'Fair Debt Buyers Practice Act' Stalls in California Senate

DBA International has managed to help stall a California bill that would place more restrictions on how debt buyers pursue accounts they have purchased.

The intervention means that the debt buying association will be able to work with the California Attorney General’s office and consumer groups to craft a bill that gives consumers the protections they are seeking while allowing the industry to collect legitimate debt, according to Jan Stieger, executive director of DBA International.

The Fair Debt Buyers Practices Act, introduced last March by State Senator Mark Leno, aims to regulate any person or entity that has bought consumer debt. It outlines the circumstances in which the buyer may communicate with consumers and file a lawsuit to collect consumer debt. Last week, Leno requested that the bill be moved to the inactive file, a designation for legislation that is being held for later consideration.

The bill was inspired in part by the latest Federal Trade Commission report about growing debt collection practice violations. The California Attorney General also was concerned that an increase in consumer lawsuits and default judgments in the state were the result of notices being delivered to the wrong person or not at all.

Among other things, an early version of the bill prohibited debt buyers from filing a lawsuit against – or even contacting by writing — a consumer without providing business records as evidence that the buyer was the sole owner of the debt.  The bill also required certain disclosures about the debt’s age and consumer obligations to pay, imposed strict penalties on violations that could not be waived, and would have allowed no cap on class action lawsuits against a buyer.

“This bill put up a lot of barriers,” Stieger said, noting that the documentation requirements and potential penalties were of most concern to the industry. “If they (debt buyers) made any mistakes (in filing a lawsuit) they couldn’t withdraw the lawsuit or do anything. It could have put people out of business for one letter error.”

Fortunately for debt buyers, the bill has been transformed through several less onerous amendments and Stieger expects more amendments as negotiations continue with the AG and consumer groups. In fact, Stieger told insideARM that the original bill is “not even close to what we are discussing at the moment. We just haven’t gotten close enough.”

Asked why the DBA didn’t try to kill the bill altogether, Stieger said it is likely that another bill with similar goals would have been introduced. By working with state lawmakers and consumer groups, all parties get a bill that protects consumers and the industry, she said.