First Party Collections in California - Reminder on Regulations

Dear Companies that do business with California Consumers,

Unlike the federal Fair Debt Collection Practices Act that applies to Third Party Collections, California has a First-Party Collections Law. That is, they regulate collections by the original creditors.

Here is a helpful summary relating to the California requirements:

California does, in fact, regulate the practice of first-party debt collection practices. This is unusual, as the regulation of debt collectors (at both the federal and state levels) is generally applicable exclusively to third-party debt collection practices.

The debt collection rules in CA are also different for first-party debt collection practices as opposed to those conducted by a third-party debt collector (or a first-party debt collector that holds itself out as a different entity than the one to which the debt is actually owed). As such, an entity that reaches out to a customer in connection with a past due payment (subject to the below rules) is likely not a “debt collector” or a “collection agency” as those terms are defined at the federal level.

The CA Rosenthal Fair Debt Collection Practices Act sets forth a number of specific guidelines and limitations to which the first-party collectors calling past due customers would be subject ((some are obvious and others are less so) this is just a summary list of the main points, not a full detailed analysis of each requirement):

1. Must Disclose the Identity of the Caller: The identity of the caller must be disclosed in all forms of communication, including letters, telegrams, faxed documents, e-mail messages, and telephone calls that are made in attempts to collect a debt. The first-party collector must disclose the name of the employee calling and the name of the company on whose behalf they are calling. Using any name other than the true name of the first-party collector’s business, company, or organization is prohibited.
2. Limitations on Communicating Information to Third Parties: In general, and with limited exceptions, a first-party collector may not communicate any information to any third party in connection with the collection of a debt.
3. Time and Place Limitations on Communications: It is unlawful for a first-party collector to communicate with the debtor regarding an unpaid debt at a time or place that the first-party collector knows or should know is either unusual or inconvenient to the debtor. First-party collectors can assume that anytime between 8:00 a.m. and 9:00 p.m., the debtor’s local time, is convenient, provided the debtor has not stated otherwise. The debtor can specify what times are ok, and first-party collectors must honor those requests.
4. Limitations on Disclosing Information: It is unlawful for a first-party collector to communicate the fact that someone has failed to pay a debt to any third person other than (a) a credit reporting agency, or (b) a person to whom a credit reporting agency may lawfully disseminate the information.
5. Prohibitions on the Use of Force or Criminal Means: First-party collectors cannot collect a debt by using physical force or any criminal means to cause harm to the person, reputation, or property.
6. Limitations on Collecting Unauthorized Amounts: First-party collectors cannot attempt to collect any amount unless such amount is expressly authorized by the agreement between the debtor and the original creditor. This would include "interest," "service charges," "collection charges," "attorney's fees," "legal notice fees" and other fees unless they were expressly authorized by a valid agreement between the parties.
7. Limitations on Representations: First-party collectors cannot state, unless true, representations of past or intended future action: (a) that information concerning nonpayment has been or is about to be furnished to a consumer reporting agency; or (b) that a lawsuit has been, is about to be, or will be, filed if payment is not made.
8. Prohibitions on Unlawful Threats: First-party collectors cannot use unlawful threats to collect debts including, threatening physical force or criminal action, threatening to increase charges (unless expressly authorized), or threatening to communicate to anyone information that will defame the debtor.
9. Limitations on Harassment or Abusive Practices: First-party collectors cannot engage in harassment or abusive practices in attempts to collect the debt. These practices include causing the debtor's or anyone's telephone to ring or to engage the debtor or any person in the telephone conversation, repeatedly or continuously for the purpose of annoying the person called, calling the debtor or anyone with a frequency that is unreasonable and that constitutes harassment, or causing the debtor or anyone expenses for long-distance telephone charges, telegram fees, or charges for other similar communications.
10. Prohibitions on Obscene or Profane Language: First-party collectors may not use language that is obscene or profane in connection with the collection of a debt.
11. Limitations on Communication with Family Members: First-party collectors are prohibited, with certain exceptions, from attempting to collect a debt by communicating information regarding the debt to any member of the debtor’s family. However, first-party collectors can: (a) Communicate with the debtor’s spouse (b) Contact any family member ONLY to locate the debtor; (c) Contact any family member if the debtor or the debtor’s attorney has previously consented in writing to the communication; or (d) Contact the debtor’s parents or guardians, if the debtor is a minor or resides with them in the same household.
12. Limitations on Communication with Debtors Employer: First-party collectors can communicate with a debtor’s employer but only to verify the debtor’s employment, locate the debtor, or garnish the debtor’s wages. No other communication to the debtor’s employer is permitted. Communication to the debtor’s employer must be in writing, except that one oral communication may be made solely for the purpose of verifying the debtor’s employment, or no response to a written communication is received within 15 days.

Finally, in written correspondences to the customer, it is required that the letter employ what has been referred to as the “Mini-Miranda” (usually at the bottom of the page): “This is an attempt to collect a debt. Any information obtained will be used for that purpose.”

If you have further questions, please call me directly at (954) 343-6959.

Robby,

Robby H. Birnbaum, Esq.

Greenspoon Marder LLP

100 West Cypress Creek Road, Suite 700

Fort Lauderdale, Florida 33309

Direct Telephone: (954) 343 6959

Direct Facsimile: (954) 343 6960

Robby.Birnbaum@gmlaw.com