BILL ANALYSIS Ó
SB 641
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Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 641
(Wieckowski) - As Amended July 16, 2015
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| |Judiciary | |7 - 3 |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill amends the Fair Debt Buying Practices Act to allow an
alleged debtor, seeking to defend an action brought by a debt
buyer, to make a motion to set aside a default judgment entered
against the alleged debtor on or after January 1, 2010 if
service of process did not result in actual notice to the
alleged debtor.
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The bill requires the motion to set aside be filed within the
earlier of: (a) six years from the entry of the default
judgment; or (b) 180 days of the first actual notice of the
action. However, in the case of identity theft or mistaken
identity of the alleged debtor, the motion to set aside must be
filed within 180 days of the first actual notice of the action
regardless of when default judgment was entered.
FISCAL EFFECT:
Minor and absorbable costs to Judicial Council; potential
increase in caseload, though likely modest, to state courts.
COMMENTS:
1)Purpose. According to the author, prior to the enactment of
the Fair Debt Buying Practices Act in 2013 (FDBPA), debt
buyers were not required to provide courts with evidence that
defendants actually owed the debts acquired. The author
contends that for many consumers with default judgments
entered against them, the first time they become aware of the
suit or judgment was upon notice of wage garnishment. The
author indicates the FDBPA made important changes to debt
buying practices, but did not affect default judgments entered
before January 1, 2014. Current law makes it difficult to set
aside default judgments more than 2 years old, and the author
contends some debt buyers wait for 2 years before seeking a
garnishment order to avoid potential challenges.
2)Debt Buying Practices. In 2010, the Federal Trade Commission
(FTC) issued a report indicating collection actions against
debtors do not provide sufficient information to defendants or
courts about the underlying debts and the buyer's right to
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collect. The report found very few consumers defended or
otherwise participated in debt collection litigation, noted
concern over the number of default judgments, and recommended
reforms to court procedures and debt buying practices to
increase the ability of consumers to participate in debt
collection litigation. The FDBPA was enacted in response to
the FTC report and reformed the state's complaint and
collection process for charged-off consumer debt.
3)Opposition. Opponents highlight that the bill allows
consumers to claim they did not receive actual notice for
several years after the entry of default judgment, and in the
case of claims of identity theft or mistaken identity, for an
unlimited number of years. With no time limitations,
opponents argue collectors will be required to maintain case
and service documents in perpetuity. Opponents also argue the
retroactive application of the bill risks unsettling cases
where documentation has already been destroyed, and will
result in additional caseload to the state's courts. Lastly,
opponents assert this bill seeks to solve a problem with
respect to service of process, not default judgments in debt
collection cases, and therefore should apply to all judicial
proceedings.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081
SB 641
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