California’s Rosenthal Act strengthens the consumer protection provided by the federal Fair Debt Collections Practices Act. Enacted in 1977, the Rosenthal Act places restrictions on the collection methods of both secondary debt collectors and the original owner of a consumer’s debt. Also known as the Fair Debt Collection Practices Act, the law details what collections methods are considered to be harassing toward California consumers and the procedures a debt collector must follow when first contacting a debtor. The law not only regulates debt collection agencies, but also describes how an agency is allowed to operate in California.
Collection Agencies
Typically, the original owner of an outstanding debt will sell that debt at a discounted rate to a collection agency. California law does not require the debt collector to inform the consumer about the sale of an outstanding debt. The one exception to this rule is with regard to a health club debt. Health clubs must first inform customers that an outstanding debt is being sold. When a collection agency first contacts a debtor, it is legally required to inform the debtor about the purpose of the phone call. It cannot initiate a phone call prior to 8 a.m. or after 9 p.m. After contacting debtors by telephone, the agency must also mail the debtor a letter with additional information about the debt and details on how to dispute it.
How to Dispute a Debt
The method of disputing a debt is also spelled out by the Rosenthal Act. Once a consumer has received written notification about the debt, he is free to dispute it by writing to the collection agency. If the collection agency does not stop collection activity at that point, the debtor may request mediation. If the matter remains unresolved, collection agencies may initiate a civil lawsuit against the debtor. All such lawsuits are handled by the California Superior Court system. Debtors may also initiate lawsuits against any collection agency that it believes has violated the Rosenthal Act. Each violation recognized by the court can incur a penalty of $100 to $1,000.
Allowable Interest
While collection agencies are entitled to collect interest on their debts, the amount is regulated by the Rosenthal Act. The rate of interest cannot exceed that of the original contracted amount. If an outstanding credit card debt was originally being charged 18% interest, a collection agency cannot collect more than that.
Reporting on Your Credit Report
A collection agency can report outstanding debts to credit agencies. The Rosenthal Act does prevent threats of such action, however. Agencies must also report any consumer disputes regarding the debt. Unfortunately, after an outstanding debt has been paid, collection agencies in California are not legally required to remove negative information from a consumer’s credit report. They are required to report that the debt has been paid.
The Rosenthal Act provides California consumers with an arsenal of tools to combat illegal debt collection activities. Consumers who are being harassed by debt collectors should study the debt collection law and understand all of their rights in the state of California.
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