SACRAMENTO– Taking a step to provide increased oversight of the debt collection industry, the California Senate Banking and Financial Institutions Committee today approved Senate Bill 908, authored by Senator Bob Wieckowski (D-Fremont), to require debt collectors and buyers to obtain a license in order to collect on debts in California.
“With consumer debt at a record high and the pandemic sending our economy into a freefall, California families struggling to pay their bills need the added protection that SB908 would provide,” said Wieckowski, a member of the Senate’s Judiciary Committee. “Under current law, people are often left to defend themselves against unscrupulous collectors who prey on their lack of understanding of consumer law. By having a state agency investigate abuses, people can put an end to the threats, harassment and real financial damage debt collectors can cause.”
SB 908 calls for the state Department of Business Oversight (DBO) to license and regulate the industry. It would field complaints from borrowers and enforce violations. Consumers would have a single location to see what companies are licensed, what companies are operating without a license, and any actions taken against a licensed company including suspension or revocation.
“It is shocking that the state of California has zero oversight of the harms caused by unscrupulous debt collections, especially since, according to the Federal Trade Commission, debt collection is the most common consumer complaint in the nation,” said Sharon Djemal, director of the East Bay Community Law Center’s Consumer Justice Clinic. “Those who follow California law have nothing to fear from this bill, since it does not change the law – it only ensures proper enforcement of it.”
California has had laws requiring fair debt collection practices since 1977, but they have not stemmed bad behavior from some in the industry because people must sue the debt collection company in order to enforce the laws. Many people do not bother. A report by The Pew Charitable Trusts found that where data are available 70 percent of lawsuits brought by the debt collection companies end with default judgments for the collectors. This enables abusive collection companies to continue with bad practices such as misrepresenting themselves, collecting against the wrong person or inflating the amount owed.
In addition to the East Bay Community Law Center, SB 908 is supported by the Western Center on Law and Poverty, California Low-Income Consumer Coalition, Public Law Center, Courage California, Bay Area Legal Aid, Bet Tzedek, California Advocates for Nursing Home Reform, California Indian Legal Services, Center for Responsible Lending, Consumer Federation of California, Consumer Reports, and Consumers for Auto Reliability and Safety.