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Know Your Rights Under the Consumer Credit Protection Laws
Californians have two consumer credit protection laws to protect them from overly aggressive and harassing debt collectors: the federal Fair Debt Collection Practices Act and the California Rosenthal Fair Debt Collection Practices Act.
The Fair Debt Collection Practices Act (FDCPA)
The federal government enacted the Fair Debt Collection Practices Act (FDCPA) in 1977 as a means of eliminating abusive debt collections practices that many thought had gotten way out of control.
The purpose of the FDCPA was to penalize businesses that violated debt collections regulations, as well as to prohibit the most egregious collections practices, including:
- Incessant calls, including communications with a debtor after they had retained an attorney
- The use of profane or obscene language
- Misrepresentation and deceit
The law gave consumers who were being mistreated by collectors a legal means to seek damages in court. Under the FDCPA, a consumer who has been the victim of prohibited collections practices can seek up to $1,000 in damages from bad-acting creditors for each violation, plus reasonable attorney’s fees. And they don’t have to show actual damages in order to recover.
While the FDCPA was a definite improvement in legal protections for consumers, a growing number of consumer advocates became critical of the federal law for not going far enough to deter collectors from engaging in abusive tactics.
Under the FDCPA, many original or first-party creditors — entities like banks, credit card issuers, payday lenders, and financial institutions that extend credit directly to consumers — were exempt from the law. In other words, the FDCPA had a loophole that allowed companies to avoid liability if they created their own in-house collection agencies. The damages cap of $1,000, consumer advocates argued, was just a drop in the bucket to these collectors, too insignificant an amount to act as a deterrent.
California’s Rosenthal Fair Debt Collection Practices Act
California, like many states, sought to close the FDCPA loopholes by enacting legislation to strengthen consumer protection. California passed the Rosenthal Fair Debt Collection Practices Act, becoming one of the most consumer protective states in the country.
The Rosenthal Act, while affording consumers the same substantive protections of the FDCPA — including those dealing with false misrepresentations, threats, harassment and unwarranted communications with persons other than the actual debtor — expanded the definition of “debt collector ” to include original creditors. Under California’s Rosenthal Fair Debt Collection Practices Act, anyone “who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection” is subject to the provisions of the law. (See Cal. Civ. Code §§ 1788 et seq.) This means that collection agencies, original creditors, and repossession agencies must all adhere to laws that prohibit abusive debt collection practices.
Knowing Which Law Covers Your Case Can Be Confusing
While these federal and state laws protect consumers, many people are not aware of their rights and how to protect themselves from abusive and harassing creditors.
California consumers can bring a suit for damages under both the FDCPA and the Rosenthal Act within a year of the violations, but which law governs which case scenario can be confusing.
For example, both the FDCPA and the Rosenthal Fair Debt Collection Practices Act Limit their protections to consumer debt (e.g., debt incurred for personal, family, or household purposes). Neither covers collections practices that occur in connection with business and commercial debts, even if the business debt takes the form of a personal loan. Further, the laws’ protections do not extend to attempts to collect alimony, child support, criminal fines and tort claims.
While you can bring an action against a third party lender under both state and federal law, if you want to bring an action against an original lender, you must bring suit under the California Rosenthal Act, even though the same standards will apply regardless of the relationship of the collector to the original lender.
Contact McFarlin LLP and Protect Your Rights
Whether you can invoke the protections of the FDCPA, the Rosenthal Fair Debt Collection Practices Act, or even if their law applies to your circumstances, the lawyers at McFarlin LLP can get collectors off your back and help you regain your financial footing. Contact us online or call us at 949-544-2640 to schedule a free consultation.