Protecting Consumers from Abusive Debt Collectors

by State Senator Mark Leno, California Progress Report

A friend and colleague of mine recently received an unexpected call from his employer notifying him that his wages would be garnished. Apparently, a judgment had been issued on an outstanding debt of several thousand dollars, and as a result, the courts had approved the wage garnishment. The only problem was that my friend had no outstanding debts, nor was he notified of any lawsuit. It turns out that the unpaid bill actually belonged to another man with a similar name and a different address. With time and effort, my friend was fortunately able to clear up the mess, but there are no safeguards in state or federal law that would prevent it from happening again to him or another innocent consumer.

This year, the California Legislature has an opportunity to put an end to some of these egregious activities. In January, the California Senate passed legislation I introduced that helps protect consumers against dishonest debt collectors and buyers. Senate Bill 890, the Fair Debt Buyer Practices Act, ensures that debt buyers substantiate the ownership and validity of the debts they attempt to collect. The bill also helps preserve our valuable judicial resources by prohibiting debt buyers from suing to collect a debt if the statute of limitations, which is four years in California, has expired. The bill is sponsored by Attorney General Kamala D. Harris.

Aggressive debt collectors and debt buyers, who purchase unpaid bills in large quantities in order to make a profit, often use deceptive tactics to collect funds. They target the wrong consumers for the wrong amounts and use the court system to improperly seek payment. In a report issued last year, the California Department of Consumer Affairs concluded that most of the debts purchased in California lack sufficient documentation to identify the debtor. Yet many of those debts result in default judgments ‘ without a defendant ever appearing in court to challenge the claim or any requirement by the court to document the age of the debt, who owes the debt and the current amount owed.

I am the first person to assert that consumers have an obligation to pay their debts in a timely fashion. Our credit system works to our country’s benefit when consumers and reputable collectors respectfully hold up their ends of the bargain. But in our deep recession, for-profit debt collection businesses have been growing exponentially, and so have the reports of abuse by these companies.

The Fair Debt Buyer Practices Act will protect all Californians, including my colleague, from being victimized by debts that belong to others, debts they do not owe, or debts that have already been paid. It will encourage collectors to use more responsible and fair practices and benefit our court system so that resources are dedicated to warranted lawsuits.

SB 890 is supported by the AFSCME (American Federation of State County and Municipal Employees), Consumer Federation of California, Consumers Union, Housing and Economic Rights Advocates, and various community legal, labor and civil rights organizations. It will be heard in the Assembly this spring.