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Release date 05/24/2013
SACRAMENTO, CA — By a unanimous vote, the California Senate passed legislation today that will strengthen state oversight of the debt buying industry and protect consumers from unfair debt collection practices. SB 233, authored by Senator Mark Leno, was passed with bipartisan support and requires debt buyers to provide consumers and the courts with documentation to prove that a debt is actually owed.
“Our current debt collection system is broken,” said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. “Current law leaves consumers vulnerable to being harassed for debts that they may have already paid off or that don’t even belong to them. This bill will protect consumers by making debt buyers prove they have a legitimate claim when they try to collect past debts.”
Tens of thousands of Californians are contacted every year by debt buyers they have never done business with, for debts that may be old or in an amount that doesn’t match the consumer’s memory or records. The debt may even be owed by someone else or the result of identity theft. Consumers Union’s 2011 report issued with the East Bay Community Law Center detailed how debt buyers are filing an increasing number of lawsuits against consumers even though often they don’t have proof to back up their claims.
Debt buyers purchase large portfolios of consumer debt from the original creditor or secondary debt buyers for pennies on the dollar. The buyers hope to make a profit by collecting a small percentage of those accounts and then resell the portfolio to another debt buyer who then restarts efforts to collect. Some debt buyers have little more than a robo-signed affidavit to back up their claims in court.
In January, the Federal Trade Commission issued a report that found debt buyers didn’t verify alleged debts in half of the cases studied by the agency. The FTC found that consumers disputed an estimated one million debts each year but that debt buyers only verified 500,000 of those disputed debts.
Under SB 233, a debt buyer must possess essential information before collecting, and must produce authenticated documents before obtaining judgment to show the debt buyer is suing the right person, for the right amount, on a debt it can legally recover. The bill also requires debt buyers to show how the amount of debt was calculated, including the original amount and the nature and type of credits, interest and other charges. In most cases, consumers currently don’t get this protection when sued on a debt.
“This bill not only protects consumers, but it will level the playing field for reputable collectors and relieve the courts of unsubstantiated lawsuits,” said Martindale.
Contact:
Michael McCauley, Consumers Union, 415.431.6747 ext 126 (office)/415.902.9537 (cell) or mmccauley@consumer.org
Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2013 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.
Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2013 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.