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Financial Services Law Insights and Observations

California updates notice requirements on time-barred debt collection efforts

State Issues Debt Collection State Legislation FCRA

State Issues

On September 5, the California governor signed AB 1526, which, among other things, amends state debt collection law to require certain written notices to be included in the first written communications provided to the debtor after the debt became time-barred and after the date for obsolescence under the FCRA. If the debt is not past the date of obsolescence, the debt collector is required to include specific language in the first written communication to the debtor after the debt has become time-barred that indicates the debtor will not be sued for the debt, but the debt may be reported as unpaid to credit reporting agencies as allowed by law. If the debt is past the date of obsolescence, the debt collector is required to include specific language in the first written communication to the debtor after the date for obsolescence indicating the debtor will not be sued for the debt and the debt will not be reported to credit reporting agencies. The law also incorporates a four-year statute of limitations on the collection of debt by specifically prohibiting a debt collector from initiating a lawsuit, an arbitration, or other legal proceeding to collect the debt after the four-year period in which the action must have been commenced has ended.

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