BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 969|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 969
Author: Papan (D)
Amended: 7/15/99 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 7-1, 7/7/99
AYES: Escutia, Morrow, O'Connell, Peace, Sher, Wright,
Schiff
NOES: Haynes
NOT VOTING: Burton
ASSEMBLY FLOOR : 63-16, 5/27/99 - See last page for vote
SUBJECT : Debt collectors
SOURCE : Attorney General
DIGEST : This bill incorporates by reference selected
provisions from the Federal Debt Collection Practices Act
(FDCPA). Specifically, this bill:
1.Adopts the provisions of the Federal Debt Collection
Practices Act relating to: acquisition of location
information; communication in connection with debt
collection; harassment or abuse; false or misleading
representations; unfair practices; validation of debts;
multiple debts; legal actions by debt collectors; and
furnishing certain deceptive forms.
2.Excludes any officer or employee from the requirements
relating to initial disclosures and validation of debts,
CONTINUED
AB 969
Page
2
while that person is acting as a debt collector for
another person, if both persons are related by common
ownership or affiliated by corporate control (in other
words, those companies collecting their own debts).
3.Specifies that remedies for violation of the fair debt
collection procedures include: actual damages and up to
a $1,000 penalty for individual violations, and actual
damages and up to $500,000 or one percent of net worth
penalty together with costs of suit and attorney's fees
to the prevailing plaintiff(s) for class actions.
4.Renames Robbins-Rosenthal Fair Debt Collection Practices
Act as the Rosenthal Fair Debt Collection Practices Act.
ANALYSIS : Existing law prohibits unfair debt collection
activities including making of threats, using obscene
language and making misrepresentations in the attempt to
collect debts, or information about debtors. It allows
limited contact with third persons, such as employers and
family members.
This bill provides that every debt collector collecting or
attempting to collect a consumer debt shall comply with the
provisions of Sections 1692b to 1692j, inclusive, of Title
15 of the United States Code. These sections provide,
among other provisions, that a collector may not harass,
oppress, or abuse a debtor, nor use obscene language.
Third parties may only be contacted with the debtor's
permission.
Existing law provides penalties for violation which include
actual damages, and penalties of no less than one hundred
dollars ($100) nor no greater than one thousand dollars
($1,000). Attorneys' fees are also available to prevailing
debtors, and to prevailing creditors if the court finds the
debtor's action to be brought in bad faith. California law
does not provide for class actions.
Existing law allows a debt collector in violation to escape
liability if:
1.A debt collector within 15 days either after discovering
a violation which is able to be cured, or after the
receipt of a written notice of such violation, the debt
AB 969
Page
3
collector notifies the debtor of the violation, and makes
whatever adjustments or corrections are necessary to
cure the violation with respect to the debtor, or;
2.If the debt collector shows by a preponderance of
evidence that the violation was not intentional and
resulted notwithstanding the maintenance of procedures
reasonably adapted to avoid any such violation.
This bill provides that violators shall be subject to the
remedies in Section 1692k of Title 15 of the United States
Code, which contains the following remedies for violation:
1.Actual damages and up to a $1,000 penalty for an
individual violation;
2.All actual damages and an amount not to exceed the lesser
of up to $500,000 or one percent of net worth penalty
together with costs of suit and attorney's fees to the
prevailing plaintiff(s) for class actions.
This bill allows a defense for collectors acting with a
good faith belief that their action is in conformity with
FTC regulations.
This bill excludes any officer or employee from the
requirements relating to initial disclosures and validation
of debts, while acting as a debt collector for another
person, if both are related by common ownership or
affiliated by corporate control (in other words, a company
collecting its own debt) as specified in paragraphs (A) and
(B) of subsection (6) of Section 1692a of Title 15 of the
United States Code subsection (11) of Section 1692e and
Section 1692g.
This bill specifies that the references to federal bodies
in this bill refer to those codes as they read on January
1, 2000.
Background
Debt collection practices in California are governed by
both federal and state law. The Federal Debt Collection
Practices Act, and state Robbins-Rosenthal Fair Debt
AB 969
Page
4
Collection Practices Act were both enacted in 1977.
According to The Fair Debt Collection Practices Acts,
(Cont. Ed. Bar 1999), "Congress enacted the federal FDCPA
on findings of abundant abusive, deceptive, and unfair
collection practices; abusive debt collection practices
that contributed to bankruptcies, family instability, job
loss, invasion of privacy; inadequacy of existing law to
protect consumers or to provide redress for these injuries;
and the need to regulate the collection of consumer debts
and provide uniform laws against unethical debt collection
practices. California's Legislature responded similarly by
enacting the Robbins-Rosenthal Fair Debt Collection
Practices Act." Id.
Problems with existing law
The area of current law which is of most concern to the
proponents of this legislation is the ability for violators
to escape liability if they cure the impact of their
illegal practice. Supporters argue that there is no
deterrent in the existing law, and that debt collectors can
flaunt the law with no threat of accountability. If any
practice is complained of, all a company must do is stop
calling, writing, harassing that person, and they are safe
from punishment. In addition, the law limits damages to
actual harm, which often means no monetary loss, as the
harm to the consumer is the distress and hardship caused by
the incessant presence of the debt collector. In the event
a group of persons is affected, the culprit can still
escape liability for all harm caused to consumers, unless
each and every consumer brings a complaint. This is highly
unlikely, a fact those engaged in improper debt collection
practices can bank on.
Another issue of concern for proponents is the interplay of
federal and state law. The federal Fair Debt Collection
Practices Act only preempts state law to the extent of any
inconsistency. A state law is not inconsistent if the
protection such law affords any consumer is greater than
the protection provided by the federal act. However, the
FTC must exempt by regulation any class of collection
practices regulated by a state law that is substantially
similar if there is adequate enforcement under state law.
This would, theoretically, allow state law to prevail, even
if a more strict federal law were in place.
AB 969
Page
5
This duel scheme of regulation can sometimes become
confusing, rendering state law unused. The sponsor argues
this bill is needed in order to establish clear lines of
acceptable behavior, pointing out that other states, such a
Pennsylvania and Massachusetts, have similarly incorporated
federal provisions to harmonize state and federal law.
The AG adds that, "consistent federal and state standards
would facilitate compliance and enforcement and provide a
level playing field for all engaged in debt collection
activity."
Federal law references translated
This bill incorporates by reference certain provisions of
federal law. Perhaps a translation would be helpful. The
bill provides that every consumer debt collector shall
comply with the provisions of Sections 1692b to 1692j of
Title 15 USC. The following is a synopsis of those
provisions:
Section 1692b is the section dealing with how one may
communicate with third persons in trying to locate a
debtor. It generally prohibits collectors from identifying
themselves as collectors to friends, family, etc, unless
asked.
Section 1692c deals with how the collector may communicate
with the debtor, e.g., no late night calls, no direct
communication with a person represented by council,
cessation of calls once the consumer notifies the collector
in writing of their intention not to pay the debt.
Section 1692d prohibits harassment and abuse.
Section 1692e prohibits false or misleading
representations.
Section 1692f proscribes unfair practices, such as charging
excessive interest, accepting checks postdated beyond five
days, causing the debtor to incur costs associated with
collection activities such as telegram fees and threatening
judicial action without intent to actually go to court.
AB 969
Page
6
Section 1692g requires that the debtor be given the true
amount of the debt, the name of the creditor to whom the
debt is owed, and explanation that the debtor may contest
the debt.
Section 1692h provides for distribution of payment among
accounts when a person has multiple debts for which the
collector is receiving payment.
Section 1692i provides for venue for any legal action to be
the place where the contract giving rise to the debt was
signed, or where the real property is located, for contests
related to the property.
Section 1692j prohibits the use of deceptive forms which
shield the identity and nature of the debt collectors
communication with the debtor.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/15/99)
Office of the Attorney General (source)
Consumers Union
ARGUMENTS IN SUPPORT : According to the author, "Because
of our current law, violations of the Fair Debt Collection
Practices Act are honored more in the breach than the
observance and there is no meaningful incentives for debt
collectors to comply. In addition, as demonstrated by a
recent pattern of conduct by a major national retailer in
fraudulently inducing debtors to validate debts after
bankruptcy, absent the threat of a class action, there is
no incentive to abort an illegal continuing course of
conduct."
Supporters state the bill is needed to address a growing
problem. "Complaints about unfair and unlawful debt
collection practices are one of the most frequent consumer
problems according to the Federal Trade Commission," claims
Consumers Union. "These practices include verbal
harassment, telephoning consumers repeatedly within a short
period of time, calling consumers at work, and contacting
AB 969
Page
7
employers, family and neighbors about a consumer's alleged
debts. Other problems involve misrepresentations, such as
threats to commence civil or criminal proceedings, to
garnish wages or repossess homes immediately, or to have
consumers arrested or jailed, when no such intent or rights
exists."
The bill's sponsor, the Attorney General, adds, "the
Attorney General's office has sponsored AB 969 to harmonize
state and federal law by applying federal debt collection
standards and remedies to all parties defined as debt
collectors under California law."
ASSEMBLY FLOOR :
AYES: Alquist, Aroner, Ashburn, Baugh, Bock, Calderon,
Campbell, Cardenas, Cardoza, Cedillo, Corbett, Correa,
Cox, Cunneen, Davis, Dickerson, Ducheny, Dutra,
Firebaugh, Florez, Floyd, Frusetta, Gallegos, Granlund,
Havice, Hertzberg, Honda, Jackson, Keeley, Knox, Kuehl,
Leach, Lempert, Leonard, Longville, Lowenthal, Machado,
Maldonado, Mazzoni, Migden, Nakano, Olberg, Oller, Robert
Pacheco, Papan, Pescetti, Reyes, Romero, Scott, Shelley,
Soto, Steinberg, Thompson, Thomson, Torlakson, Vincent,
Washington, Wayne, Wesson, Wiggins, Wildman, Wright,
Villaraigosa
NOES: Aanestad, Ackerman, Baldwin, Bates, Battin, Brewer,
Briggs, House, Kaloogian, Maddox, Margett, McClintock,
Rod Pacheco, Runner, Strickland, Zettel
NOT VOTING: Strom-Martin
RJG:kb 7/23/99 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****