Debt Collection Bills Advance in Western States

Two bills in major Western U.S. states aimed at reining in debt collection practices have recently advanced in their respective legislative chambers. One targets debt buyers specifically while the other is designed to more tightly control debt collectors working for government clients.

In California, SB 233 passed out of a Senate committee last week and had several readings on the full chamber’s floor this week. The bill, also called the Fair Debt Buying Practices Act, is the latest iteration of bills that have been introduced in each of the three most recent sessions of the state legislature.

Other efforts have been authored by Sen. Mark Leno (D-San Francisco), the sponsor of this year’s SB 233. Last year, his SB 890 passed the full Senate and made it through at least one Assembly committee before dying in another committee. The previous year, the bill never made it out of its first Senate committee.

Most significantly, the bill places a long list of requirements on purchasers of charged-off consumer debt that must be met before collection efforts can begin. Debt buyers must have in their possession proof that they are the sole owner of the debt, the account balance at chargeoff, date of default or last payment, name and address of both the creditor and debtor, and a complete chain of title on the account if bought and sold multiple times.

The next step for the bill will be a full Senate vote.

In Oregon, a bill that would restrict government debt collection contractors from using official letterhead – specifically, that of district attorneys, has passed that state’s Senate and has been referred to a committee, where it has already seen a hearing.

Oregon’s SB 525 allows district attorneys to use private debt collectors in their check diversion programs, but sets rules for the relationships. Specifically, it prohibits district attorney from allowing debt collection entity to use name, seal or letterhead of district attorney and makes the use of name, seal or letterhead of public official by debt collector an unlawful collection practice.

The editorial board of newspaper The Oregonian recently officially endorsed the bill.

The issue of bad check collection on behalf of district attorneys has gotten attention lately, specifically in Massachusetts.