---

Credit

Thursday, March 01, 2012

California Legislative Alerts:

On this page, Consumer Action highlights important California legislation and other state issues relating to credit.

 

NEW: Consumer Action is monitoring SB 515 Reforming Payday Loans

SB 515 (D-Jackson) would limit payday loans to four times a year per borrower, extend the amount of time to repay the payday loan to 30 days, and establish 2010 CFLL small dollar loan pilot program standards for lenders to assess the borrowers’ ability to repay their loans.

SB 890 targets collection agency abuses

The Fair Debt Buyers Act (SB 890) would protect Californians by requiring that debt buyers have sufficient information to link an individual to an alleged debt, and would prohibit collectors from suing on "time-barred" debt (debts that consumers no longer legally owe).

Many Californians receive harassing phone calls from third-party debt collectors, accusing them of failing to pay their bills. Quite often, this is a case of mistaken identity, and the collector harangues an innocent party with a similar name or number with no connection to the debt in question. To compound this problem, collection agencies and their attorneys file hundreds of thousands of lawsuits every year in our state, some of which are filed against debt-free individuals with no connection to the original creditor. Incredibly, these lawsuits rarely include the information needed to prove the claim is legitimate, because current law doesn't require it. Consequently, innocent Californians wind up with a judgment on their record or have their wages garnished because they were sued for someone else's debt.

Last year, California State Senator Lou Correia was sued for a $4,000 debt owed by an unrelated person named Luis Correia. The Senator learned of the lawsuit only after his wages had been garnished. Senator Correia shared his horror story with his fellow Senator Mark Leno, who drafted SB 890 to help those in the same predicament as Senator Correia.

Debt collectors routinely appear at the very top of the Federal Trade Commission's list of consumer complaints. In 2010, the FTC received over 33,000 complaints alleging that debt collectors attempted to collect a debt that the consumer did not owe at all or was larger than the amount the consumer actually owed. These errors generally do not stem from honest mistakes by collectors; instead, they are the predictable outcome of a conscious decision made by many debt buying companies: to save money by obtaining as little documentation about the alleged debt as possible, and by using robo-signing to provide phony verification when the legitimacy of a debt is challenged by consumers. In this way, debt buyers are more profitable, at the expense of many innocent consumers who face harassment or even frivolous lawsuits by collection attorneys.