That California legislature last year passed last year SB 531, which became effective July 1, 2022, imposing additional validation requirements on certain debt collectors under the Rosenthal Act. The bill was designed to do as follows:
This bill would require a debt collector to which delinquent debt, as defined and specified, has been assigned to provide to the debtor, upon the debtor’s request, a written statement that includes certain information, including the date the debt became delinquent or the date of the last payment, within 30 calendar days of receipt of a debtor’s written request for information regarding the debt or proof of the debt, as specified. The bill would require a debt collector to which delinquent debt has been assigned to include in its first written communication with the debtor a specified notice, and would require a debt collector to provide a debtor an active postal address to which a debtor may send a request for the information. The bill would provide that a debt buyer who complies with the written statement requirements under the Debt Collection Licensing Act is deemed to comply with this new requirement on a debt collector, to which a delinquent debt has been assigned, to provide a written statement to the debtor upon the debtor’s request. The bill would prohibit a debt collector to which a delinquent debt has been assigned from making a written statement to a debtor in an attempt to collect a delinquent consumer debt, except if the debt collector has access to specified information, as provided. The bill would provide that these provisions become operative on July 1, 2022.
The Bill requires that, within 30 days of request by the consumer:
A debt collector to which delinquent debt has been assigned shall provide to the debtor, upon the debtor’s written request, a statement that includes all of the following information pursuant to subdivision (c):
(1) That the debt collector has authority to assert the rights of the creditor to collect the debt.
(2) (A) The debt balance and an explanation of the amount, nature, and reason for all interest and fees, if any, imposed by the creditor or any subsequent entities to which the debt was assigned.
(B) The explanation required by subparagraph (A) shall identify separately the balance, the total of any interest, and the total of any fees.
(3) The date the debt became delinquent or the date of the last payment.
(4) The name and an address of the creditor and the creditor’s account number associated with the debt. The creditor’s name and address shall be in sufficient form so as to reasonably identify the creditor.
(5) The name and last known address of the debtor as they appeared in the creditor’s records before the assignment of the debt to the debt collector.
(6) The names and addresses of all persons or entities other than the debt collector to which the debt was assigned. The names and addresses shall be in sufficient form so as to reasonably identify each assignee.
(7) The California license number of the debt collector.
SB 531 prohibits a debt collector from making a written statement to a debtor in an attempt to collect a delinquent debt unless the debt collector has access to a copy of a contract or other document evidencing the debtor’s agreement to the debt. (Civ. Code 1788.14.5(b)). The debt collector under section 1788.14.5(e) requires further notices in the first written communication, in no smaller than 12-point type, a separate prominent notice that contains the following statement:
“You may request records showing the following: (1) that [insert name of debt collector] has the right to seek collection of the debt; (2) the debt balance, including an explanation of any interest charges and additional fees; (3) the date the debt became delinquent or the date of the last payment; (4) the name of the creditor and the account number associated with the debt; (5) the name and last known address of the debtor as it appeared in the creditor’s records prior to assignment of the debt; and (6) the names of all persons or entities other than the debt collector to which the debt has been assigned, if applicable. You may also request from us a copy of the contract or other document evidencing your agreement to the debt.
A request for these records may be addressed to: [insert debt collector’s active mailing address and email address, if applicable].” (2) If a language other than English is principally used by the debt collector in the initial oral contact with the debtor, the notice required by this subdivision shall be provided to the debtor in that language within five business days.
The term “delinquent debt” means a consumer debt, other than a mortgage debt, that is past due at least 90 days and has not been charged off. (Civ. Code 1788.14.5(g)) The Senate Floor Analysis further explains this definition:
The author intends for this bill to improve transparency for consumers who are subject to collections activities, regardless of whether their debt has been charged off or is only delinquent. As discussed in the next section, existing law provides transparency for consumers if the debt related to the collections activity has been charged off. The term “charge off” generally refers to the situation where a creditor, in compliance with generally accepted accounting principles, determines that a loan will not be repaid as agreed upon and removes that loan from its balance sheet. Instead of the loan serving as an asset representing an investment that will provide a profit over time, a charged-off loan is an expense that reduces the creditor’s profit because the debtor is not expected to repay the loan. In some cases, the creditor will attempt to sell the charged-off debt to a debt buyer who purchases the legal rights to act as the creditor in attempting to collect the debt. A person who attempts to collect a charged-off debt is required to comply with the state FDBPA, in addition to the state and federal versions of the FDCPA when engaging in collections activities. A delinquent debt describes a debt where the consumer has fallen behind on their loan payments. Falling behind on loan payments is a fairly common event and does not necessarily mean the loan will ultimately be charged off, though a loan that remains in delinquent status will eventually be charged off. When a loan falls into delinquent status, some creditors decide to assign the debt to a third-party collector, often because the third party may have comparative advantages relative to the creditor in collecting past-due accounts. In cases where the transfer of the debt is not structured as a charge off and sale, the third-party collector is not subject to the requirements of the FDBPA, which contains stronger validation requirements than the federal Fair Debt Collections Practices Act to which the third party must comply.