The Center for Responsible Lending — a consumer advocacy group — has released a report that analyzes the impact of a state debt buying law that was enacted in California in 2013 on the number of debt collection lawsuits filed against consumers in the years since the law went into effect, concluding that the law has had a “modest positive impact” on the number of lawsuits filed, but still concluding that the “decks remain stacked” in favor of debt buyers and against consumers.
A copy of the report can be downloaded by clicking here.
The California Fair Debt Buying Practices (CFDBPA) Act went into effect in 2013 and raised the amount of documentation that needed to be provided when a consumer was sued by a debt buyer for an unpaid debt. The number of collection lawsuits filed in the year before the law went into effect was 120,000, and that total dropped to 32,000 in 2015, but has since risen to 52,000 in 2017, according to the report.
For cases not subject to the CFDBPA, the default judgment rate is 64%, compared with 66% for cases subject to the law.
Ninety-eight percent of defendants did not have any representation when defending themselves. When represented by an attorney, cases were dismissed 100% of the time, according to the study. When consumers represented themselves, the case was dismissed 70% of the time.
The researchers alleged that 61% of debt collection cases were filed without the minimum documentary evidence required by the CFDBPA.
Among the recommendations made by the report’s authors are:
- Enforce existing documentation requirements
- Strengthen existing state law with respect to required documentation to establish proof of debt
- Strengthen existing state law with respect to required documentation to establish proof of debt
- Discourage debt buyers from acting as “lawsuit factories” by holding them accountable through existing enforcement mechanisms if they initiate unwarranted legal actions
