New Law to Impose Strict Notice Requirements

Sacramento, CA – 28 August 2018 – On August 22nd, the California state legislature passed Assembly Bill 1526, which is related to the collection of debt aged beyond the statute of limitations for bringing forth legal action against borrowers or consumers.

Since 2014, in California, debt buyers collecting from California residents have been required by Cal Civ Code § 1788.52(d)(2) to provide one of two notices, as applicable, when a debt is “time-barred.”

The new pending legislation creates the same requirement for debt collectors, making it a violation for a debt collector to send a collection letter to a consumer on a time-barred debt without providing the debtor with one of the following written notices, depending on the age of the debt:

(d) (1) A debt buyer shall include with its first written communication with the debtor in no smaller than 12-point type, a separate prominent notice that provides:

“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.”;

Or,

“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.”

The notice must be included in the first written communication to the consumer after the debt has become “time-barred” by the statute of limitations.

The new law amends Cal. Civ. Proc. Code § 337, pertaining to the statute of limitations for written contracts and book accounts, by prohibiting the initiation of a legal action on time-barred debt and negates the necessity of a consumer to raise it as an affirmative defense against the action. Similar prohibitions on “time barred” debts also currently exist for debt buyers under Cal Civ Code § 1788.56.

This legislation is pending final approval by California Governor Jerry Brown. Upon signature, the new law will go into effect January 1, 2019.