PNDR September Newsletter

Legal Update

On August 22, 2018, the California legislature amended the Rosenthal Fair Debt Collection Practices Act (Assembly Bill 1526 submitted by Assemblymember Ash Kalra) which will now impose strict notice requirements pertaining to written demands sent by debt collectors (which includes original creditors in California) relating to time-barred debt.

This law specifically prohibits debt collectors from sending an initial written communication to any debtor attempting to collect a time-barred debt without providing specified written notices.

Amended California Civil Code Section 1788.14 will require that the first written communication to a debtor (which includes communications sent via fax or email) include one of the following notices:

(1.)“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt collector] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.” (Sent if the debt can still be reported on a debtor’s credit report); OR

(2.)“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.” (Sent if the debt can no longer be reported on a debtor’s credit report.)

Assembly Bill 1526 also amended California Civil Code 337 which codifies the 4-year statute of limitations for lawsuits alleging breach of contract and/or book account claims. Amended Section 337 now sets forth that a debt collector may not initiate a lawsuit alleging these claims if the statute of limitations has expired.

Previously, California law allowed such lawsuits to be filed (so long as you were not a “debt buyer”) and required the debtor to allege the passing of the statute of limitations as an affirmative defense.

The amended statutes will become effective on January 1, 2019 if Governor Jerry Brown approves them (which is expected).

Please contact us if you want to discuss how these new laws may affect your business. The text of the amended California laws can be found here.