No More Steamrolling Consumers: the East Bay Community Law Center’s Fair Debt Bill Is Now State Law

FOR IMMEDIATE RELEASE MONDAY, JULY 15, 2013

CONTACT: Elisa Della-Piana, (510) 847 – 3001, edellapiana@ebclc.org

No More Steamrolling Consumers: the East Bay Community Law Center’s Fair Debt Bill Is Now State Law

Governor Brown signs SB 233, the Fair Debt-Buying Practices Act

Unscrupulous debt collection agencies have misused the courts to steamroll low-income consumers in recent years, but the State of California took a major step towards ending these unfair practices when Governor Jerry Brown signed into law the Fair Debt-Buying Practices Act (SB 233). The bill was co-sponsored by California Attorney General Kamala Harris and the East Bay Community Law Center (EBCLC) and jointly-authored by State Senators Mark Leno and Lou Correa.

Debt buyers routinely buy debts for pennies on the dollar, sue the wrong person for the wrong amount – often without proper service – and win up to 95% of cases in default judgments, without any argument by the person being sued. The Fair Debt-Buying Practices Act requires debt buyers to verify the validity of a debt before commencing collection, and to prove they are suing the right person for the right amount.

“This is a huge victory for consumers in California,” Senator Leno stated in a press release. “For years, the aggressive and deceptive tactics of debt buyers have gone unchecked in our state. Abusive debt collectors have attempted to recover funds from Californians even when they could not prove they were targeting the right person for the correct debt amount. I applaud Governor Brown for signing this important legislation that protects innocent consumers and relieves our courts from the burdens and costs associated with processing large volumes of unsubstantiated debts.”

“Too many Californians have been hurt by bad debt collection practices,” added State Attorney General Kamala Harris. “This bill protects consumers and holds debt collectors accountable. I applaud Governor Brown for signing it into law.”

EBCLC Senior Advisor and Public Good Law Center Executive Director, Ted Mermin said, “This law benefits a great many people in California. First and foremost, it ends some of the worst abuses that consumers have suffered at the hands of debt collectors.”

He added, “It also makes it easier to do business for debt buyers who want to do the right thing but need a level playing field. Finally, the law provides relief to the California courts that have been overwhelmed by improper debt collection suits for years.”

Megan Ryan, Staff Attorney at EBCLC’s Neighborhood Justice Clinic (NJC) noted, “In my years working at EBCLC, I have met countless clients who were victims of abusive debt-collection practices.” Ryan added, “Due to these abuses, we have seen people lose their homes, lack the money to pay for basic necessities like groceries, and endure endless – unnecessary – stress.”

“Reform has been long overdue in the collections industry, especially in cases involving debt buyers,” EBCLC Alumna and current Consumers Union Staff Attorney, Suzanne Martindale said. “This new law restores fundamental fairness and due process to the system for collecting debts in California.”

EBCLC client Janice Delaney’s story* illustrates some of the problems the new law addresses: four years after a debt buyer accepted her final check for a $1,000 debt and promised to close her account, Ms. Delaney was sued on the same account for $5,000 by a different debt buyer who could not produce any documentation proving that it owned the debt or that she owed any money.

After extensive legal research, EBCLC Alumna Rachel Terp wrote the bill’s first draft. She worked as a summer legal intern at EBCLC’s Neighborhood Justice Clinic (NJC) and co-authored, “PAST DUE: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now,” which provided the background and impetus for SB 233.

Said Terp, “I am honored that EBCLC gave me the opportunity to investigate policy solutions to the plague of unsubstantiated debt collection cases that flood California’s superior courts.”

The Fair Debt-Buying Practices Act goes into effect January 1, 2014.

*Ms. Delaney’s name has been changed to protect confidentiality.

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The East Bay Community Law Center provides free legal services to eligible East Bay clients. Since its founding in 1988 by law students at UC Berkeley’s School of Law, EBCLC has become the largest provider of free legal services in the East Bay. To learn more about EBCLC, go to www.ebclc.org. EBCLC’s Neighborhood Justice Clinic offers legal assistance to low-income residents of Alameda County in a wide range of cases, including citation defense, consumer protection, debt collection defense, identity theft, small claims, and DMV issues, among many others.