Two laws were recently signed into law by Governor Jerry Brown, both laws are positive developments for California consumers.
1) Deficiency Collections on Foreclosure SB 426 prohibits deficiency collections and adverse credit reporting on non-recourse loans following a non-judicial foreclosure. A deficiency is the outstanding balance of a mortgage and the foreclosure sale amount. In spite of existing anti-deficiency protections for residential borrowers in California, some creditors and debt collectors have been attempting to collect debts by non-judicial means after a foreclosure. SB 426 makes clear that this practice is illegal. CRC and Housing Economic Rights Advocates co-sponsored the legislation. For more information, visit Senate Majority Leader Corbett’s webpage: Governor Signs Corbett Bill Protecting Struggling Homeowners, Borrowers
2. Debt Collectors in California will have to prove that the borrower owes a debt SB 233 requires debt buyers and collection agencies to prove in court that a borrower owes a debt that they agency owns, the balance of that debt and that the debt is still within the statute of limitations and subject to collections before any judgment can be issued against the borrower. Public Good Law Center sponsored this legislation. An article in the Visala Times Delta explains the need for this bill- “Governor signs bill that holds debt collectors to stricter standards“ by Valerie Gibbons, July 12, 2013
According to the article, the bill traces its origins to State Senator Lou Correa (D-Anaheim), who was told his wages would be garnished after a default judgment on a debt. The only problem was that Senator Correa didn’t know about the debt because he didn’t owe it. According to the article, the mix-up took years for him to clear up the mistake the collection agency made. And, Correa isn’t alone- according to the article, debt collectors/buyers hold the unenviable spot of #1 industry for complaints to the Federal Trade Commission, which has over 100,000 cases “in the federal pipeline against the firms.”
Resources from the CFPB if you are dealing with debt collectors If you’re dealing with debt collectors who are engaging in illegal practices, you will also be happy to know that the Consumer Financial Protection Bureau is taking steps to regulate the collection industry. As of July 10, 2013, the CFPB will begin taking complaints about debt collectors on their website. (Click on “debt collection.”)
Model letters to use with debt collectors The CFPB also recently released five model letters that consumers can use if they’re dealing with a debt collector. Click here to access them.
1) Needs more information on the debt- For consumers who need more information about a debt.
2) Wants to dispute the debt and wants debt collector to prove responsibility or stop communication- Tells collector that you’re disputing the debt, instructs the collector to stop contacting you until they provide evidence that you’re responsible for the debt.
3) Restrict how and when debt collector contacts you- to tell the collector your preferred way to be contacted.
4) Have hired a lawyer- this will direct the collectors to contact your lawyer instead of you.
5) Wants debt collector to stop any and all contact- it’s important to note that sending this letter doesn’t stop a debt collector from continuing to pursue other remedies, like a lawsuit.
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