AB 1405

Consumers who owe multiple debts that they cannot pay often seek assistance from debt settlement providers: businesses that promise to negotiate with creditors to reduce consumers’ debt balances. These negotiations are meant to yield affordable payment plans under which the consumer makes regular payments to creditors to satisfy the negotiated settlement amounts, together with fees paid to the debt settlement provider for its efforts on the consumer’s behalf. In many cases, debt settlement services leave consumers worse off than they would have been if they had not enrolled in a debt settlement program in the first place.

This bill establishes the Fair Debt Settlement Practices Act (Act) to prohibit debt settlement companies from engaging in specified practices or acts and to authorize a harmed consumer to bring a civil action against the provider by debt settlement companies.