California Bill Seeks to Rein in Debt Settlement Companies That Target MCAs / Business Loan Borrowers

AB-1166 in California has been quietly moving through the legislature in California since February. The bill seeks to amend the Fair Debt Settlement Practices Act to include commercial financing recipients with consumer borrowers as a covered and protected group. Per the bill, “Commercial Financing means an accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, commercial open-end credit plan, or lease financing transaction intended by the recipient for use primarily for other than personal, family, or household purposes.”

If it became law, debt settlement providers would be prohibited from engaging in misleading practices, have to provide specific disclosures, allow the business owner to cancel the debt settlement agreement at any time, have to provide monthly statements, itemize their compensation, and more.

The full text can be read here. It recently passed through the Senate Banking and Financial Institutions committee on July 2.