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Text of SB 890 Fair Debt Buyers Practices act


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as amended

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.

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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.

© 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.

© 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 courtinfo.com: The Leading Courts Site on the Net 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.

© 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.

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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.

© 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.

© 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 © 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.

© 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:

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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.

© 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 ©.

(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.

© 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.

I like some of these trickle down changes to other statutes also.

5000 dollars for a violation of this statute, mandatory standing pleaded and shown, SoL check before a default .

It seems like Erica Brackfield accomplished with one ****ty garnishment what all of us are trying to do.

I have to Give a big salute to the Law offices of Erica Brackfield she has single handedly taken down the debt collection industry in california.

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