SACRAMENTO, Calif. (AP) — Debt collectors would have to make sure they are going after the right person under a bill approved by the state Senate on Friday.
Democratic Sen. Mark Leno of San Francisco said some unscrupulous debt-buyers don’t care who they target.
They might lure innocent parties into court to obtain default judgments that let them seize property or garnish wages — including from consumers who never owed the debt to begin with.
“They are not required to have any documentation that the person they’re trying to collect from is actually the right person,” Leno said. “The business model is that they just want to get you into court because it’s likely you’re not going to show up if you know it’s not your debt … They can take control of your life and make things miserable, and these are oftentimes innocent, if not in fact the wrong people altogether.”
Even a Southern California state lawmaker found himself a victim of mistaken identity when a collection agency arranged to have his Senate salary garnished to pay off a debt that wasn’t his.
Sen. Lou Correa, D-Anaheim, said he was able to correct the problem, but said other consumers are falling victim to improperly obtained court orders.
The bill requires debt-buyers to have proper documentation and provide it to the targeted consumers upon request, among other protections.
“Simply what it says is, you need to prove that the debt that is owed is actually legitimate debt,” said Correa.
“If it can happen to Lou Correa, it can happen to you,” warned Leno.
Senators passed SB233 unanimously, sending it to the Assembly.
Attorney General Kamala Harris sought the measure, which applies to a debt buyer who purchases what is known as charged-off consumer debt for collection purposes. Charged-off debt is consumer debt that the creditor writes off as a loss or expense, then sells to a third party.
The debt buyer would be prohibited from sending a written collection notice to the consumer without having the full history of the debt, the contract that created the debt, and identifying information on the debtor, including the name, address and account number. The debt buyer would have to provide all that information to the consumer within 15 days, upon request, or stop trying to collect the debt.
Consumers Union and the Center for Responsible Lending, which are backing the bill, said some agencies try to collect old debt, debt that has already been paid, or go to court seeking default judgments with robo-signed affidavits instead of actual documentation.
Harris’ office says a high percentage of those debt collection lawsuits result in default judgments because the consumers don’t show up to defend themselves.
The measure has no listed opposition.
Leno said banks and legitimate debt collection companies aren’t fighting the bill because they recognize that slip-shod operations are harming their industry.