Consumer Debt Collection Protections to Apply to Commercial Debts in California

SB1286 is on its way to the California governor’s desk. In the era of state-based commercial finance legislation this bill stands out for its unique focus on the collections process.

“Existing law, the Rosenthal Fair Debt Collection Practices Act (RFDCPA), prohibits debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and requires debtors to act fairly in entering into and honoring those debts,” the bill’s authors wrote. “This bill would recast those provisions to expand the scope of those provisions to additionally prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of covered commercial debts…”

In a CounselorLibrary BizFinLaw Alert, Hudson Cook attorneys Kate Fisher and Bob Gage, wrote of it:

What would this bill mean for you if you provide financing to California businesses? First, don’t assume that the law won’t apply to you just because you originated a debt. The RFDCPA, unlike most debt collection laws, applies to a person collecting its own debt in its own name. Second, be aware that the bill defines “covered commercial credit transaction” broadly enough that any business that owes you money, regardless of the form of the transaction, might have rights under the RFDCPA if the original amount financed or lease amount was $500,000 or less. If you determine (or your lawyer tells you) that some debts owed to you might be covered if the bill goes into effect, then you’ll need to see what new obligations the law imposes on you.

Read the full language of the law here.