Companies that purchase charged off consumer debts owed by California residents have some new and stricter guidelines to follow starting on Jan. 1, 2014. The changes are outlined in California’s Fair Debt Buying Practices Act. Most of the new rules resulting from the Act will be applied to debts purchased after the enactment date.
Debt buyers must possess some of the following information in order to make a written statement to collect:
An accurate account of the balance of a debt at charge-off, and the nature and reason for any post-charge-off interest and fees. While this part of the Act does not “require a specific itemization” it does require those items be broken out separately. The intent is to curb the questionable practice of inflating balances in collection.
The date the account went into default, or the date of last payment. Knowing this date will help consumers understand how much risk remains that they can still be sued for a debt, and should also assist in helping to better understand any valid post charge-off interest and fees.
The name and address of the charge-off creditor (the original lender), and of any previous purchasers of the account. This will help people to clearly identify whether the debt is their own, which has not always been easy to determine when debt buyers resell debts to other companies.
The debt buyer must have access to a copy of the agreement evidencing a debt. This can include “the most recent monthly statement showing a record of a purchase transaction, last payment, or balance transfer…” Providing consumers this type of documentation is typically something debt collectors and debt buyers are already accustomed to in order to meet their obligations when responding to debt validation requests under existing federal laws (the Fair Debt Collection Practices Act). But there is more.
The Fair Debt Buying Practices Act requires the collector to provide information relating to the above bullet items within 15 days of receiving a consumer’s written request. And collection efforts must cease until the request has been met.
