Fair Debt Buyers Protection Act Passes Senate

SACRAMENTO – The California Senate today passed legislation that would create significant new consumer protections against unfair debt collection practices. Senate Bill 890, the Fair Debt Buyers Protection Act of 2012, ensures that debt buyers substantiate the validity of a debt before they collect and requires that they direct their collection efforts at the proper debtor for the right amount. The bill, which passed the Senate with a 22-14 vote, is authored by Senator Mark Leno and sponsored by Attorney General Kamala D. Harris.

“The passage of this legislation is a major breakthrough for consumer protection in California,” said Senator Leno. “Aggressive debt buyers are using deceptive tactics to collect funds when they cannot even prove they are targeting the right consumer for the correct debt amount. The Fair Debt Buyers Protection Act relieves consumers and courts from the burdens and costs associated with processing large volumes of unsubstantiated debts.”

SB 890 prohibits a collector from bringing a lawsuit or collecting a debt unless it can verify the ownership and amount of the debt. The bill also ends lawsuits on uncollected debts that are barred by an applicable statute of limitations.

“Too often, a consumer can get ensnarled in a long and costly battle to prove they are not the ones responsible for debt,” said Attorney General Harris. “The Fair Debt Buyers Practices Act will put reasonable requirements on debt buyers and ensure consumers are not forced to pay the debts of others.”

A report released by the Federal Trade Commission (FTC) in 2010 concluded that the nation’s system for resolving disputes over consumer debts is “broken.” In its report, the FTC called on states to do more to protect consumers and improve debt collection practices.

Debt buyer practices echo the widespread processing of foreclosure documents that have arisen during the nation’s mortgage scandal. Debt buyers use “robo signers” who mass produce affidavits attesting that they have reviewed debt records for their validity, even though this is typically a lengthy process. Debt collectors also frequently file lawsuits against consumers without proof that the debt ever existed. Regardless, 95% of these cases end in default judgment because consumers do not respond to the lawsuits, often because they never received notice of the lawsuit.

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.