The California State Senate has passed the Fair Debt Buyers Practices Act, which will require purchasers of consumer debt (“debt buyers”) to provide documentary evidence to consumers in order to ensure that their collection efforts are directed at the proper individual. Debt buyers generally purchase defaulted bulk consumer obligations (thousands at a time) for pennies on the dollar, and then file a large volume of lawsuits on the purported debts, claiming to be an assignee of the debts. These companies hope for a windfall return, preying on unrepresented consumers or those who do not show up and allow a default judgment to be entered. Quite often, debt collection efforts by debt buyers target the wrong consumers or wrong amounts, or seek payment on debt that has expired or been discharged.
According to a press release from California’s Attorney General, the Fair Debt Buyer Practices Act would prohibit debt buyers from obtaining a judgment in a debt collection lawsuit unless the debt buyer can document their ownership of the debt, the balance of the debt, the date of the default or last payment, the identity of prior owners of the debt and the name and address of the debtor in the original creditor’s records. In addition, the debt buyer must also have the original contract or a document provided to the debtor while the account was active to show evidence of the debt.
The bill now moves to the Assembly.