EBCLC Celebrates Expansion of Statewide Protections Against Predatory Debt Settlement Practices

On Monday, October 4, 2021, Governor Newsom signed AB 1405 into law, effectively reining in the largely unregulated practices of the debt settlement industry. This new law will require transparency and disclosure for companies that have been repeatedly been investigated by the Federal Trade Commission, Consumer Financial Protection Bureau, and California Department of Financial Protection and Innovation. The East Bay Community Law Center (EBCLC) has witnessed firsthand the harm caused by debt settlement companies in Alameda County and was honored to work collaboratively to advance this bill. 

"AB 1405 was realized through the powerful stories of our clients as well as EBCLC’s robust data tracking systems,” said EBCLC Consumer Justice Director, Desiree Nguyen Orth. “EBCLC was able to provide the numbers to validate our intuition as advocates and attorneys that Californians, especially women of color, need the additional protections and recourse from predatory debt settlement practices that this critical piece of legislation will provide.” 

The passage of AB 1405 recognizes that millions of people statewide – including EBCLC’s clients in Alameda County – who have increased their credit card debt to make up for unreliable hours, furloughs, decreased wages and unemployment. Families who have been hard hit by the pandemic and have seen one unpaid bill spiral into collections, wage garnishment and or foreclosure now have the right to get direct information about how debt settlement can worsen their financial situation. It also gives consumers a pathway to hold debt settlement companies accountable. 

According to EBCLC Deputy Director Jay Kim, “We know that low-income communities of color face unfair practices, higher costs, and additional layers of structural inequities when trying to obtain financial and economic stability. AB 1405 will help ameliorate these racial disparities and ensure stronger protections and transparency for consumers throughout the state.” 

The East Bay Community Law Center is grateful to Assembly Member Buffy Wicks and our partners in the California Low-Income Consumer Coalition including, Bet Tzedek, Centro Legal de la Raza, Community Legal Services in East Palo Alto, Elder Law & Advocacy, 
The Katherine & George Alexander Community Law Center Justice, Legal Aid of Marin, Legal Aid Society of San Bernardino, Public Counsel, Public Law Center, Riverside Legal Aid, UC Irvine, School of Law Consumer Law Clinic and Watsonville Law Center (WLC) for their joint partnership in this legislative victory.