The Fair Debt Collection Practices Act (15 U.S.C. The federal law SSS 1692 & following governs the ways in which debt collectors can try to collect a debt. They includes, among other things:
- Debt collectors are prohibited from using unfair and deceptive tactics
- The time at which debt collectors may contact you is regulated.
- Collectors must honor your request to not contact you.
The FDCPA applies to agencies that collect debts on behalf of others and to some debt buyers. The FDCPA would not apply when a credit card company collects an overdue balance. It would, however, apply if a credit card company hired an agency to collect for them.
The Rosenthal Fair Debt Collection Practices Act, (Cal.) protects those who live in California. Civ. Code SSSS1788 to 1788.33), which covers more types of collectors and provides additional protection to consumers. If you are a Californian and a collector breaks the Rosenthal Act you can file a complaint, sue the collector, or use the violation of the law to negotiate a settlement.
Differences Between California’s Debt Collection Law and Federal Collections Laws
While the federal FDCPA applies to debt collectors and sometimes debt buyers–but not original creditors–California law extends the protection to creditors and others.
The Rosenthal Act defines “debt collectors” as:
- Original creditors
- collection agencies
- Anyone who collects debts from consumers in the normal course of business is considered a collector.
- Anyone who manufactures and sells forms and letters for debt collection. (Cal. Civ. Code SS 1788.2).
What About Collection Lawyers in California?
California’s Business & Professions Code sets out the standards for attorneys. This law requires that lawyers and their staff adhere to the Rosenthal Act and certain provisions of the FDCPA. (Cal. Bus. Bus.
California Law: Incorporating Federal Law
Rosenthal Act requires original creditors to comply with the majority of federal FDCPA. (Cal. Civ. Code SS 1788.17). In California, the original creditors must comply with the Rosenthal Act as well as the FDCPA. For example, if a credit card company contacts a customer about owing bills, they must comply with both the FDCPA as well as the Rosenthal Act.
The Rosenthal Act has two important exceptions that allow creditors to avoid complying with the FDCPA. Creditors are not required to give consumers a “mini Miranda”, and they do not have to send them a notice of debt validation.
Miniature-Miranda Requirement Under The FDCPA
According to the federal FDCPA, the debt collector must disclose that they are attempting a collection and that all information will be used in this manner. These disclosures are sometimes called “mini-Miranda.” These disclosures should also be included in any subsequent communication. (15 U.S.C. SS 1692e (11)).
A Consumer Financial Protection Bureau regulation, which will take effect in late 2021 requires debt collectors to make mini-Miranda disclosures using the same or similar languages as the rest of their communication. The collectors do not have to provide translations or identify consumers who cannot communicate in English. (12 C.F.R. SS 1006.18 (e)(4)).
California’s Debt Collection Law Does Not Cover Debts or Collectors
The Rosenthal Act does not apply to everyone who tries to collect debts in California. It also doesn’t cover all types of debt.
Occasional collectors of consumer debts are not required to comply. Rosenthal Act only applies when companies and individuals regularly and ordinarily collect consumer debts. Say, for example, that you are contacting a friend who owes money but does not regularly collect money. Rosenthal Act is not required. (Cal. Civ. Code SS 1788.2).
Only consumer credit transactions are covered by the law. The Rosenthal Act applies to debt collectors who attempt to collect debts incurred by people when they borrow money, buy property, or obtain services to meet personal, household, or family needs. (Cal. Civ. Code SS 1788.2). It is unlikely to protect you against those who collect debts that you incur when operating your business. You don’t have to comply with the law if you are collecting debts that other businesses owe you.
Rosenthal Act Infractions When Facing Foreclosure
The Rosenthal Act may apply to you if you are behind in your mortgage payments. The California Court of Appeal, Fourth District, ruled in Davidson v. Seterus, Inc., 21, Cal.App.5th 283, (2018) that a mortgage servicer attempting a collection of debt was subject to the Rosenthal Act. Consider consulting an attorney if you believe your loan servicer has violated the Rosenthal Act.
Rosenthal Act Prohibited Collection Activities
The Rosenthal Act includes a long list of regulations that apply to debt recovery activities.
Can I be personally threatened by a collector? Can a collector threaten me personally?
California law prohibits debt collectors from making the following threats.
- Threaten to use violence or criminal tactics against you, your property, or your reputation.
- You can intimidate you by accusing of you committing a criminal offense by not paying your debt, unless it is possible to charge you with a crime. This is rare.
- Do not make defamatory remarks to anyone else or threaten to do so.
- You may incorrectly tell someone that they can assign your debt and you will lose all defenses to it.
- If the collector is not legally permitted to take such action, they should not threaten to arrest you or seize your assets. In most cases, the collector must file a lawsuit against you and obtain a judgment prior to taking certain collection measures, such as garnishing your wage. (Cal. Civ. Code SS 1788.10).
Can a Debt Collector Use Offensive Language or Harass Me?
The debt collectors have a limited range of words and methods to use when contacting you, especially on the phone.
- A debt collector can’t use obscene or profane language.
- Callers must identify themselves when they call you.
- A collector cannot misrepresent themselves in a manner that causes them to spend more money than they would have otherwise, such as for long-distance phone calls or similar charges.
- A debt collector cannot call or ring your phone repeatedly in an attempt to annoy you.
- The collector cannot contact you so frequently that it constitutes harassment. This includes both phone calls and in-person communications. (Cal. Civ. Code SS 1788.11).
Debt Collectors Must Tell You if the Statute of Limitations Has Expired
Rosenthal Act mandates that a debt collector informs you if a statute of limitations has expired for a specific debt. The notice must be included in the collector’s first written communication after the expiration of the statute. (Cal. Civ. Code SS 1788.14).
A collection agency is also prohibited from initiating a lawsuit, arbitration, or any other legal action to collect a debt that has expired. (Cal. Civ. Proc. Code SS 337).
Disclosure of Time-Barred Debts
Since 2014, Debt Buyers who try to collect debts from California residents must provide one of two notices if the statute of limitation for filing a lawsuit to collect the debt has passed.
The law limits the amount of time you can be sued for a debt. We will not sue for your debt because it is old. If you don’t pay your debt, [insert the name of the debt collector] can [continue] to report it as unpaid to credit reporting agencies for as long the law allows this reporting.
The law limits the amount of time you can be sued for a debt. We will not sue or report your debt to any credit bureau because it is old. (Civ. Code SS 1788.52 (d) (2)).
As of January 1, 2019 debt collection agencies are required to send the notice when a debt has expired. The notice must be included in the first written communication that the debt collector sends to the consumer following the expiration of the statute. (Cal. Civ. Code SS 1788.14).
Can I Be Called by a Debt Collector at Work?
The Rosenthal Act includes several regulations that require debt collectors to protect your privacy.
- A debt collector can contact your employer to verify employment, locate you find out if your medical insurance covers the debt (in a medical case), or garnish your wages if a judgment is obtained against you.
- If you are a minor, the collector cannot reveal your debts to anyone except your spouse or parents (or your siblings if they live in your household). The collector can still contact your family to find you.
- If you fail to pay, a collector cannot publish your name on a list of public deadbeats (also known as “deadbeat lists”).
- The envelope cannot contain any information that could embarrass or humiliate you. The envelope may only show the name, address, and telephone number of both the debtor and the collector. You can’t get postcards from a collector. (Cal. Civ. Code SS 1788.12)
Can a Debt Collector Try to Trick Me Into Paying a Debt?
The following are also prohibited for collectors.
- Use letterhead with the name of a lawyer unless it is from a firm or an attorney has approved the letter. Do not threaten to sue you unless they plan to.
- Appear to be acting on behalf of the government unless you’re trying to collect debts.
- Tell them that you’ll be charged additional fees for collection or attorney’s fees unless the law allows it or you’ve agreed to pay those costs.
- Replicate themselves as an agency of credit reporting or claim they will report you to one if that is not their intention.
- Send a letter claiming to be from the Department of Claims, credit, audit, or Legal, unless you are sure it is one of these departments. (Cal. Civ. Code SS 1788.13).
California Passes a Coercive Debt Law
When someone forces another person to borrow money, or if a victim is forced into borrowing under threat or force, this is called “coerced debt”. Coerced debt can be seen in someone who gets a credit card for a relative without their knowledge.
California AB1243 is effective on January 1, 2023, and allows judges who issue restraining orders against elder or dependent adult abuse to find that certain debts were coerced. (Cal. Welf. & Inst. Code SS 15657.03. Code SS 15657.03.)
No Contact if You Have a Lawyer
Debt collectors cannot contact you if your lawyer has agreed to speak to creditors in your name and sent a written notice. If the lawyer does not return the collector’s telephone calls or correspondence or does not discuss the debt in question, the collector can contact you. (Cal. Civ. Code SS 1788.14).
Debt Collectors Must Respect the Judicial Process
California law requires debt collectors to comply with certain additional requirements.
- If a debt collector sues, it must serve notice to you. If the creditor receives a default judgment, they can’t collect the debt or even try to collect it if they know that you were not legally served.
- You can only be sued by a debt collector in the county where you lived, when you acquired the debt, or where you live today. (Cal. Civ. Code SS 1788.15).
Making a Complaint Against a Collector
You can file a complaint with the California Attorney General’s Office, the Federal Trade Commission, and the Consumer Financial Protection Bureau if you believe a debt collector has harassed you in violation of California law.
How to File a Complaint with the California Attorney General
If you think a debt collection agency has violated the Rosenthal Act you can submit a complaint to the California Attorney General’s Office. The Attorney General will not sue you, but it does use complaints to find out about wrongdoing.
The Attorney General’s Office also provides useful information for the public about debt collectors.
How to File a Complaint With the Consumer Financial Protection Bureau
You can also file a complaint at the Consumer Financial Protection Bureau. The CFPB will send your complaint to the collector, and they will work hard to get you a reply.
Filing a Lawsuit Against the Debt Collector
You can sue the debt collector in court. You can get back any damages that you have incurred as a result of the debt collector violating the law. A court may also award you $100-$1,000 more if the debt collector violated California law by acting “willfully and knowing”. You can also get awarded attorneys’ fees. (Cal. Civ. Code SS 1788.30).
You have one year to file your claim. (Cal. Civ. Code SS1788.30). A court may also reduce the amount awarded by the amount owed to the creditor.
You will need an attorney to win and file a lawsuit, but if your legal knowledge is good, you can file your suit yourself in small claim court. You should also be aware that debt collectors are not liable if they notify you and correct a law violation within 15 days of discovering the violation. (Cal. Civ. Code SS 1788.30). If you can prove that there are actual damages, the debt collector is unlikely to be able to correct the violation.
Use the Violation as a Leverage for Debt Settlement Negotiations
You can use a collector’s violation of the Rosenthal Act as leverage when you are negotiating a settlement. Collectors are aware that a lawsuit could be expensive to defend and may result in a judgment against them.
Tax Consequences for Resolving a Debt For Less Than What You Owe
The amount of a canceled debt may be taxed if it is less than what you owe. IRS considers debts that are canceled for more than $600 as taxable. If you settle debts below what is owed, your tax liability can be increased depending on the amount and your tax bracket. For more information, consult a tax expert.
The strength of your lawsuit will determine how much leverage you can get. You will have more leverage if you can prove a violation, such as several instances of harassing calls or testimony from coworkers who received threats.
California Debt Settlement Laws
The California Fair Debt Settlement Practices Act Civ. Code SS 1788.300 and subsequent) effective January 1, 2020, protects consumers who hire someone to perform debt settlement services.
- requiring certain disclosures
- Some practices are prohibited (such as engaging in deceptive or false acts or practices).
- Giving cancellation rights is a way to give your customers the right to cancel.
- Allowing a private action in the event that the debt settlement company breaks the law.
Speak to an Attorney Today!
It is important to check the statutes regularly because they can change. Contact Tenina Law to learn how you can find state statutes. The way courts and agencies interpret the law and apply it can also vary. Some rules may even differ within one state. Here are some reasons why you should consult an attorney.
Consider talking to a lawyer if you believe a creditor or debt collector has violated the law in trying to collect debts from you. An attorney can help you analyze your situation and will be able to advise you on your legal rights and options. A lawyer may also help you negotiate a settlement of your debt.
