California Debt Collection Protections

The Rosenthal Fair Debt Collection Practices Act and other statutes

Agenda

1. What is HERA?

2. Rosenthal Fair Debt Collection Practices Act

3. Fair Debt Buying Practices Act

4. Civil Code § 1632 Contracts for Non-English

Speakers

5. Special issues for particular kinds of debt (student

loans, HOA dues, auto loans, medical debt)

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WHAT IS HERA?

3Our services are free!

Debt Collection Student loanAuto loanMedical debtHigh cost loans (auto-title, payday, check cashing)Home Owners Association (HOA)

Credit Reporting Identity theftAccessing credit reportDenial of credit or loan because of credit reportErrors on credit report

Financial Products Recommendations

Affordable small dollar loansCredit building products

Mortgages Foreclosure prevention and mortgage servicing issues

Veterans & Servicemembers

Enforcing special protections and assisting with special resources for veterans and service members

HERA’s Services

Tel (510) 271-8443www.heraca.org

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What is the Rosenthal Fair Debt Collections Practices Act? California Civil Code § 1788, et seq.

Applies only to consumer credit transactions

Applies to both original creditors and third party debt collectors

Excludes attorneys, but law firms that collect debt and their staff may be covered

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Rosenthal Act applies to a narrower set of consumer transactionsFDCPA broadly covers most consumer transactions:

“debt” is “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes….” 15 U.S.C. § 1692a(5).

Rosenthal Act applies only to consumer credit transactions: “consumer debt” is “money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.” Cal. Civ. Code § 1788.2(f)

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“Consumer Credit Transaction”?Read more: http://thebluechairstudio.com/severson-newsletter/california-resenthal/

Home equity line of credit? Yes.

Credit card debt? Yes.

Debt from auto repair services? Nope (Gouskos v. Aptos Village Garage, Inc., 94 Cal.App.4th 754 (2001)).

Regular HOA assessments? Nope. (Durham v. Continental Central Credit, 2009 WL 3416114, at *7 (S.D. Cal. Oct. 20, 2009)).

Rent collection? Nope. (Leasure v. Willmark Communities, Inc., 2013 WL 6097944, at *1 (S.D. Cal. Mar. 14, 2013).

Vehicle lease? Nope. (Bescos v. Bank of Am., 105 Cal. App. 4th

378, 393 (2003)).

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Borderline consumer credit transactions Courts are split on whether there is a consumer credit

transaction when consumer acquires something without paying for it

Failure to pay for car insurance. (Crawford v. Farmers Group, Inc., 160 Cal. App. 3d 1164, 1168-69 (1984) (no service acquired without payment because insured can cancel at any time by simply not paying the monthly premium)).

Dishonored checks? Depends. (In re JWJ Contracting Co., Inc., 371 F.3d 1079, 1081 (9th Cir. 2004) (acceptance of later bounced check transformed contemporaneous exchange into credit).

Overdue video rental? (Koller v. West Bay Acquisitions, LLC, 2012 WL 2862440 (N.D. Cal. July 11, 2012) (acquisition because video kept for longer than paid for and owed money for the extra time.).

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Rosenthal Act Covers Original Creditors FDCPA – “Debt Collector” is a person or entity

collecting debts owed to another. 15 U.S.C. § 1692a(6). Generally does not apply to original creditors (except where creditor collects its own debts using a different name that suggests it’s a third-party debt collector).

Rosenthal Act – Debt collector includes anyone “who, in the ordinary course of business, regularly, on behalf of himself of herself or others, engages in debt collection.” Cal. Civ. Code § 1788.2(c). Thus, the Rosenthal Act includes creditors, such as credit card companies and lenders.

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Mortgage Servicers FDCPA - Generally, mortgage servicers are not debt

collectors when they stand in the shoes of the creditor or collect debts that are not in default.

Rosenthal Act – Mortgage servicer may be a 'debt collector' under the Rosenthal Act even if it is the original lender. (Reyes v. Wells Fargo Bank, N.A., 2011 WL 30759(N.D. Cal. Jan. 3, 2011)).

Trustee acting under a deed of trust to foreclose on property is exempt from the Rosenthal Act. Cal. Civ. Code § 2924(b).

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Attorneys and Law FirmsThe Rosenthal Act expressly excludes attorneys

from its coverage. Civ. Code § 1788.2(c).

BUT, collection attorneys and their staff are governed by Business & Professions Code § 6077.5, which incorporates the obligations of the Rosenthal Act.

BUT, § 6077.5 has no express remedies!

The Rosenthal Act may include “law firms.” Abels v. JBC Legal Group, P.C., 227 F.R.D. 541 (N.D. Cal. 2005).

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Requirements for Debt Collectors FDCPA – • Debt validation notice within five days of first

contact with debt amount, creditor name, thirty day dispute period.

• “Mini-Miranda” in all communications

Rosenthal Act – First letter must contain debtor rights script Notice must be provided in language of first

oral collection contact

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Prohibitions on Debt Collectors The Rosenthal Act includes and incorporates FDCPA’s

prohibitions: Telephone harassment (before 8 am and after 9 pm; repeated

and annoying calls) Contacting third parties (except spouse and except to find

whereabouts) Contacting consumer represented by counsel Contacting at work if consumer says it’s inconvenient Threats of violence or other criminal activities Using obscene or profane language Falsely stating creditor is affiliated with the government Misrepresenting character, amount or legal status of debt Falsely implying communications from an attorney Threatening to take unlawful or unintended action Can only sue in county of residence or where debt incurred

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Enforcing the Rosenthal Act File a Complaint With the California Attorney General Public Inquiry

Unit: Although the Attorney General generally won't sue on the consumer’s behalf, it might contact the debt collector and forward a copy of your complaint. (Attorney General's consumer protection website is located at http://oag.ca.gov/consumers.)

File a Lawsuit Against the Debt Collector and seek remedies:

Actual damages (embarrassment, humiliation, fear, emotional distress, physical illness caused by the violations)

Statutory penalties (up to $1,000 per lawsuit) Class action (lesser of $500,000 or 1% of debt collector’s net worth) Attorneys’ fees and costs

Debt Collector can avoid liability by proving that the violation was not intentional but resulted from a bona fide error despite procedures reasonably adapted to avoid any such error.

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California Fair Debt Buying Practices Act (SB 233) Landmark reform legislation authored by Senator Mark

Leno and sponsored by Attorney General Kamala Harris and the East Bay Community Law Center

The Problem: Debt buying collection efforts against the wrong person or targeting time-barred debt or debt that is already paid.

Regulates debt buyers – person or entity regularly engaged in business of purchasing charged-off consumer debt for collection purposes (Cal. Civil Code § 1788.50).

Applies to debts purchased after January 1, 2014

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SB 233 Required Disclosure of Account Information

Debt Buyer has 15 days from debtor’s written request to provide information or else it must cease debt collection

Debt Buyer can’t make written collection efforts without specific information about the debt and a copy of the contract:

Documentation of the right to collect Debt balance and explanation of fees and interest Name of original creditor and account number Name of last known address of debtor from original creditor’s

records Name of entities of that purchased debt Notification that cannot sue on time-barred debt Notification when debt is too old to report to credit bureaus Written statement of debtor’s right to request information

Mandatory communications in language of first oral contact

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SB 233 Settlement of Debts (Civil Code § 1788.54)Settlement agreements need to be

documented in open court or reduced to writing and given to debtor

Debt buyer must provide receipts within 30 days of payment

Debt buyer must give final statement when account is paid in full

Debt buyer cannot sell resolved debt or any information related to it

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SB 233 Requirements for a Debt Buyer Lawsuit (Civil Code § 1788.58) Can’t file lawsuit if statute of limitations has expired

(4 years on written contract in California)

Complaint must allege that plaintiff is a debt buyer and sole owner of debt or has authority to act on behalf of all creditors

Complaint must allege nature of debt, date of default or last payment, original creditor and account number, name and last known address of debtor, name of entities that purchased debt, compliance with notice requirements

Must include a copy evidencing the debt (contract)

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SB 233 Remedies and Enforcement Remedies are the same as the Rosenthal Act,

but can’t seek both

Court can dismiss debt buyer’s complaint with prejudice

Court can award defendant costs of preparation, including lost wages and transportation expenses if plaintiff is unprepared for trial

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Civil Code § 1632 Remedies and Enforcement If a "contract" is negotiated in a foreign language then that

contract needs to be written in that foreign language.

Applies to he five most common non-English languages spoken in California: Spanish, Chinese, Tagalog, Vietnamese, and Korean.

Applies to most loans, rental agreements, reverse mortgages, legal services contracts, foreclosure consulting contracts

Consumer has an absolute right to rescind the contract for noncompliance

Civil penalties by licensing agencies and California Attorney General

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Student Loan Debt1. Type of Student Loans – Federal (Direct, FFEL, Perkins);

Private

2. Special Relief for Corinthian Colleges, ITT Tech studentsa. Closed School Dischargeb. Defense to Repayment

3. Other Options for Debt Reliefa. Student Tuition Recovery Fund (STRF) b. Disability Dischargec. False Certification Discharged. Bankruptcy Discharge (Difficult to qualify)

4. Repayment Options – Income driven repayment, teacher/public service loan forgiveness, federal debt consolidation

Who can help? EBCLC, Bay Legal and HERA

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Auto Loan Debt If borrower defaults, auto can be repossessed by a licensed

repossession agency without notice

Legal owner must provide at least 15 days’ written Notice of Intent to Sell the Vehicle (NOI) with specific information required by Civil Code § 2983.2, including the right to delay the sale by 10 days and the right to reinstate the loan.

If the sale of the vehicle results in a surplus, the surplus amount must be returned to you within 45 days of the sale.

If the sale does not net enough to fully satisfy your loan and other amounts due, you will be liable for the difference.

If the NOI did not contain all of the required information, then ou are not liable for the deficiency balance. Civil Code § 2983.2(a).

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Medical Debt - California Hospital Fair Pricing Act (Health & Safety Code § 127400, et seq.)

Hospitals must have a discount charity care program for uninsured patients or those with high medical costs who are at or below 350% of the federal poverty level (applications and FPL calculator at https://syfphr.oshpd.ca.gov )

Hospital cannot charge more than the highest amount charted by government-sponsored health programs in which it participates

Debt collector cannot report negative information to credit bureau or commence lawsuit against patient for nonpayment until 150 days after initial billing