CA Governor Signs Law to Stop Abusive Debt Collection Practices

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We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Monday, July 15th, 2013

Last week, the Governor of California signed important new legislation aimed at protecting consumers from abusive debt collection practices.  The “Fair Debt Buying Practices Act” takes aim at debt buyers – companies that buy consumer debts from creditors on the cheap, and then sue consumers to collect them at full price.

These companies have been harassing consumers across the country for debts that they have already paid off or that don’t even belong to them. However, in most states, debt buyers can get away with it in court because they can just file a “robo-signed” affidavit claiming they have a right to collect the debt.

Thankfully, in California, that’s about to change.

California’s new law will protect consumers by making debt buyers prove they have a legitimate claim when they try to collect past debt.  Debt buyers will have to share documents with consumers and the courts showing they are suing the right person, for the right amount, on a debt they can legally recover.  Debt buyers will also have to show how the debt was calculated, including a breakdown of principal, interest and fees.

Consumers Union has been calling for reform of the debt buying industry for years.  CU’s 2011 joint report with the East Bay Community Law Center featured stories from real consumers who were unjustly targeted by debt buyers with no proof that they even had the right to collect anything.  These consumers faced harassment, lawsuits, garnished wages and damaged credit scores even though they had done nothing wrong.

CU urges other states to follow California’s lead and enact sensible reforms to protect consumers from abusive debt buyer practices.

Have you ever been contacted by a debt collector even though you didn’t owe any debt?  If so, tell us in the comments.

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