confidentiality of which is protected by any state or federal  
            law.

             This bill  would provide that in an action initiated by a debt  
            buyer, no default or other judgment may be entered against a  
            debtor unless business records, authenticated through a sworn  
            declaration, are submitted by the debt buyer to the court to  
            establish specified facts required to be alleged in the  
            complaint.

             This bill  would prohibit a default or other judgment from  
            being entered against a debtor unless a copy of the contract  
            or other document, as specified, authenticated through a sworn  
            declaration, has been submitted by the debt buyer to the  
            court.

             This bill  would provide that in any action on a consumer debt,  
            if a debt buyer plaintiff seeks a default judgment and has not  
            complied with the above requirements, the court shall not  
            enter a default judgment for the plaintiff and may, in its  
            discretion, dismiss the action.

             This bill  would provide that in the case of an action brought  
            by an individual or individuals, a debt buyer that violates  
            any provision above with respect to any person shall be liable  
            to that person in an amount equal to a sum of:  (1) actual  
            damages; and (2) statutory damages, which shall not be less  
            than $100 nor greater than $1,000.

             This bill  would provide that, in the case of a class action, a  
            debt buyer that violates any of the above provisions shall be  
            liable for statutory damages for each plaintiff, and, if the  
            court finds that the debt buyer engages in a pattern and  
            practice of violating any provision of this bill, the court  
            may award additional damages to the class in an amount not to  
            exceed the lesser of $500,000 or one percent of the net worth  
            of the debt buyer.

             This bill  would provide that, in the case of any successful  
            action to enforce liability under this bill, the court shall  
            award the costs of the action, together with reasonable  
            attorney's fees as determined by the court.  

             This bill  would allow reasonable attorney's fees to be awarded  
            to a prevailing debt buyer upon a finding by the court that  
                                                                      



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            the plaintiff's prosecution of the action was not in good  
            faith.  This bill would also provide that a debt buyer shall  
            have no civil liability if the debt buyer shows by a  
            preponderance of evidence that the violation was not  
            intentional and resulted from a bona fide error, and occurred  
            notwithstanding the maintenance of procedures reasonably  
            adopted to avoid any error.

             This bill  would require an action to enforce any liability  
            created by this bill to be brought within one year from the  
            date of the last violation.  This bill would further state  
            that recovery in an action brought under the Rosenthal Fair  
            Debt Collection Practices Act shall preclude recovery for the  
            same acts in an action brought under this bill.

             This bill  would further provide that in a case involving  
            consumer debt, as regulated by this bill, if the defendant  
            debtor appears for trial on the scheduled trial date, and the  
            plaintiff debt buyer either fails to appear or is not prepared  
            to proceed to trial, and the court does not find a good cause  
            for continuance, the court may, in its discretion, dismiss the  
            action with or without prejudice.  The court may also award  
            the defendant debtor's costs of preparing for trial,  
            including, but not limited to, lost wages and transportation  
            expenses.

             This bill  would additionally define "debt buyer," apply the  
            above provisions to consumer debt sold or resold on or after  
            January 1, 2014, and make related findings and declarations.

          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.  (Code Civ. Proc Secs.  
            700.010; 706.103; 706.104; 706.108; 706.122.)
           
             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.
                                                                      



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                                        COMMENT
           
          1.   Stated need for the bill 

          According to the author:

            [T]he Federal Trade Commission [(FTC) has stated that],  
            [t]he system for resolving disputes about consumer debts is  
            broken, and has urged states to pass legislation to provide  
            adequate protection for consumers. 

            The system is broken because courts have been swamped with  
            debt collection law suits driven by the growth of an  
            industry that buys and sells bundled portfolios of consumer  
            debt, and misuses the courts to leverage their collection  
            efforts.  

            The industry's practices echo the scandal surrounding the  
            processing of delinquent mortgages.  Here, debt buyers use  
            "robo signers" who sign affidavits averring that they have  
            reviewed and verified debtors' records, when they have only  
            reviewed basic, and often incomplete, account statements  
            records or spreadsheets on a computer screen.   Moreover,  
            because consumer debt is being bought and sold so  
            frequently, and over a period of years, companies are  
            frequently pursuing the wrong person, or the filing claims  
            that have no lawful basis.

            Frequently, these debt collection actions are filed by debt  
            buyers without proof that the debt ever existed.  Yet  
            actions proceed to judgment because ninety-five percent of  
            consumers do not respond to these lawsuits-many because they  
            do not receive notice-allowing the debt collector to take a  
            default judgment against the consumer and levy against the  
            consumer's personnel accounts.
            . . .

            The Fair Debt Buyers Act would reform the debt collection  
            litigation process in a number of ways to aid consumers and  
            unburden the courts from costly, unmeritorious litigation.  

          2.    Implementing the FTC's recommendations  
           
          As noted above, the FTC recently released a comprehensive  
          report entitled Repairing A Broken System: Protecting  
                                                                      



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          Consumers in Debt Collection Litigation and Arbitration that  
          contained recommendations for reforms similar to those  
          proposed by this bill.

             a.   Complaints must include detailed information  
           
            The FTC found that complaints filed by debt collectors to  
            initiate collection actions against debtors were lacking.   
            The FTC's report noted that "[t]he function of debt  
            collection complaints in a notice pleading system is to  
            provide sufficient information so that:  (1) consumers can  
            determine whether to admit or deny the complaint allegations  
            and assert affirmative defenses in their answers; and (2)  
            judges can determine whether to grant a motion for a more  
            definite statement or enter a default judgment . . . Based  
            on the evidence gathered in connection with these  
            proceedings, the FTC believes that many debt collection  
            complaints do not provide this information to consumers."   
            To address that issue, this bill would, among other things,  
            enhance the complaint so that the debtor has more complete  
            information regarding the debt at issue, and, in turn, is  
            able to respond appropriately to the complaint.

            Specifically, the bill would provide that in an action  
            brought by a debt buyer on a consumer debt, the complaint  
            must allege:  (1) that the plaintiff is a debt buyer; (2)  
                                                             the nature of the underlying debt and the transaction from  
            which it is derived; (3) that the debt buyer is the sole  
            owner or has authority to assert the owners rights; (4) the  
            debt balance at charge off and the reason for all  
            post-charge-off interest and fees; (5) the date of the last  
            payment; (6) the name and address of the charge-off  
            creditor, and the creditor's account number; (7) the name  
            and last known address of the debtor as they appear in the  
            charge-off creditor's records; and (8) the names and  
            addresses of all entities that purchased the debt after  
            charge off.  The complaint must also allege that the debt  
            buyer complied with this bill's requirement for debt buyers  
            to possess specific information before making a written  
            statement to a debtor in an attempt to collect the debt.   
            Regarding the necessity of requiring additional information  
            from debt buyers when they seek to collect upon debt,  
            Consumers Union (CU), in support, contends that "[t]ens of  
            thousands of Californians are contacted every year by debt  
            buyers they have never done business with, for debts that  
            may be old or in an amount that doesn't match the consumer's  
                                                                      



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            memory or records.  The debt may even be owed by someone  
            else or the result of identity theft.  Yet some debt  
            buyer[s] have little more than a robo-signed affidavit to  
            back up their claims in court."  To address the reported  
            abuses, the detailed complaint requirements would appear to  
            provide consumers with necessary information about the debt  
            for which collection is attempted, and in turn, allow those  
            consumers to file an appropriate answer to the complaint.

            It is important to note that many of the complaints  
            currently filed by some debt buyers are simply form  
            complaints that provide little, if any, useful information  
            to the consumer being sued about the underlying debt.   
            Regarding the filing practices of some of those firms, the  
            New York Times' October 31, 2010 article entitled Debt  
            Collectors Face a Hazard: Writer's Cramp reported that:
             
               In some instances, banks are selling account information  
               that is riddled with errors.  More often, essential  
               background information simply is not acquired by debt  
               buyers, in large part because that data adds to the price  
               of each account. But court rules state that anyone  
               submitting an affidavit to a court against a debtor must  
               have proof of that claim - proper documentation of a  
               debt's origins, history and amount. 
                
               Without that information it is hard to imagine how any  
               company could meet the legal standard of due diligence,  
               particularly while churning out thousands and thousands  
               of affidavits a week.  Analysts say that  
               affidavit-signers at debt-buying companies appear to have  
               little choice but to take at face value the few facts  
               typically provided to them - often little more than basic  
               account information on a computer screen.  (Segal, Debt  
               Collectors Face a Hazard: Writer's Cramp (Oct. 31, 2010)  
               New York Times  [as of May 3, 2013].)

            b.   Disclosure of information prior to judgments  

            To ensure that the court has sufficient information about the  
            underlying debt, this bill would prohibit a default or other  
            judgment from being entered against a debtor until the debt  
            buyer submits business records that have been authenticated  
            through sworn declaration and establish specified facts  
                                                                      



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            regarding the debt.  Specifically, those records must show  
            proper ownership of the debt, the debt balance and reason for  
            any post-charge-off fees, date of default or last payment, and  
            the name and address of the charge-off creditor, debtor, and  
            all persons or entities who purchased the debt after  
            charge-off.  Furthermore, the debt buyer must also provide a  
            copy of the contract or other document evidencing the debtor's  
            agreement to the debt, authenticated through sworn  
            declaration, prior to entering a default or other judgment  
            against a debtor.  As a result, the proposed requirements  
            would appear to ensure that the court has relatively detailed  
            information about the nature and history of the debt.

            It should be noted that a large percentage of debt collection  
            actions reportedly result in default judgments.  Those  
            judgments are entered in favor of the plaintiff (debt buyer)  
            due to the failure of the defendant (consumer) to file a  
            timely response to the complaint.  

            When those consumers fail to respond, there is no advocate  
            to raise, on their behalf, applicable defenses or challenge  
            the assertions made by the debt buyer.  The FTC's report  
            noted concern about the number of default judgments and  
            recommended steps to "increase consumer participation in  
            debt collection litigation to help decrease the prevalence  
            of default judgments," and noted that "[i]n an effort to  
            address this problem in another way, some court systems have  
            adopted measures to encourage judges to apply appropriate  
            and consistent standards - including legal standards and  
            court rules - in deciding whether to grant such judgments."   
            (Repairing a Broken System (July 2010) Federal Trade  
            Commission  
              
            [as of May 3, 2013] at p. 20.)  The requirements discussed  
            above essentially provide a set of consistent standards for  
            a judge to use when granting a default judgment.
           
            This bill would also provide that if a debt buyer seeks a  
            default judgment and has not complied with the requirement of  
            this bill, the court shall not enter a default judgment and  
            may dismiss the action.  Similarly, if a defendant debtor  
            appears for trial and the plaintiff debt buyer fails to appear  
            or is not prepared to proceed (and there is no good cause for  
            continuance), the court may dismiss the action and award the  
            defendant debtor's costs for preparing for trial.

                                                                      



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            c.   Statute of limitations  
           
            The FTC's report also expressed concern that certain  
            collectors "regularly sue consumers on time-barred debts."   
            That practice is exacerbated by the practical reality that  
            many consumers do not defend themselves against these suits,  
            even when the action would be barred by the statute of  
            limitations.  The FTC further asserted that "[b]ecause an  
            expired statute of limitations is an affirmative defense in  
            most states, collectors have no obligation to allege in the  
            complaint that the debt is not time-barred, and many  
            collectors do not include this information.  If consumers do  
            not defend, there is no one to raise the defense that the  
            debt is time-barred.  Indeed, some judges who participated  
            in the roundtables stated that, even if a debt collection  
            action appears to be time-barred, it would be improper for  
            courts to consider affirmative defenses that no party had  
            raised.  As a result, some courts appear to be granting  
            default judgments on time-barred debt."  (Repairing a Broken  
            System (July 2010) Federal Trade Commission  
              
            [as of May 3, 2013] at p. 30.)  
           
            This bill would address those issues by, among other things,  
            prohibiting a debt buyer from bringing suit or initiating an  
            arbitration or other legal proceeding to collect a consumer  
            debt if the applicable statute of limitations has expired, and  
            requiring a debt buyer to notify a debtor if a debt is  
            time-barred.  Regarding the need to address the issue of  
            time-barred debts, the Attorney General, sponsor, asserts: 

               Industry practices have become a significant focus of  
               public concern due to collection efforts being directed  
               to the wrong consumer, or seeking the collection of debt  
               that is time barred or has been paid.  These concerns are  
               compounded because a very high percentage of debt  
               collection litigation results in default judgments where  
               consumers do not appear to present whatever defenses may  
               be available to them.

          3.    Additional limitations on debt collection  

          This bill would additionally prohibit a debt buyer from making  
          a written statement to a debtor in an attempt to collect a  
          consumer debt unless the debt buyer possesses specific  
          documentation regarding the debt.  The debt buyer must make  
                                                                      



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          that information available, without charge, to the debtor  
          within 15 calendar days of receipt of a request.  If the debt  
          buyer cannot provide the information within that time frame,  
          the debt buyer must cease all collection of the debt until the  
          information is provided.  

          In support of the documentation requirements, AARP notes that  
          "[t]he elderly are disproportionately victims of identity  
          theft and are thus often targeted with lawsuits for debts they  
          never obtained or authorized. . . .  This legislation will  
          provide crucial protections to ensure that the senior will not  
          be subjected to this type of unwarranted harassment, requiring  
          that debt buyers have essential information about a debt  
          before they try to collect the debt and that the information  
          be shared with the consumer on request. . . ."  

          4.    Remedies  
           
          This bill would provide specific penalties and damages against  
          a debt buyer who violates the above requirements.   
          Specifically, the debt buyer would be liable to the consumer  
          in an amount equal to the actual damages plus statutory  
          damages (between $100 and $1000 per violation per person), and  
          also would allow a prevailing debtor to receive reasonable  
          attorney's fees and costs.  This bill would also provide that  
          in any class action where a court finds that the debt buyer  
          engaged in a pattern and practice of violating this bill, the  
          court may award additional damages in an amount not to exceed  
          the lesser of $500,000 or one percent of the net worth of the  
          debt buyer.

          It should be noted that this bill would also limit the  
          liability of debt buyers if the buyer shows that the violation  
          was not intentional and resulted from a bona fide error, and  
          occurred notwithstanding the maintenance of procedures  
          reasonably adopted to avoid any error.  That safe harbor  
          provision would appear to shield debt buyers from liability in  
          cases where the error was truly inadvertent.

          5.    Claim of exemption  

          Under existing law, a judgment debtor can claim that his or her  
          property or money is exempt from collection efforts.  Those  
          claims may be filed with the levying officer within 10 days  
          after the date the notice of levy was served on the judgment  
          debtor, and must include a financial statement.  (Code Civ.  
                                                                      



          SB 233 (Leno and Correa)
          Page 15 of ?



          Proc. Secs. 703.520, 703.530.)  To facilitate exemptions, this  
          bill would require the levying officer enforcing a money  
          judgment to also provide a copy of the forms that the judgment  
          debtor may use to make a claim of exemption and provide a  
          financial statement, as specified.


           Support  :  AARP; Center for Responsible Lending; Consumers Union;  
          East Bay Community Law Center; Encore Capital Group; Public Law  
          Center

           Opposition  :  None Known

                                        HISTORY
           
           Source  :  Attorney General Kamala Harris

           Related Pending Legislation  :  SB 702 (Anderson) would require  
          applications for default judgment to contain specified  
          information.  This bill is set for hearing in this Committee on  
          May 7, 2013.

           Prior Legislation  :  SB 890 (Leno, 2011) See Background.

           Prior Vote  :  Senate Committee on Banking & Financial  
          Institutions (Ayes 8, Noes 0)

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