Collection Agency Laws & Licensing Requirements

Collection Agencies are no longer required to have a specific state license and bond. Collection Agencies do have laws they must follow and provisions may apply to creditors, as well as anyone who sell forms for debt collection. Creditors may also be required to comply with California's Fair Debt Collection Practices Act SEE CIVIL CODE SECTION 1788-1788.3. Attorneys are excluded because they are covered by State Bar provisions [B&P 6077.5]

Collection Agencies may have to comply with the California's Consumer Credit Reporting Agencies Act if dealing with Credit Reporting.

California's has the Unfair Business Practices Act, which you may review at the following link: California Business & Professions Code Section 17000-17002. This Law can be used by the Attorney General, District Attorneys Office, and Others to obtain an injunction and/or utilize in cases remedies involving Unlawful, Unfair, or Fraudulent Business Practices.

Assigned Accounts See CALIFORNIA CODE OF CIVIL PROCEDURE

Certain types of transactions, concerning the collection of assigned accounts may be specifically permitted, or specifically not permitted. In Otherwords, A Collection Agency may not file a Small Claims Court action to recover accounts assigned by a creditor.(California Code of Civil Procedure Section 116.420).

Interest Rate(s): Legal 10% - Judgment 10% or Unless Contracted Otherwise

Debt Collection Statute of Limitations:
Open Acct. Reduced to writing 4 Years, Not in writing 2 Years. Written Contract 4Years in California. - Domestic Judgments 10 Years and renewable at 10 Years - Foreign Judgments 10 Years commencing with judgment and debtors commencement of a California residence.

Bad Check California Civil Code Sec 1719-1720
1719. (a) (1) Notwithstanding any penal sanctions that may apply, any person who passes a check on insufficient funds shall be liable to the payee for the amount of the check and a service charge payable to the payee for an amount not to exceed twenty-five dollars ($25) for the first check passed on insufficient funds and an amount not to exceed thirty-five dollars ($35) for each subsequent check to that payee passed on insufficient funds. (2) Notwithstanding any penal sanctions that may apply, any person who passes a check on insufficient funds shall be liable to the payee for damages equal to treble the amount of the check if a written demand for payment is mailed by certified mail to the person who had passed a check on insufficient funds and the written demand informs this person of (A) the provisions of this section, (B) the amount of the check, and (C) the amount of the service charge payable to the payee. The person who had passed a check on insufficient funds shall have 30 days from the date the written demand was mailed to pay the amount of the check, the amount of the service charge payable to the payee, and the costs to mail the written demand for payment. If this person fails to pay in full the amount of the check, the service charge payable to the payee, and the costs to mail the written demand within this period, this person shall then be liable instead for the amount of the check, minus any partial payments made toward the amount of the check or the service charge within 30 days of the written demand, and damages equal to treble that amount, which shall not be less than one hundred dollars ($100) nor more than one thousand five hundred dollars ($1,500). When a person becomes liable for treble damages for a check that is the subject of a written demand, that person shall no longer be liable for any service charge for that check and any costs to mail the written demand. (3) Notwithstanding paragraphs (1) and (2), a person shall not be liable for the service charge, costs to mail the written demand, or treble damages if he or she stops payment in order to resolve a good faith dispute with the payee. The payee is entitled to the service charge, costs to mail the written demand, or treble damages only upon proving by clear and convincing evidence that there was no good faith dispute, as defined in subdivision (b). (4) Notwithstanding paragraph (1), a person shall not be liable under that paragraph for the service charge if, at any time, he or she presents the payee with written confirmation by his or her financial institution that the check was returned to the payee by the financial institution due to an error on the part of the financial institution.(5) Notwithstanding paragraph (1), a person shall not be liable under that paragraph for the service charge if the person presents the payee with written confirmation that his or her account had insufficient funds as a result of a delay in the regularly scheduled transfer of, or the posting of, a direct deposit of a social security or government benefit assistance payment. (6) As used in this subdivision, to "pass a check on insufficient funds" means to make, utter, draw, or deliver any check, draft, or order for the payment of money upon any bank, depository, person, firm, or corporation that refuses to honor the check, draft, or order for any of the following reasons: (A) Lack of funds or credit in the account to pay the check. (B) The person who wrote the check does not have an account with the drawee. (C) The person who wrote the check instructed the drawee to stop payment on the check. (b) For purposes of this section, in the case of a stop payment, the existence of a "good faith dispute" shall be determined by the trier of fact. A "good faith dispute" is one in which the court finds that the drawer had a reasonable belief of his or her legal entitlement to withhold payment. Grounds for the entitlement include, but are not limited to, the following: services were not rendered, goods were not delivered, goods or services purchased are faulty, not as promised, or otherwise unsatisfactory, or there was an overcharge. (c) In the case of a stop payment, the notice to the drawer required by this section shall be in substantially the following form:

NOTICE

To: __________________________ (name of drawer) __________________________ is the payee of a check you wrote (name of payee) for $ ________________________. The check was not paid because (amount) you stopped payment, and the payee demands payment. You may have a good faith dispute as to whether you owe the full amount. If you do not have a good faith dispute with the payee and fail to pay the payee the full amount of the check in cash, a service charge of an amount not to exceed twenty-five dollars ($25) for the first check passed on insufficient funds and an amount not to exceed thirty-five dollars ($35) for each subsequent check passed on insufficient funds, and the costs to mail this notice within 30 days after this notice was mailed, you could be sued and held responsible to pay at least both of the following: (1) The amount of the check. (2) Damages of at least one hundred dollars ($100) or, if higher, three times the amount of the check up to one thousand five hundred dollars ($1,500). If the court determines that you do have a good faith dispute with the payee, you will not have to pay the service charge, treble damages, or mailing cost. If you stopped payment because you have a good faith dispute with the payee, you should try to work out your dispute with the payee. You can contact the payee at: __________________________________________________________ (name of payee) __________________________________________________________ (street address) __________________________________________________________ (telephone number) You may wish to contact a lawyer to discuss your legal rights and responsibilities.

__________________________________ (name of sender of notice)

(d) In the case of a stop payment, a court may not award damages or costs under this section unless the court receives into evidence a copy of the written demand that, in that case, shall have been sent to the drawer and a signed certified mail receipt showing delivery, or attempted delivery if refused, of the written demand to the drawer's last known address. (e) A cause of action under this section may be brought in small claims court by the original payee, if it does not exceed the jurisdiction of that court, or in any other appropriate court. The payee shall, in order to recover damages because the drawer instructed the drawee to stop payment, show to the satisfaction of the trier of fact that there was a reasonable effort on the part of the payee to reconcile and resolve the dispute prior to pursuing the dispute through the courts. (f) A cause of action under this section may be brought by a holder of the check or an assignee of the payee. A proceeding under this section is a limited civil case. However, if the assignee is acting on behalf of the payee, for a flat fee or a percentage fee, the assignee may not charge the payee a greater flat fee or percentage fee for that portion of the amount collected that represents treble damages than is charged the payee for collecting the face amount of the check, draft, or order. This subdivision shall not apply to an action brought in small claims court. (g) Notwithstanding subdivision (a), if the payee is the court, the written demand for payment described in subdivision (a) may be mailed to the drawer by the court clerk. Notwithstanding subdivision (d), in the case of a stop payment where the demand is mailed by the court clerk, a court may not award damages or costs pursuant to subdivision (d), unless the court receives into evidence a copy of the written demand, and a certificate of mailing by the court clerk in the form provided for in subdivision (4) of Section 1013a of the Code of Civil Procedure for service in civil actions. For purposes of this subdivision, in courts where a single court clerk serves more than one court, the clerk shall be deemed the court clerk of each court. (h) The requirements of this section in regard to remedies are mandatory upon a court. (i) The assignee of the payee or a holder of the check may demand, recover, or enforce the service charge, damages, and costs specified in this section to the same extent as the original payee. (j) (1) A drawer is liable for damages and costs only if all of the requirements of this section have been satisfied. (2) The drawer shall in no event be liable more than once under this section on each check for a service charge, damages, or costs. (k) Nothing in this section is intended to condition, curtail, or otherwise prejudice the rights, claims, remedies, and defenses under Division 3 (commencing with Section 3101) of the Commercial Code of a drawer, payee, assignee, or holder, including a holder in due course as defined in Section 3302 of the Commercial Code, in connection with the enforcement of this section.

1720. (a) If an obligee fails to give a timely response to an inquiry of an obligor concerning any debit or credit applicable to an obligation, he shall not be entitled to interest, financing charges, service charges, or any other similar charges thereon, from the date of mailing of the inquiry to the date of mailing of the response. (b) For the purpose of subdivision (a): (1) An "inquiry" is a writing which is posted by certified mail to the address of the obligee to which payments are normally tendered, unless another address is specifically indicated on the statement for such purpose, then to such address. (2) A "response" is a writing which is responsive to an inquiry and mailed to the last known address of the obligor. (3) A response is "timely" if it is mailed within 60 days from the date on which the inquiry was mailed.(c) This section shall only apply to an obligation created pursuant to a retail installment account as defined by Section 1802.7..

Bad Check Laws & Civil Penalty: The amount that is due, Treble Damages (3 times the amount) with a minimum of $100.00 and a maximum of $1,500.00 per week.
See: California Civil Code Sec.1719 Dishonored Check Law], Sec. (f) (scroll down to Sec 1719 f)

Checks Marked "Payment In Full": Where a check or draft is tendered by the debtor and the words "Payment in full" or Other Words of similar meaning are noted on the check or draft, the acceptance of the check or draft does not constitute an accord and satisfaction if the creditor protests by striking out or otherwise deleting the notation, or if the acceptance of the check or draft was inadvertent or without knowledge of the notation. Exceptions apply, and Creditors should read California Civil Code Section 1526,  (Scroll down to bottom of page when you get there).

A Person Writing an NSF Check: is liable for treble damages (3 times the amount) under California Civil Code Sec.1719 Dishonored Check Law], (scroll down to Sec 1719 ) unless that person pays the face amount of the check, the service charge, &  the cost of mailing a written demand Notice by certified mail within 30 days of mailing of the Notice. Treble Damages shall not be less than $100.00 nor more than $1,500.00. When the person becomes liable for the treble damages, that person is no longer liable for the service charge or the cost of mailing the treble damages Notice/Letter.

Dishonored Checks: Any person who passes a check on Insufficient Funds shall be liable to the Payee for the amount of the Check, and a Service Charge payable to the payee (not to exceed $25.00 for the first check, and $35.00 per check for each subsequent check to that payee).

Payment Stopped: On payments where there has been a "Stop Payment" on a check, a creditor may recover treble damages (3 times the amount) if a specific notice requirement has been met and there is no "Good Faith Dispute". The existence of a "Good Faith Dispute" is one in which the Court finds that the writer had a reasonable belief of entitlement to withhold payment. Grounds may include, but are not limited to: services not rendered, goods not delivered, goods or services are faulty, not as promised, or otherwise unsatisfactory, or there was an overcharge.

Treble damages is limited to a minimum of $100.00 and a maximum $1,500.00. California Civil Code Section 1719

A Specific Form of Notice is prescribed in California Civil Code Section 1719.

State of California Department of Consumer Affairs "Privacy Rights - Payment By Check Or Credit Card,"

Special rules apply for Credit Cards & Card Vouchers.
There are rules to protect the privacy of consumers in California. Creditors accepting payment by check or credit card must obey these rules. In California a retailer who accepts checks generally may not:

• 1) Require credit card to accept check;

• 2) Record credit card number;

• 3) Require credit card authorization if check returned;

• 4) Call the Card Issuer to check credit availability.

Garnishment & General Exemptions: Exempts 75% of disposable earnings per week, from Garnishment or an amount equal to 30 times federal minimum hourly wage, whichever is greater. Exemptions for necessaries of life.

Summary: Bond Not Required Some License and registration, Must Warn consumer of credit reporting damage. Restrictions also apply to creditors.

Threats Penal Code Sec 422.
Extortion Penal Code 518-527
False Identity Penal Code 528-539
Forgery Penal Code 470-483.5.

More Debt Collection Related Laws & Information:
CALIFORNIA ATTORNEY GENERAL & DEBT COLLECTORS
CALIFORNIA BUSINESS AND PROFESSIONS CODE
CALIFORNIA PENAL CODE SEC 422

Attorney General Office Helps Consumers With Debt Collection Violations In Many Cases

California Attorney Bar Locate an Attorney who practices in California, State laws, and Links

Federal Laws:
California Collection Agencies Must Follow the Federal Fair Debt Collection Practices Act
The Federal Debt Collection Law is enforced by The Federal Trade Commission

Other Credit and Collection Links

The major laws that govern financial institutions and protect individuals in their financial dealings are:

• Consumer Credit Protection Act It is the purpose of this title to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.
• Truth in Lending Act Consumer Credit Costs Disclosures, requires a lender to tell you how much it will cost to borrow money so that you can compare the terms of credit offered by different lenders.
• Fair Credit and Charge Card Disclosure Act requires a lender offering you a credit card to tell you the annual percentage rate (APR), the amount of any annual fee, and whether you have a grace period to pay your bill before a finance charge is added.
• Fair Credit Reporting Act controls how your credit history (how you pay your bills) is kept by credit bureaus and used by lenders.
• Equal Credit Opportunity Act prohibits lenders from discriminating against you in a credit transaction on the basis of certain personal characteristics such as race, color, religion, national origin, sex, marital status, age, because you receive public assistance or because you’ve exercised your rights under the Consumer Credit Protection Act.
• Fair Debt Collection Practices Act lays out the rules a debt collector must follow when trying to collect a debt from a consumer.
• Home Equity Loan Consumer Protection Act requires a lender to give you complete information about the home equity loan plan it offers—first when you receive an application and again before you first use the line of credit.
• The Home Ownership and Equity Protection Act requires disclosures and imposes substantive limitations on mortgage transactions having rates or fees above a certain percentage or amount. It also requires disclosures about the potential costs for reverse mortgages.
• Fair Housing Act prohibits lenders from discriminating against you in real estate mortgage or home improvement loans on the basis of race, color, religion, national origin, sex, familial status, or handicap.
• Real Estate Settlement Procedures Act states that lenders must give purchasers information about the costs required to close a mortgage loan. It also protects consumers from unnecessarily high real estate settlement costs by prohibiting certain business practices. This applies when you take out or refinance a loan secured by real estate such as a mortgage loan or a home equity loan.
• Fair Credit Billing Act requires that a lender promptly correct a mistake on your credit card bill.
• Expedited Funds Availability Act limits how long a bank may delay your use of the funds you deposit in an account.
• Truth in Savings Act requires lenders to disclose the terms of their deposit accounts in a uniform way.
• Electronic Fund Transfer Act limits an individual’s liability if their ATM card is lost or stolen and calls for investigation and correction of errors made to your account.
• Consumer Leasing Act requires the costs and the terms of a consumer lease, such as a lease for a car or for furniture, be outlined to you so that you can compare the cost of leasing.

Credit and Collection Links

Comptroller of the Currency
Office of the Ombudsman
Customer Assistance Unit
1301 McKinney Street
Suite 3710
Houston, TX 77010
1 (800) 613-6743
    (regulates banks with national in the name or N.A. after the name)

Federal Deposit Insurance Corporation
Compliance and Consumer Affairs
550 17th Street, N.W.
Washington, DC 20429
(202) 942-3100 or 1 (800) 934-3342
    (regulates state chartered banks that are not members of the Federal Reserve System)

Office of Thrift Supervision
Consumer Programs
1700 G Street, N.W.
Washington, DC 20552
(202) 906-6237 or 1 (800) 842-6929
    (regulates federal savings and loans and federal savings banks)

National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, VA 22314-3428
(703) 518-6330
    (regulates federally chartered credit unions)

Federal Trade Commission
Consumer Response Center
6th and Pennsylvania, N.W.
Washington, DC 20580
877-FTC-HELP – toll free (877-382-4357)
    (regulates finance companies, stores, auto dealers, mortgage companies, and credit
    bureaus)

More Credit and Collection Links

LawDog State Credit and Collection Laws Laws about, Autos, Checks, Credit, Courts, Judgments, Secured Debts, UCC, Credit Terms and Use, Bankruptcy Courts, Collections and State Agencies/Organizations.

Open Directory Project Links

Yahoo Search Consumer Rights & Protections

THIS IS FOR MY PERSONAL INFORMATIONAL PURPOSES ONLY. The information here may not be complete and it is not to be construed as legal advise or opinion. This Is Not A Complete List Of All The Laws Relating To These Subjects. The information provided is not to be considered legal advice, Always discuss matters relating to such and seek advise from your legal advisor or a legal professional. We do not Guarantee or Warranty any information contained in and/or linked to any of our web sites, and we assume no responsibility for the use of such. Please let us know of any incorrect information right away so we can investigate and correct any errors.