Bill Text: CA SB890 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Debt buyers.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Engrossed - Dead) 2012-07-02 - Set, first hearing. Failed passage in committee. Reconsideration granted. [SB890 Detail]
Download: California-2011-SB890-Amended.html
Bill Title: Debt buyers.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Engrossed - Dead) 2012-07-02 - Set, first hearing. Failed passage in committee. Reconsideration granted. [SB890 Detail]
Download: California-2011-SB890-Amended.html
BILL NUMBER: SB 890 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 27, 2011
AMENDED IN SENATE MAY 17, 2011
AMENDED IN SENATE MARCH 24, 2011
INTRODUCED BY Senator Leno
FEBRUARY 18, 2011
An act to add Title 1.6C.5 (commencing with Section 1788.50) to
Part 4 of Division 3 of the Civil Code, and to amend Sections
700.010, 706.103, 706.104, 706.108, and 706.122 of, and to add
Sections 581.5 to, the Code of Civil Procedure, relating to debt
buyers.
LEGISLATIVE COUNSEL'S DIGEST
SB 890, as amended, Leno. Debt buyers.
(1) Existing state and federal law regulate the practice of debt
collection. Existing state law prohibits a debt collector from
engaging in specified conduct, including the use of threats or
causing a telephone to ring repeatedly to annoy the person called.
Existing law prohibits a debt collector from obtaining an affirmation
from a debtor of a consumer debt that has been discharged in
bankruptcy, without clearly and conspicuously disclosing to the
debtor, in writing, the fact that the debtor is not legally obligated
to make such affirmation.
This bill would enact the Fair Debt Buyers Practices Act, which
would regulate the activities of a person who
or entity that has bought consumer debt and the circumstances
in which the person may bring suit. The bill would prohibit a debt
buyer, as defined, from making any written statement in an attempt to
collect a consumer debt , including bringing suit,
unless the debt buyer has valid documentation
evidence in the form of business records that
the debt buyer is the sole owner of the specific debt at issue
and reasonable verification of the amount of the debt
allegedly owed , the amount of the debt, and the name
of the creditor at the time the debt was charged off, among other
things . The bill would require the debt buyer to make this
documentation evidence available to the
debtor, without charge, upon receipt of a request, within 5
15 days. The bill would prohibit a debt
buyer from communicating with a debtor in writing without providing a
specified notice. The bill would require all settlement
agreements between a debt buyer and a debtor to be in writing and
would require a debt buyer who receives a payment on a debt to
provide an original a receipt or
statement containing specified certain
information. The bill would prohibit a debt buyer from
initiating a suit to collect a debt if the statute of limitations on
the cause of action has expired. The bill would prescribe penalties
for a violation of the act and would provide that its provisions may
not be waived. The bill would require a debt buyer bringing an
action on consumer debt to include certain information in his or her
complaint. The bill would prohibit an entry of judgment in
favor of a plaintiff debt buyer unless properly authenticated
business records relating to the debt and ownership of it, among
other things, are properly in evidence, and would require
permit a court to enter a judgment
against the plaintiff debt buyer dismiss a debt buyer'
s action to collect with prejudice if this information is not
provided or if he or she the debt buyer
fails to appear or is not prepared on the date scheduled for trial.
(2) Existing law establishes a process for the enforcement of
money judgments and requires a levying officer to provide certain
documents and information to a judgment debtor and to a designated
employer in connection with wage garnishment. Existing law permits a
process server also to serve an earnings withholding order on an
employer and requires that the process server also serve certain
documents at this time. Existing law requires an employer who is
served with an earnings withholding order to provide certain
documents to an employee who is a judgment debtor.
This bill would require, in the circumstances described above,
that a copy of the form that the judgment debtor may use to make a
claim of exemption and a copy of the form used to provide a financial
statement also be provided.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Title 1.6C.5 (commencing with Section 1788.50) is added
to Part 4 of Division 3 of the Civil Code, to read:
TITLE 1.6C.5. Fair Debt Buyers Practices Act
1788.50. (a) As used in this title, "debt buyer" means a person
who, in the ordinary course of business, regularly engages
in purchasing delinquent, charged-off consumer loans, or consumer
credit accounts, or other delinquent consumer debt. "Debt buyer"
or entity that regularly purchases charged-off
consumer loans or consumer credit accounts, or other delinquent
consumer debt. "Debt buyer" includes a person acting on behalf
of a debt buyer.
(b) Terms defined in Title 1.6C (commencing with Section 1788)
shall apply to this title.
1788.51. The requirements and remedies of this title are
cumulative to those in Title 1.6C (commencing with Section 1788) as
well as any other law.
1788.52. A debt buyer shall not make any written statement in an
attempt to collect a consumer debt, including bringing suit or
initiating another type of proceeding, unless the debt buyer has in
his or her possession valid documentation that the debt buyer is the
sole owner of the specific debt or account at issue and reasonable
verification of the amount of the debt allegedly owed by the debtor.
Reasonable verification shall include documentation of the name of
the original creditor, the name and address of the debtor as it
appeared on the original creditor's records, the original creditor's
account number associated with the debt, a copy of the contract or
other document evidencing the debtor's agreement to the debt, and an
itemized accounting of the amount claimed to be owed, including all
fees and charges. Upon receipt of a request from the debtor to whom
the debt purportedly applies, the debt buyer shall make this
information available, without charge, to the debtor within five
business days.
1788.54. A debt buyer who receives payment on a debt shall
provide an original receipt or an exact copy of the receipt to the
individual from whom payment is received within 10 days of payment. A
receipt provided in this regard shall:
(a) Show the amount and date paid, the name of the entity paid,
the current account number, the name of the original creditor, and
the account number issued by the original creditor. If the debt buyer
is in possession of the names of any prior purchasers of the debt
and the account numbers issued by those purchasers, this information
shall also be included.
(b) State clearly and conspicuously if the payment is accepted as
payment in full or as a full and final compromise of the debt. If any
part of the debt will be owing after the payment is made, the
receipt shall state clearly and conspicuously the balance due after
payment is credited.
1788.56. A debt buyer shall not bring suit, initiate another
proceeding, or take any other action to collect a consumer debt if
the applicable statute of limitations on the cause of action has
expired.
1788.58. In an action brought by a debt buyer on a consumer debt:
(a) The plaintiff shall disclose clearly and conspicuously on the
face of the complaint that he or she is a debt buyer.
(b) All of the following shall be attached to the complaint:
(1) A copy of the contract or other writing evidencing the
original debt and agreement of the debtor to be responsible for that
debt, and establishing that each defendant debtor is, in fact,
responsible for the original account.
(2) A copy of the writing establishing that the debt buyer is the
sole current owner of the debt. If the debt has been sold more than
once, admissible written evidence shall be provided to establish an
unbroken chain of ownership interests. Each writing shall contain the
original account number of the debt sold or purchased, which shall
be redacted for security purposes to show only the last four digits,
and shall clearly show the debtor's correct name associated with the
original account number.
(3) A statement of calculation of liability that separately states
the amount of the original debt, each fee and charge added to the
debt, and each payment credited to the debt after the earliest of
charge off or the delinquency closest in time to the sale of the
debt.
1788.60. (a) In an action initiated by a debt buyer prior to the
entry of a judgment, including a default judgment, against a debtor,
the plaintiff shall clearly and conspicuously disclose to the court
that he or she is a debt buyer and shall provide admissible evidence
to establish the amount and nature of the debt and the identity of
the debtor, including all of the information described in subdivision
(b).
(b) For the purpose of this section, the only evidence sufficient
to establish the amount and nature of the debt shall be properly
authenticated business records that satisfy the requirements of
Sections 1271 and 1272 of the Evidence Code. The authenticated
business records shall include the following items:
(1) A copy of the contract or other writing evidencing the
original debt and agreement of the debtor to be responsible for that
debt.
(2) The original account number.
(3) The name of the original creditor.
(4) The original charge-off balance.
(5) An itemization of charges and fees claimed to be owed.
(6) An itemization of post charge-off additions, if applicable.
(7) The date of last payment.
(8) The amount of interest claimed and the basis for the interest
charged.
(c) If a plaintiff who is a debt buyer seeks a default judgment
and has not complied with the requirements of this section, the court
shall not enter a default judgment for the plaintiff and shall
instead dismiss the action with prejudice.
1788.52. (a) A debt buyer shall not make any written statement in
an attempt to collect a consumer debt unless the debt buyer has in
its possession evidence, in the form of business records, all of the
following:
(1) That the debt buyer is the sole owner of the specific debt or
account at issue.
(2) The amount of the debt allegedly owed by the debtor, including
an itemized accounting of all post-charge-off fees and charges.
(3) The name of the creditor at the time of charge-off.
(4) The name and address of the debtor as it appeared on the
charge-off creditor's records.
(5) The charge-off creditor's account number associated with the
debt.
(6) If the debt is purchased on or after January 1, 2012, a copy
of the contract or other document evidencing the debtor's agreement
to the debt or, if the claim is based on debt for which no such
signed writing evidencing the original agreement exists, then copies
of documents demonstrating that the debt was incurred by the person
receiving the written statement.
(b) A debt buyer shall provide a copy of the evidence described in
subdivision (a) to the debtor, without charge, within 15 calendar
days of receipt of a debtor's request for the evidence. A debt buyer
shall also provide a copy of the materials described in paragraph (1)
or (2) of subdivision (b) of Section 1788.60 to the debtor, without
charge, within 10 business days of receipt of the debtor's request
for the materials.
(c) A debt buyer shall not communicate with a debtor in writing in
an attempt to collect a time-barred debt without clearly and
conspicuously providing the following written notice in at least
12-point boldface type on the first page of the debt buyer's first
communication with the debtor:
"BECAUSE OF THE PASSAGE OF TIME, WE MAY NOT SUE IN COURT, OR
COMMENCE AN ARBITRATION OR OTHER PROCEEDING, ON DEBT THAT IS BARRED
BY A STATUTE OF LIMITATIONS. YOU SHOULD CONSULT AN ATTORNEY, VISIT A
LOCAL SELF-HELP CENTER, OR VISIT WWW.COURTINFO.COM/SELFHELP FOR MORE
INFORMATION."
1788.54. (a) All settlement agreements between a debt buyer and a
debtor shall be in writing. A debt buyer that receives payment on a
debt shall provide a receipt or monthly statement to the individual
from whom payment is received within 15 calendar days of payment. The
receipt or statement shall clearly and conspicuously show the amount
and date paid, the name of the entity paid, the current account
number, the name of the charge-off creditor, and the account number
issued by the charge-off creditor, and the remaining balance owing,
if any.
(b) If a debt buyer accepts a payment as payment in full or as a
full and final compromise of the debt, a final statement that
complies with subdivision (a) shall be provided to the debtor within
15 calendar days.
1788.56. A debt buyer shall not bring suit, or initiate an
arbitration or other legal proceeding, to collect a consumer debt if
the applicable statute of limitations on the debt buyer's claim has
expired.
1788.58. In an action brought by a debt buyer on a consumer debt:
(a) The plaintiff shall disclose clearly and conspicuously on the
face of the complaint that the plaintiff is a debt buyer.
(b) The complaint shall include all of the following:
(1) A short statement, written in simple language, describing the
nature of the underlying debt and the consumer transaction from which
it is derived.
(2) All of the information set forth in paragraphs (2) to (5),
inclusive of subdivision (a) of Section 1788.52.
(3) An allegation that the debt buyer is the sole current owner of
the debt, and setting forth the names of any and all previous owners
of the debt.
(4) An allegation that the debt is not barred by the applicable
statute of limitations.
(c) In an action on a consumer debt, a debt buyer shall attach to
the complaint a copy of the contract or other writing evidencing the
original debt, signed by the defendant, unless the debt buyer
provides a sworn declaration that the documents could not be obtained
prior to the time of filing suit. If a claim is based on credit card
debt and a signed writing evidencing the original debt does not
exist, then copies of any documents generated when the credit card
was actually used shall be attached.
1788.60. (a) In an action initiated by a debt buyer, prior to the
entry of a judgment against a debtor, including a default judgment,
the plaintiff shall clearly and conspicuously disclose to the court
that it is a debt buyer and shall provide admissible evidence
satisfactory to the court to establish the amount and nature of the
debt and the identity of the debtor, including all of the information
described in subdivision (b).
(b) For the purpose of this section, the only evidence sufficient
to establish the amount and nature of the debt shall be properly
authenticated business records that the court determines are
sufficient to satisfy the requirements of Sections 1271 and 1272 of
the Evidence Code. The authenticated business records shall include
the following items:
(1) A copy of the contract or other writing evidencing the
original debt, signed by the defendant. If a claim is based on debt
for which a signed writing evidencing the original debt does not
exist, then copies of documents demonstrating that the debt was
incurred by the defendant.
(2) A copy of a writing, including, but not limited to, the bill
of sale, establishing that the debt buyer is the sole current owner
of the debt and showing from which entity the debt was acquired. If
the debt has been sold more than once after being charged off,
admissible written evidence shall be provided to establish an
unbroken chain of ownership interests. Each writing shall contain the
original account number of the debt sold or purchased, which shall
be redacted for security purposes in accordance with Rule 1.20 of the
California Rules of Court.
(3) The account number at time of charge-off.
(4) The name of the charge-off creditor.
(5) The account balance at the time of charge-off.
(6) An itemization of post-charge-off fees and charges claimed to
be owed.
(7) The date of last payment, if any.
(8) The amount of interest claimed and the basis for the interest
charged.
(9) The alleged date of default.
(c) In any action on a consumer debt, if the plaintiff who is a
debt buyer seeks a default judgment and has not complied with the
requirements of this section, the court shall not enter a default
judgment for the plaintiff and may, in its discretion, dismiss the
action with or without prejudice.
(d) In any action on a consumer debt, a debt buyer shall have the
burden of pleading and of proving that the applicable statute of
limitations has not expired. Before entering a judgment in the
action, the court shall determine on the record that the applicable
statute of limitations has not expired.
1788.62. (a) Except as otherwise provided by this section, a debt
buyer who violates any provision of this title with respect
to any person is liable to the person who suffers the
violation in an amount equal to the sum of the following:
(1) Any actual damage sustained by the person.
(2) The amount established pursuant to either subparagraph (A) or
(B):
(A) The case of any action by an individual, such additional
damages as the court may allow, but not less than five
hundred dollars ($500) per violation and not more than five thousand
dollars ($5,000) per violation.
(B) In the case of a class action, the amount for each named
plaintiff as could be recovered under subparagraph (A), and an amount
as the court may determine for each other class member, not
exceeding the amount per person that could be recovered under
subparagraph (A).
(3) In the case of
any successful action to enforce the foregoing liability, the costs
of the action, together with a reasonable attorney's fee as
determined by the court. damages as the court may
allow, but not more than two thousand dollars ($2,000) per action.
(B) In the case of a class action, the amount for each named
plaintiff that could be recovered under subparagraph (A) and an
amount that the court may determine for the class, not to exceed the
lesser of five hundred thousand dollars ($500,000) or 1 percent of
the fair market value of the debt buyer.
(3) In the case of any successful action to enforce the foregoing
liability, the costs of the action, together with reasonable
attorneys' fees as determined by the court. Reasonable attorneys'
fees may be awarded to a prevailing debt buyer upon a finding by the
court that the action was brought in bad faith and for the purpose of
harassment.
(b) In determining the amount of liability under paragraph (2) of
subdivision (a), the court shall consider, among other relevant
factors, the following:
(1) In any individual action under subparagraph (A) of paragraph
(2) of subdivision (a), the frequency and persistence of
noncompliance by the debt buyer, and the nature of the noncompliance.
(2) In any class action under subparagraph (A) of paragraph (2) of
subdivision (a), the frequency and persistence of noncompliance by
the debt buyer, the nature of the noncompliance, the resources of the
debt buyer, and the number of persons adversely affected.
(c) A debt buyer shall not be held liable in any action brought
under this title if the debt buyer shows by a preponderance of
evidence that the violation was not intentional and resulted from a
bona fide error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.
(d) An action to enforce any liability created by this title may
be brought within two years from the date of discovery of
the violation occurs last violation .
1788.64. Any waiver of the provisions of this title is contrary
to public policy, and is void and unenforceable.
SEC. 2. Section 581.5 is added to the Code of Civil Procedure, to
read:
581.5. In a case involving consumer debt, as defined in Section
1788.2 of the Civil Code, and as regulated under Title 1.6C.5
(commencing with Section 1788.50) of Part 4 of Division 3 of the
Civil Code, if the defendant debtor appears for trial on the
scheduled trial date, and the plaintiff debt buyer either fails to
appear or is not prepared to proceed to trial, and the court does not
find a good cause for continuance, judgment shall be
entered for the debtor the court may, in its
discretion, dismiss the action with or without prejudice .
Notwithstanding any other law, in this instance, the court may award
the defendant debtor's costs of preparing for trial, including, but
not limited to, lost wages and transportation expenses.
SEC. 3. Section 700.010 of the Code of Civil Procedure is amended
to read:
700.010. (a) At the time of levy pursuant to this article or
promptly thereafter, the levying officer shall serve a copy of the
following on the judgment debtor:
(1) The writ of execution.
(2) A notice of levy.
(3) If the judgment debtor is a natural person, a copy of the form
listing exemptions prepared by the Judicial Council pursuant to
subdivision (c) of Section 681.030, the list of exemption amounts
published pursuant to subdivision (e) of Section 703.150, a copy of
the form that the judgment debtor may use to make a claim of
exemption pursuant to Section 703.520, and a copy of the form the
judgment debtor may use to provide a financial statement pursuant to
Section 703.530.
(4) Any affidavit of identity, as defined in Section 680.135, for
names of the debtor listed on the writ of execution.
(b) Service under this section shall be made personally or by
mail.
SEC. 4. Section 706.103 of the Code of Civil Procedure is amended
to read:
706.103. (a) The levying officer shall serve upon the designated
employer all of the following:
(1) The original and one copy of the earnings withholding order.
(2) The form for the employer's return.
(3) The notice to employee of earnings withholding order.
(4) A copy of the form that the judgment debtor may use to make a
claim of exemption.
(5) A copy of the form the judgment debtor may use to provide a
financial statement.
(b) At the time the levying officer makes service pursuant to
subdivision (a), the levying officer shall provide the employer with
a copy of the employer's instructions referred to in Section 706.127.
The Judicial Council may adopt rules prescribing the circumstances
when compliance with this subdivision is not required.
(c) No earnings withholding order shall be served upon the
employer after the time specified in subdivision (b) of Section
699.530.
SEC. 5. Section 706.104 of the Code of Civil Procedure is amended
to read:
706.104. Any employer who is served with an earnings withholding
order shall:
(a) Deliver to the judgment debtor a copy of the earnings
withholding order, the notice to employee of earnings withholding, a
copy of the form that the judgment debtor may use to make a claim of
exemption, and a copy of the form the judgment debtor may use to
provide a financial statement within 10 days from the date of
service. If the judgment debtor is no longer employed by the employer
and the employer does not owe the employee any earnings, the
employer is not required to make such delivery. The employer is not
subject to any civil liability for failure to comply with this
subdivision. Nothing in this subdivision limits the power of a court
to hold the employer in contempt of court for failure to comply with
this subdivision.
(b) Complete the employer's return on the form provided by the
levying officer and mail it by first-class mail, postage prepaid, to
the levying officer within 15 days from the date of service. If the
earnings withholding order is ineffective, the employer shall state
in the employer's return that the order will not be complied with for
this reason and shall return the order to the levying officer with
the employer's return.
SEC. 6. Section 706.108 of the Code of Civil Procedure is amended
to read:
706.108. (a) If a writ of execution has been issued to the county
where the judgment debtor's employer is to be served and the time
specified in subdivision (b) of Section 699.530 for levy on property
under the writ has not expired, a judgment creditor may deliver an
application for issuance of an earnings withholding order to a
registered process server who may then issue an earnings withholding
order.
(b) If the registered process server has issued the earnings
withholding order, the registered process server, before serving the
earnings withholding order, shall deposit with the levying officer a
copy of the writ of execution, the application for issuance of an
earnings withholding order, and a copy of the earnings withholding
order, and shall pay the fee provided by Section 26750 of the
Government Code.
(c) A registered process server may serve an earnings withholding
order on an employer whether the earnings withholding order was
issued by a levying officer or by a registered process server, but no
earnings withholding order may be served after the time specified in
subdivision (b) of Section 699.530. In performing this function, the
registered process server shall serve upon the designated employer
all of the following:
(1) The original and one copy of the earnings withholding order.
(2) The form for the employer's return.
(3) The notice to the employee of the earnings withholding order.
(4) A copy of the form that the judgment debtor may use to make a
claim of exemption.
(5) A copy of the form the judgment debtor may use to provide a
financial statement.
(6) A copy of the employer's instructions referred to in Section
706.127, except as otherwise prescribed in rules adopted by the
Judicial Council.
(d) Within five court days after service under this section, all
of the following shall be filed with the levying officer:
(1) The writ of execution, if it is not already in the hands of
the levying officer.
(2) Proof of service on the employer of the papers listed in
subdivision (c).
(3) Instructions in writing, as required by the provisions of
Section 687.010.
(e) If the fee provided by Section 26750 of the Government Code
has been paid, the levying officer shall perform all other duties
required by this chapter as if the levying officer had served the
earnings withholding order. If the registered process server does not
comply with subdivisions (b), where applicable, and (d), the service
of the earnings withholding order is ineffective and the levying
officer is not required to perform any duties under the order and may
terminate the order and may release any withheld earnings to the
judgment debtor.
(f) The fee for services of a registered process server under this
section shall be allowed as a recoverable cost pursuant to Section
1033.5.
SEC. 7. Section 706.122 of the Code of Civil Procedure is amended
to read:
706.122. The "notice to employee of earnings withholding order"
shall contain a statement that informs the employee in simple terms
of the nature of a wage garnishment, the right to an exemption, the
procedure for claiming an exemption, and any other information the
Judicial Council determines would be useful to the employee and
appropriate for inclusion in the notice, including all of the
following:
(a) The named employer has been ordered to withhold from the
earnings of the judgment debtor the amounts required to be withheld
under Section 706.050, or such other amounts as are specified in the
earnings withholding order, and to pay these amounts over to the
levying officer for transmittal to the person specified in the order
in payment of the judgment described in the order.
(b) The manner of computing the amounts required to be withheld
pursuant to Section 706.050.
(c) The judgment debtor may be able to keep more or all of the
judgment debtor's earnings if the judgment debtor proves that the
additional earnings are necessary for the support of the judgment
debtor or the judgment debtor's family supported in whole or in part
by the judgment debtor.
(d) If the judgment debtor wishes a court hearing to prove that
amounts should not be withheld from the judgment debtor's earnings
because they are necessary for the support of the judgment debtor or
the judgment debtor's family supported in whole or in part by the
judgment debtor, the judgment debtor shall file with the levying
officer an original and one copy of the "judgment debtor's claim of
exemption" and an original and one copy of the "judgment debtor's
financial statement."
SEC. 8. The provisions of this act are severable. If any
provision of this section or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
