On January 1, 2014, the California Fair Debt Buying Practices Act ("FDBPA") went into effect. The Act, which is intended to provide more protections to consumers whose debts have been sold to a debt buyer, only applies to these debt buyers. It does not apply to creditors, collection agencies, or collection attorneys.
When a person stops making payments on a credit account (such as a credit card or auto loan), a creditor may "charge-off" the account and sell it to a "debt buyer" for less than what the debtor owes. So what exactly is a debt buyer? Under the FDBPA, a "debt buyer" is defined as "a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or hires an attorney-at-law for collection litigation." See, California Civil Code § 1788.50(a)(1). The term "charged-off consumer debt" means "a consumer debt that has been removed from a creditor's books as an asset and treated as a loss or expense." Id., at § 1788.50(a)(2). A "debt buyer" does not include "a person or entity that acquires a charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of consumer debt that has not been charged off. Id. at § 1788.50(a)(1).
Importantly, the Act only applies to consumer debts that are sold or resold on or after January 1, 2014. Id. at § 1788.50(d). Check your loan sale agreements to confirm whether your debt is within the Act. If it is, the Act regulates information that a debt buyer must possess, and documentation that the debt buyer must have access to, before the debt buyer makes "any written statement to the debtor in an attempt to collect a consumer debt." See, California Civil Code § 1788.52.
If the debt buyer decides to write to a consumer, the debt buyer must "possess" the certain information at the time of the writing and cannot take collection actions against you unless it has the following account information:
· The account balance when the creditor charged off the debt
· the amount of interest and fees added after the charge-off
· the date of the last payment you made or the default date
· the charge-off creditor's name
· the account number of the charge-off debt
· the debtor's name and address that was on file with the charge-off creditor
· the names of every entity that ever purchased the debt, and
· a copy of the contract with the original creditor.
If the debt buyer decides to write to a consumer, the debt must also "have access to" the following documentation: "a copy of a contract or other document evidencing the debtor's agreement to the debt. If the claim is based on debt for which no signed contract or agreement exists, the debt buyer shall have access to a copy of a document provided to the debtor while the account was active, demonstrating that the debt was incurred by the debtor. For a revolving credit account, the most recent monthly statement recording a purchase transaction, last payment, or balance transfer shall be deemed sufficient to satisfy this requirement." Id., at § 1788.52(b). Basically, get those ducks in a row before writing the consumer.
For more information on how to approach collecting a debt under the FDBPA, contact experienced collection attorney Ronald P. Slates today.