Submitted by George L. Cohn, Senior Attorney, Collection Lawyers
Published by The National List of Attorneys
Mr. Cohn is Senior Attorney at Collection Lawyers, a California debt collection litigation law firm. Collection Lawyers has been representing banks, governmental agencies, corporations, collection agencies, and other creditors for over 25 solid years. With proven efficiency, productivity, and consistent client services, Collection Lawyers does immediate collections as part of litigation, resulting in maximized returns for its clients. Realizing that winning the case is only part of the battle, Collection Lawyers has developed effective and unique strategies for California collection litigation. Collection Lawyers scrutinizes collection recovery at all stages of the collection litigation process, including pre-suit, suit, and post-judgment enforcement and execution. Collection Lawyers has extensive experience in commercial, retail, and student loan collection litigation, creditor bankruptcy matters, and in defense of suits filed against creditors.
California Senate Bill 233, sponsored by CA State Attorney General Kamala Harris, and authored by State Senator Mark Leno, was signed into law by Governor Jerry Brown on 7/11/13. The California Debt Buying Practices Act (FDBPA) will become effective on 1/1/14. The FDBPA imposes substantial new restrictions, requirements and mandated disclosures by debt buyers in CA. It also creates new liability for debt buyers.
As of 1/1/14, debt buyers pursuing California debtors will need documentation in their possession even before they can send the initial demand letter to initiate collection activity on a debt. Debt buyers and debt sellers will have to coordinate transmission of substantial additional information and some documentation in every portfolio.
“Chain of ownership” must be provided, and suit must be filed before the statute of limitation expires. Complaints must contain detailed information, and include a copy of any underlying written agreement with the debtor.
Economic Implications of the FDBPA
The market value of CA portfolios bought or sold after 1/1/14 that do not have the requisite information and documentation may be substantially impaired. Because the FDBPA will not apply to portfolios bought and sold prior to 1/1/14, debt buyers should attempt to close transactions before the FDBPA’s effective date. In addition, proof should be readily available to be able to forestall subsequent liability claims.
The marketability of portfolios without the requisite documentation will most likely lessen over time. CA claims are generally between 8-12% of many national portfolios. A debtor moving from another state to CA would be protected by the FDBPA. Therefore, debt buyers will probably demand detailed information for entire acquired portfolios.
It is probable CA judges will assume that this level of documentation will be required and is readily available in all purchased transactions, and CA courts could require the same level of documentation and disclosures in many other consumer transactions. The FDBPA will require that debt buyers implement requisite new procedures and confirm compliance.