CALIFORNIA FAIR DEBT COLLECTION PRACTICES ACT Updated 1 January 2012

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1 I. BACKGROUND CALIFORNIA FAIR DEBT COLLECTION PRACTICES ACT Updated 1 January 2012 A. Contents: This memorandum summarizes California's Fair Debt Collection Practices Act, California Civil Code (the "CCC") 1788 et seq. (the "Act"). B. Legislative Intent: The main purposes of the Act, also known as the Rosenthal Fair Debt Collection Practices Act, are (1) to prohibit debt collectors from using unfair and deceptive acts to collect consumer debts; and (2) to require debtors to act fairly in entering into and honoring their consumer debts. C. Definitions: The Act defines "debt collection" as "any act or practice in connection with the collection of consumer debts," Civil Code (b), and a "debt collector" as "any person who, in the ordinary course of business, regularly,... engages in debt collection." (Civil Code (c).) Because these definitions are very broad, the Act applies to virtually all financial institutions collecting on debts of natural persons for primarily personal, family, or household purposes. II. DEBT COLLECTOR RESPONSIBILITIES A. Communication with Debtor 1. Initiating Communication With Debtor a. A debt collector may not initiate communication with a debtor if the debtor's attorney gives his or her name and address to the debt collector, and requests, in writing, that all communications about the debt be sent to the attorney. (CCC (c).) b. However, a debt collector may send a debtor statements of account, and respond in the ordinary course of business to a debtor's inquiries. A debt collector may initiate communication with a debtor if the debtor's attorney fails to respond to the debt collector's communications, or if the attorney gives prior approval to the contact with the debtor. (CCC (c).) 2. Written Communication With Debtor: A debt collector may not intentionally embarrass a debtor by sending a written communication to the debtor that displays any information about the debt or debtor. Of course, an envelope may show the name, address, and phone number of the debtor and debt collector. (CCC (d).) 3. Communications From Collection Agencies to Debtors: Licensed collection agencies may not demand money from a debtor unless the agency actually has been assigned the claim. (CCC (l).) B. Communication with Third Parties 1. Communication With Debtor's Employer a. A debt collector may communicate with a debtor's 1

2 employer about a debt without the written consent of the debtor or the debtor's lawyer only to: (1) Verify the debtor's employment. A debt collector may do this once orally without prior written contact; (2) Locate a debtor; (3) After judgment, to garnish a debtor's wages; or (4) Inquire as to whether medical insurance exists, if it is a medical debt. If the debt collector is a health care provider, the communication may be oral. b. With the exceptions noted above, all communications must be in writing, unless an employer fails to respond within 15 days. c. A debt collector may ask an employer for this information only as often as is necessary to collect a debt. (CCC (a).) 2. Communication With Debtor's Family: Before judgment, a debt collector may only give information about a debt to the debtor's spouse. A debt collector may also give information to the parents or guardians of a debtor if the debtor is a minor or lives in the same household as the parents or guardians. Unless the debtor or his or her attorney gives written consent, a debt collector may only contact other members of a debtor's family to locate the debtor. (CCC (b).) 3. Communication With Other Third Parties: Debt collectors may not give "deadbeat lists" to anyone, or reveal debtors' names in advertisements selling debts. (CCC (c).) However, debt collectors may give information to consumer reporting agencies and others who have a legitimate business need for such information. (CCC (e).) C. Manner and Content of Communications 1. Telephone Calls and Other Oral Communication a. A debt collector may not: (1) Use obscene or profane language (CCC (a)); (2) Make anyone pay for calls, telegrams or such by misrepresenting the purpose of the call (CCC (c)); (3) Let the phone ring to annoy anyone (CCC (d)); or (4) Call or talk to a debtor or his or her employer unreasonably and harassingly often (CCC (e)). b. On the phone, a debt collector must either: (1) Identify him or herself; or (2) Give his or her registered alias and the true name of agency he or she represents. (CCC (b).) D. Threats: A debt collector may not: 1. Use or threaten to use physical force, violence, or criminal means to harm anybody or their reputation, or property (CCC (a)); 2. Threaten to falsely accuse debtor of a crime (CCC (b)); 3. Threaten to or knowingly defame a debtor. However, a debt collector may tell certain others that a debtor failed to pay the debt (CCC (c)); 4. Falsely tell a debtor that he or she will lose defenses to a debt if the debt collector sells or assigns the debt, or threaten to do so (CCC (d)). 2

3 5. Threaten to arrest a debtor or seize, garnish, attach, or sell anyone's property or wages, unless: (a) the action is legal; and (b) the debt collector contemplates doing it (CCC (e)); or 6. Threaten to do something the Act forbids (CCC (f)). E. Misrepresentations in Communications 1. Debt collectors may not use false representations to collect consumer debts. Accordingly, all communications with a debtor must be in the name of the debt collector or the person on whose behalf he or she is acting. (CCC (a).) 2. A debt collector may not falsely represent that: (a) The debtor will be responsible for any charges, including attorneys' fees and finance charges, which may not legally be charged to the debtor (CCC (e)); (b) Information is about to be given to a consumer reporting agency (CCC (f)); (c) It is a consumer reporting agency, or otherwise mislead a debtor about the true nature of the business or services of the debt collector (CCC (g)); (d) Legal proceedings have begun or will begin if the debtor does not pay (CCC (j)); (e) The debt has or will be sold, assigned or referred to a debt collector for collection (CCC (k)); or (f) A letter, notice, or form was sent by or for a claim, credit, audit, or legal department. (CCC (h).) F. Misrepresentation of Relationship With Courts or Government 1. It is a misdemeanor punishable by up to six months in jail or a fine up to $2,500, or both, to send any communication that simulates legal or judicial process, or that falsely gives the appearance of being authorized, issued, or approved by a government agency or attorney. (CCC ) 2. Although not a misdemeanor, debt collectors may not represent that they are vouched for, bonded by, affiliated with, an instrumentality, agent, or official of any government or governmental agency, unless they are employed by and working on behalf of that agency. (CCC (d).) G. Impersonating an Attorney: Debt collectors may not falsely represent that any person is an attorney. The Act also forbids the use of an attorney's letterhead or name on any written instrument which has not been written, approved or authorized by the attorney whose name or stationery is used. (CCC (c).) H. Miscellaneous Provisions 1. Affirmations: When seeking an affirmation from an adjudicated bankrupt debtor, a debt collector must clearly and conspicuously disclose in writing that the debtor has no legal obligation to give the affirmation. (CCC (a).) 2. Debt Collection Fees, Charges, and Expenses: A debt collector may only collect or attempt to collect fees, charges and expenses related to debt collection from 3

4 the debtor as the law permits. (CCC (b).) 3. Service of Process: Debt collectors may not use judicial proceedings if they know that service of process is defective. (CCC (a).) 4. Venue: Unless the debt has already been reduced to a judgment, a debt collector must use the court in the county where the debtor lives, or incurred the debt, or lived when the debt was incurred. (CCC (b).) III. DEBTORS RESPONSIBILITIES: OPEN-END ACCOUNTS A. Use of Accounts: A debtor may not attempt to transact business under a consumer credit account if the debtor knows that his or her credit privileges have been suspended or terminated. (CCC (a)(1).) B. Reporting Lost Access Devices: If a debtor's credit card or other access device is lost or stolen, the debtor must notify the creditor within a reasonable time after discovering the loss, and must assist the creditor in investigating any unauthorized use of the account. (CCC (a)(2).) C. Creditor Must Disclose: An account debtor only has the above responsibilities if the creditor clearly and conspicuously discloses these duties in writing to the debtor. (CCC (b).) IV. ENFORCEMENT A. Damages: If a debt collector violates the Act, he or she is liable to the debtor for any actual damages caused by the violation. In addition, if the violation is done willfully and knowingly, the court may impose a penalty between $100 and $1,000 on the debt collector. (CCC (a), (b).) B. Costs and Attorney's Fees: The prevailing party is entitled to court costs. A prevailing debtor is entitled to recover reasonable attorneys' fees for time necessarily spent to enforce the liability. A prevailing debt collector may only recover attorneys' fees if the court finds that the debtor's prosecution or defense of the case was not in good faith. (CCC (c).) C. Cure of Violation: A debt collector may avoid civil liability by notifying the debtor of the violation and taking whatever actions are necessary to cure the violation within 15 days of discovering or receiving written notice of a violation. (CCC (d).) D. Defenses 1. If a debt collector proves that the violation was unintentional, and occurred in spite of the maintenance of procedures reasonably adapted to avoid such violations, the debt collector may avoid civil liability. (CCC (e).) 2. A debt collector may raise an intentional violation of the Act by the debtor as a defense if the violation is pertinent or relevant to the claim against the debt collector. (CCC 4

5 (g).) 3. Effect on Other Laws: The remedies provided by the Act are cumulative. (CCC ) 4. Statute of Limitations: The statute of limitations for violations of the Act is one year from the time of the violation. (CCC (f).) 5