New California debt-collection safeguards signed into law

Gov. Jerry Brown has signed legislation giving California consumers more protection from unfair debt-collection practices.

The Fair Debt Buying Practices Act, authored by Sen. Mark Leno (D-San Francisco), requires debt collectors to verify that an obligation is real before going after consumers.

Similar protections already exist at the federal level, but the state bill is more specific in its requirement that collectors go the extra mile in making sure money is owed.

“Completely innocent Californians have been victimized by this industry,� Leno told me. “At a time when we’re coming out of a deep economic crisis, this is insult to injury for many families.�

I wrote this week about an Orange County man who was told by a debt collector that it’s the consumer’s responsibility to prove that a debt isn’t owed, not the collector’s job to prove that it is.

Chris Koegel, assistant director of the Federal Trade Commission’s division of financial practices, said that’s just plain wrong. The onus, he said, is on the debt collector to verify that a debt is real.

Leno’s bill makes the same point.

“Too many Californians have been hurt by bad debt collection practices,� California Atty. Gen. Kamala D Harris said. “This bill protects consumers and holds debt collectors accountable.�

Of roughly 125,000 complaints made last year to the FTC about debt collectors, almost 10,000 involved collectors failing to verify a loan as per federal law.