Main Regulations and Limitations for Collecting Debt in California

Since it is one of the most expensive states in the country in terms of cost of living, it should come as no surprise that California also ranks among the top states in terms of outstanding consumer debt. Living in California is expensive, and many of the residents who call The Golden State home are suffering from a number of obligations that are weighing down their monthly budgets.

One recent report noted that the average resident in the state of California has more than $5,000 in credit card debt. On top of that, they are also struggling with nearly $30,000 in student loan debt. Add in the monthly expenses of a mortgage and a car payment and it’s no wonder why so many people seem to be falling further and further behind.

Since debt has become such a staple in the American economy, many small businesses have no choice but to extend credit terms to customers who simply cannot afford to pay cash for large ticket items. And when you start extending credit to customers, there are inevitably going to be a few incidents where those customers are unable to make the agreed upon payments, and trying to collect those outstanding debts can be a monumental task.

In addition to being protected on a federal level by the Fair Debt Collection Practices Act, residents of California are also protected on a state level by the California/Rosenthal Fair Debt Collection Practices Act. If you are tasked with collecting outstanding debts from a consumer here in California, you must follow all of the regulations stipulated by both of these acts.

Statute of Limitations

One of the most significant regulations that is specific to the state of California is that the statute of limitations on any type of outstanding debt is only four years. This means that it is completely illegal to attempt to collect on any debt that is more than four years old.

If we are talking about a debt that was strictly an oral agreement, the amount of time that you have to collect is cut in half to only two years.

Refusing to Pay

California debt collection laws also give consumers the right to refuse to pay any debt-related bill if they believe that there is an error on the statement or they are disputing some type of fraudulent activity on their account. In order to prevent these types of issues from slowing your collection process in California, you are always going to want to make sure every aspect of your statements are 100% correct.

Other Debt Collection Regulations

In addition to those two specific differences, the California/Rosenthal Fair Debt Collection Practices Act also emphasizes many of the same points that are covered in the federal regulations. This includes things like limiting who you can contact about a debt, how you must represent yourself during those conversations, and the specific times of day when you are able to attempt to have those conversations.

The best way to make sure that you are always abiding by all of the most recent debt collection rules and regulations is to partner with a quality debt collection agency that has experience dealing with all types of outstanding debts. And if you are attempting to collect from consumers who are located in the state of California, you should make sure that your collection agency has experience working within the strict regulations there.

By | 2017-03-12T14:12:52+00:00 March 7th, 2017|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present