SACRAMENTO – With more Californians living paycheck-to-paycheck and taking on more debt to cover their bills, the California State Senate today approved with bipartisan support SB 908 by Senator Bob Wieckowski (D-Fremont) to require the licensing of debt collectors and debt buyers in California. The bill is supported by a number of California’s top consumer organizations.
“Consumer debt is at an all-time high and without SB 908, more Californians will fall prey to the often abusive tactics of debt collectors,” said Senator Wieckowski, a member of the Judiciary Committee. “We license all sorts of professions in California that do not have the power to do the financial harm to individuals that debt collectors can do by garnishing wages and seizing people’s assets. It is a gaping loophole that needs to be closed to protect California consumers, especially when so many are struggling through this pandemic.”
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.
The state passed fair debt California laws in 1977, but their enforcement relies on individuals to sue the debt collection companies. Often, consumers do not have the time or resources to take such action. 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 allows companies to continue collecting against the wrong person, inflating the amount of money owed and other bad practices.
SB 908 would also require collection attorneys to be licensed by the DBO. Some law firms operate as collection mills and send out thousands of notices on their letterhead, which often frightens and intimidates consumers.
Leigh E. Ferrin, Director of Litigation and Pro Bono at the Public Law Center, said licensing collection attorneys is a critical part of the bill.
“We believe it is important for collection attorneys to be licensed through the DBO for clarity and transparency,” Ferrin said. “It is often very difficult for our clients to understand the role that the collection attorneys play and having a licensing system will provide that additional information and access to better protect consumers. We need SB 908 now more than ever to license not only those who follow the law, but also to hold accountable the bad actors that will undoubtedly use the deep recession as an opportunity to prey on the desperate and vulnerable.”
In addition to the Public Law Center, SB 908 is also supported by California Low-Income Consumer Coalition, Consumer Reports, Center for Responsible Lending, Consumer Federation of California, Bay Area Legal Aid, East Bay Community Law Center, Bez Tzedek, Courage California, Western Center on Law and Poverty, and Consumers for Auto Reliability and Safety, among other groups.
Senator Wieckowski represents the 10 District, which includes southern Alameda County and parts of Santa Clara County.