What is the Fair Debt Buying Practices Act (FDBPA)?
The California Fair Debt Buying Practices Act (“FDBPA”) came into force on 1 January 2014.
The act, which seeks to provide more protection for borrowers whose debt has been sold to a debt buyer, applies only to those debt buyers. It is not available to creditors, collection agencies or payment attorneys.
What is a Debt Buyer?
Whenever a person stops making payments on a credit account, a creditor can “bill” the account and sell it for less than what the debtor owes to a “debt buyer.” So what exactly is a buyer of the debt and how are?
Under the FDBPA, a “debt buyer” is defined as “a person or entity regularly engaged in the purchase of charged consumer debt for collection purposes, if it collects the debt itself, hires a third party for collection, or hires an attorney-at-law for collection litigation”(See section1788.50(a)(1) of the Civil Code of California). The term “charged-off consumer debt” implies “a consumer debt removed as an asset from the books of a creditor and treated as a loss or expense.” (Section 1788.50(a)(2)).
What Is the Information That a Debt Buyer Should “Posses” to Write to a Consumer?
When the debt buyer decides to write to a consumer, the debt buyer must at the time of writing “possess” such information and can not take collection action against you unless it has the following account details:
- The account balance when the creditor paid the debt
- the sum of interest and fees applied after the charge-off
- the date of the last payment you received or the default date
- the name of the charge-off creditor
- the account number of the charge-off debt
- the name and address of the debtor in file with the charge-off creditor
- the names of each person that has ever bought the debt.
What Are the Changes to the Debt Collection Law?
Two senate bills from California will impact the consumer debt collection process providing relief to debtors in judgment.
SB-501 (2015-2016) amends CCP § 706.050 and changes the formula for calculating the percentage of disposable income subject to a wage garnishment. As a result, this gives a slight amount of relief to low income judgment debtors.
A judgment debtor may, by current law, file a notice of motion and motion to set aside a default or default judgment and for leave to contest a debt-related action up to 2 years after a default judgment has been entered. The provision would make a judgment debtor of a consumer debt sold or re-sold up to 6 years after that date, or 180 days after the actual notice of the case. victims of identity theft are given a special provision.
The judgment debtor who files the motion should also include “an affidavit stating under oath that the person’s lack of actual notice in time to defend the action is not caused by his or her avoidance of service or inexcusable neglect.” Moreover, “either party may submit evidence in support of his or her motion or opposition, including evidence relating to the proceedings, and the court may consider such evidence.