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<ns0:Id>20250AB__116698AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2025-02-21</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>AMENDED_SENATE</ns0:ActionText>
<ns0:ActionDate>2025-07-07</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Valencia</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Valencia</ns0:Name>
</ns0:Legislator>
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<ns0:Title>An act to amend Sections 1788.301, 1788.302, 1788.304, and 1788.305 of the Civil Code, relating to commercial debt. </ns0:Title>
<ns0:RelatingClause>commercial debt</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Fair Debt Settlement Practices Act.</ns0:Subject>
</ns0:GeneralSubject>
<ns0:DigestText>
<html:p>Existing law, the Fair Debt Settlement Practices Act, prohibits a debt settlement provider from engaging in false, deceptive, or misleading acts or practices, as specified, when providing debt settlement services. Existing law requires a debt settlement provider to provide a consumer with certain disclosures along with an unsigned copy of the proposed written contract between the debt settlement provider and the consumer and prohibits certain unfair, abusive, or deceptive practices in connection with payment processor activities. Existing law authorizes a consumer to terminate a contract for debt settlement services at any time without a fee or penalty of any sort by notifying the debt settlement provider, at which time the debt settlement provider is required to, among other things, provide, within 3 business days, a detailed accounting of any amounts received or expected to be
received by the debt settlement provider from the consumer’s settlement account after the debt settlement provider received effective notice of request for cancellation. Existing law authorizes a consumer to bring a civil action for violation of these provisions.</html:p>
<html:p>This bill would expand the protections for consumers described above to include commercial debtors, as defined, and make other, nonsubstantive and related changes.</html:p>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_6C5FDE45-A471-4668-8865-D61D54DE7DF7">
<ns0:Num>SECTION 1.</ns0:Num>
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Section 1788.301 of the
<ns0:DocName>Civil Code</ns0:DocName>
is amended to read:
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<ns0:LawSection id="id_A9879F89-3F4F-4002-AC81-749B6CABF1D0">
<ns0:Num>1788.301.</ns0:Num>
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<html:p>For purposes of this title:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
“Commercial loan” means a loan of a principal amount of five thousand dollars ($5,000) or more, or any loan under an open-end credit program,
whether secured by either real or personal property, or both, or unsecured, the proceeds of which are intended by the borrower for use primarily for other than personal, family, or household purposes.
</html:p>
<html:p>For purposes of determining whether a loan is a commercial loan, the lender may rely on any written statement of intended purposes signed by the borrower. The statement may be a separate statement signed by the borrower or may be contained in a loan application or other document signed by the borrower. The lender shall not be required to ascertain that the proceeds of the loan are used in accordance with the statement of intended purposes.</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
“Commercial
debtor” means a person who satisfies both of the following conditions:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The person owes commercial debt in an amount equal to or less than five hundred thousand dollars ($500,000) and is responsible for repaying that debt.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The
person is not a business entity organized for profit with annual gross receipts of more than the annual gross receipt level established for a “small business” as biennially adjusted by the Department of General Services in accordance with Section 14837 of the Government Code.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
“Debt settlement provider” means a person who, for compensation and on behalf of a consumer or commercial debtor, provides debt settlement services.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
“Debt settlement services” means any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Providing advice, or offering to act or acting as an intermediary,
including, but not limited to, offering debt negotiation, debt reduction, or debt relief services between a consumer and one or more of the consumer’s creditors or between a commercial debtor and one or more of the commercial debtor’s creditors, if the primary purpose of that advice or action is to obtain a settlement for less than the full amount of the debt.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Advising, encouraging, or counseling a consumer or commercial
debtor to accumulate funds in an account for future payment of a reduced amount of debt to one or more of the consumer’s or commercial debtor’s creditors.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
“Settlement account” means a depository account established and used for the purpose of holding funds of a consumer or commercial debtor to be distributed to a creditor in the event of a settlement of a consumer’s or commercial
debtor’s debt with the creditor.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
“Consumer” means a person who is allegedly legally responsible for a consumer debt.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
“Person” means a natural person or entity, whether a corporation, partnership, association, trust, limited liability company, cooperative, or other organization.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
“Creditor” means the person who originated the debt or is assigned, or has purchased for collection, a debt for which a consumer or commercial
debtor
is allegedly legally responsible.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
“Commercial debt” means money, whether in principal, interest, fees, or other charges, that is due or owing or alleged to be due relating to one or more commercial loans.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
“Consumer debt” means money, whether in principal, interest, fees, or other charges, which is due or owing or
alleged to be due or owing from a natural person to another person and incurred primarily for personal, family, or household purposes.
</html:p>
<html:p>
(k)
<html:span class="EnSpace"/>
“Payment processor” means a person who provides payment processing services.
</html:p>
<html:p>
(
<html:i>l</html:i>
)
<html:span class="EnSpace"/>
“Payment processing services” means accepting, maintaining, holding, or distributing funds, or facilitating the acceptance, maintenance, holding, or distribution of funds, on behalf of a consumer or commercial debtor for the purpose of facilitating debt settlement services.
</html:p>
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</ns0:BillSection>
<ns0:BillSection id="id_28B63B8F-4C05-454D-9AC0-9CD54729DF96">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 1788.302 of the
<ns0:DocName>Civil Code</ns0:DocName>
is amended to read:
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<ns0:LawSection id="id_599C583D-0941-4551-BD37-4520359484C9">
<ns0:Num>1788.302.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
A debt settlement provider shall not engage in false, deceptive, or misleading acts or practices when providing debt settlement services. Without limiting the general application of the foregoing, an act or practice is false, deceptive, or misleading, in connection with providing debt settlement services, if the act or practice consists of any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Making or permitting another entity to publicly make on behalf of the debt settlement provider, a statement or representation that is false, deceptive, or misleading.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Posting directly, or indirectly causing to be posted, an online review or ranking on
an internet website if the debt settlement provider, or its agent, provided anything of value in exchange for favorable treatment in that review or ranking.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Omitting any material information.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
A debt settlement provider shall provide to the consumer or commercial debtor the following disclosures along with an unsigned copy of the written contract proposed to be entered into between the debt settlement provider and the consumer or commercial debtor. A fully executed copy of the contract shall be delivered to the consumer or commercial debtor by the debt settlement provider immediately after the debt settlement provider receives the contract.
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The contract shall be preceded by a disclosure that contains all of the following information in conspicuous boldface type that is larger than the typeface provided in the contract typeface:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
There is no guarantee that any particular debt or all of the consumer’s
or commercial debtor’s enrolled debts will be reduced, eliminated, or otherwise settled.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The deposits made pursuant to the contract will not be distributed to the creditor until a settlement is obtained. This may take months to achieve.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
If the consumer or commercial debtor stops paying any creditor, any of the following may occur:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The creditors may still try to collect.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The creditors may sue.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
If a creditor obtains a judgment against the consumer or commercial debtor, the creditor may garnish the consumer’s wages or levy the consumer’s or commercial debtor’s bank account or accounts, or both garnish the consumer’s wages and levy the consumer’s bank account or accounts.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
The consumer’s or commercial debtor’s credit score or credit rating may be negatively impacted.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Failing to pay debts on time may adversely affect the consumer’s or commercial
debtor’s credit rating or credit scores.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Specific results cannot be predicted or guaranteed, and the debt settlement provider cannot require a creditor to negotiate or settle a debt.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
A consumer or commercial debtor may cancel the debt settlement contract at any time without any penalty.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
Debt settlement services may not be suitable for all individuals.
</html:p>
<html:p>
(H)
<html:span class="EnSpace"/>
Bankruptcy may provide an alternative to debt settlement.
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Canceled debt may be counted as income under federal tax law, and the consumer or commercial debtor may have to pay income taxes on the amount of forgiven or reduced debt.
</html:p>
<html:p>
(J)
<html:span class="EnSpace"/>
Many sources of income may be protected from debt collection. Common sources of protected income include disability insurance benefits, life insurance benefits, military benefits, pension plans, retirement benefits, public assistance, social security benefits, supplemental security income (SSI), unemployment benefits, veterans benefits, workers compensation, and student aid. See form EJ-155 from the Judicial
Council for a complete list.
</html:p>
<html:p>
(K)
<html:span class="EnSpace"/>
The number of months estimated to enter into settlement agreements that completely resolve all enrolled debts.
</html:p>
<html:p>
(L)
<html:span class="EnSpace"/>
All conditions that the consumer or commercial debtor must satisfy before the debt settlement provider will make a settlement offer to a creditor.
</html:p>
<html:p>
(M)
<html:span class="EnSpace"/>
Whether the debt settlement provider pays or receives referral fees.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Each contract between a consumer or commercial
debtor and debt settlement provider:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Shall list each debt to be serviced, including, for each debt, the name of the creditor and the total amount of the debt. The total amount of the debt may be based on either a billing statement for the debt or information in the consumer’s consumer report, as that term is defined under the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.). The billing statement or consumer report must have been issued within 30 calendar days of the date of the contract.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Shall provide the estimated period of time it will take the consumer or commercial
debtor to accumulate in a settlement account the amount of money estimated to be required to settle all debts.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Shall provide the minimum amount of time necessary to achieve the represented results.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Shall provide, in terms easily understood by the least sophisticated consumer or commercial debtor, the method that the debt settlement provider will use to calculate the charges and fees for debt settlement services.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Shall provide the name and mailing address of the debt settlement provider and of the consumer or commercial debtor.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
Shall provide a telephone number at which the consumer or commercial debtor may speak, during normal business hours, with a live representative of the debt settlement provider during normal business hours who is able to access information about the consumer’s or commercial
debtor’s account.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
Shall be provided to the consumer or commercial debtor
in English and in the language in which it was negotiated or in which the debt settlement services were offered, if that language is one of the languages set forth in Section 1632.
</html:p>
<html:p>
(H)
<html:span class="EnSpace"/>
Shall not require a compulsory agreement with any other party. A debt settlement provider may require that the consumer or commercial debtor obtain a dedicated settlement account and provide a list of preferred vendors, however a payment processor who receives compensation from the consumer or commercial
debtor for payment processing services must supply its own contract to the consumer or commercial debtor
for engagement.
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
Shall not be entered into by a consumer or commercial debtor who is not already allegedly legally responsible for all the debt that will be enrolled in the debt settlement services. In the event multiple consumers or commercial debtors engage in a single contract for debt settlement services, if any consumer or commercial
debtor is not proficient in English and speaks a language set forth in Section 1632, a translated copy of the disclosures and contract shall be provided to the consumer or commercial debtor in that language and in a manner that complies with this subdivision.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A debt settlement provider shall provide the disclosures and unsigned copy of the written contract required by this subdivision to the consumer no less than three calendar days before the execution of the contract by the consumer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A debt settlement provider shall not communicate with any of a consumer’s creditors until five calendar days after full execution of a contract for debt settlement services.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
This paragraph does not apply to commercial debt.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
A debt settlement provider and a payment processor shall not engage in unfair, abusive, or deceptive acts or practices when providing debt settlement services or payment processing services. Without limiting
the general application of the foregoing, in connection with providing debt settlement services and payment processing services, an act or practice is unfair, abusive, or deceptive if the act or practice consists of any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
For a debt settlement provider and payment processor, offering to lend money or extend credit to the consumer or commercial debtor, or purchase an enrolled debt.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For a debt settlement provider and in relation to a consumer debt, requesting or receiving payment
of any fee or consideration for debt settlement services, unless and until all of the following occur:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The debt settlement provider has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement approved and executed by the consumer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The consumer has made at least one payment pursuant to that settlement agreement between the consumer
and the creditor.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
To the extent that consumer debts enrolled in a debt settlement service are negotiated, settled, or modified individually, the fee or consideration must either:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Bear the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount. The individual debt amount and the entire debt amount are those owed at the time the debt was enrolled in the service.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Represent a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or
alteration. The percentage charged cannot change from one individual debt to another. The amount saved is the difference between the amount owed at the time the debt was enrolled in the service and the amount agreed upon pursuant to the settlement agreement between the consumer and the creditor to satisfy the debt.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For a debt settlement provider and in relation to a commercial debt, collecting or retaining fees in excess of the difference between the amount owned at the time the commercial debt was enrolled in the service and the amount agreed upon pursuant to any settlement
agreement between the commercial debt and the creditor to satisfy the commercial debt.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
For a payment processor, facilitating the distribution of payment of any fee or consideration for debt settlement services before the requirements set forth in paragraph (2) have been met.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
For a payment processor, failing to distribute a statement of accounting to a consumer or commercial
debtor at least once per month while the consumer or commercial
debtor is engaged with the payment processor, as well as on or before the fifth business day after a consumer or commercial debtor requests a statement of accounting.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
When an accounting is available to the consumer or commercial debtor online, the payment processor must make prominent and ongoing the ability for a consumer or commercial
debtor to opt in to a paper accounting to be mailed to the consumer or commercial debtor
under the terms of this section.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The statement of accounting must contain the following information to the extent applicable:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A list of deposits made into, and withdrawals from, the consumer’s or commercial debtor’s settlement account during the previous month.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The fees that the debt settlement provider has billed and collected in connection with each of the debts settled during the previous month.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
The fees that the payment
processor has billed and collected in connection with payment processing services during the previous month.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
The amount of money that the consumer or commercial debtor holds in the consumer’s or commercial debtor’s
settlement account.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Within five business days of a consumer’s or commercial debtor’s request, a payment processor shall provide a consolidated statement of accounting containing all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A list of deposits made into, and withdrawals from, the consumer’s or commercial debtor’s settlement account starting from the outset of the contract.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A list of fees that the debt settlement provider has billed and collected in connection with each of the debts settled starting from the outset of the contract.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
A list of fees that the payment processor has billed and collected in connection with payment processing services starting from the outset of the contract.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
The amount of money that the consumer holds in the consumer’s settlement account or the amount of money that the commercial debtor holds in the commercial
debtor’s settlement account.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
For a debt settlement provider, failing to distribute a statement of accounting to a consumer or commercial debtor at least once per month while the contract
for debt settlement services is in effect, as well as on or before the fifth business day after a consumer or commercial
debtor
requests a statement of accounting.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
When an accounting is available to the consumer or commercial debtor online, the debt settlement provider must make prominent and ongoing the ability for a consumer or commercial debtor to opt in to a paper accounting to be mailed to the consumer or commercial
debtor under the terms of this section.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The statement of accounting must contain the following information to the extent applicable:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The amounts, dates, and creditors associated with each settlement obtained by the debt settlement provider on behalf of the consumer or commercial debtor.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The fees that the debt settlement provider has billed and collected in connection with each of the debts settled.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
With respect
to any debt settled by the debt settlement provider on behalf of the consumer or commercial
debtor, all of the following information:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
The total amount of money that the consumer or commercial debtor paid or will pay to the creditor to settle the debt.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
The amount of the debt at the time the debt settlement provider and the consumer or commercial debtor entered into the contract.
</html:p>
<html:p>
(III)
<html:span class="EnSpace"/>
The amount of the debt at the time the creditor agreed to settle the debt.
</html:p>
<html:p>
(IV)
<html:span class="EnSpace"/>
The amount of compensation that the debt settlement provider received, or may receive, to settle the debt.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A consumer or commercial debtor may terminate a contract for debt settlement services at any time without a fee or penalty of any sort by notifying the debt settlement provider in writing, electronically, or orally.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The notice described in paragraph (1) shall be deemed effective immediately upon being
sent if made electronically, including via text message or orally. When the notice is sent via certified mail, notice shall be deemed effective upon receipt. When written notice is sent via noncertified mail, notice shall be deemed effective seven calendar days from the date of mailing.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Upon effective notice of request for cancellation of the contract, the debt settlement provider shall do all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Immediately cancel the contract.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Immediately notify the payment processor that the consumer or commercial debtor has
canceled the debt settlement services and transmit to the payment processor the consumer’s or
commercial debtor’s instruction to close the settlement account and deliver the balance in the settlement account to the
consumer or commercial debtor.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Provide, within three business days, a detailed accounting of any amounts received or expected to be received by the debt settlement provider from the consumer’s or commercial debtor’s settlement account after the debt settlement provider received effective notice of request for cancellation. The detailed accounting shall include an explanation of how the amounts were calculated in accordance with the
requirements of paragraph (2) of subdivision (c).
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Provide within three business days copies of all documents, notices, or other communications it has received from any creditor on behalf of the consumer or commercial debtor.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The items in subparagraphs (C) and (D) of paragraph (3) shall be sent by United States mail or by electronic means reasonably calculated to reach the consumer.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Upon receipt of notice of cancellation of the contract from the consumer, commercial
debtor, or debt settlement provider, the payment processor shall stop accumulating service fees, close the settlement account, and deliver to the consumer or commercial debtor the balance in the settlement account within seven days. The payment processor shall provide, within 10 business days, a detailed accounting of the amount refunded and any amounts sent to the debt settlement provider after or upon the payment processor receiving notice of the cancellation of the contract.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
A debt settlement provider shall immediately forward the following notices to the consumer or commercial
debtor, either by United States mail or by electronic means reasonably calculated to reach the consumer or commercial debtor:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Any notice of a lawsuit on an enrolled debt from any person other than the consumer or commercial debtor.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Any settlement agreement that a debt settlement provider has negotiated on the consumer’s or commercial
debtor’s behalf.
</html:p>
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</ns0:BillSection>
<ns0:BillSection id="id_08F10DEA-4409-4937-BEE0-C3D2315A470D">
<ns0:Num>SEC. 3.</ns0:Num>
<ns0:ActionLine action="IS_AMENDED" ns3:href="urn:caml:codes:CIV:caml#xpointer(%2Fcaml%3ALawDoc%2Fcaml%3ACode%2Fcaml%3ALawHeading%5B%40type%3D'DIVISION'%20and%20caml%3ANum%3D'3.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'PART'%20and%20caml%3ANum%3D'4.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'TITLE'%20and%20caml%3ANum%3D'1.6C.17.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'CHAPTER'%20and%20caml%3ANum%3D'2.'%5D%2Fcaml%3ALawSection%5Bcaml%3ANum%3D'1788.304.'%5D)" ns3:label="fractionType: LAW_SECTION" ns3:type="locator">
Section 1788.304 of the
<ns0:DocName>Civil Code</ns0:DocName>
is amended to read:
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<ns0:Fragment>
<ns0:LawSection id="id_9D273962-7559-4C36-8E0A-5B811F1B1826">
<ns0:Num>1788.304.</ns0:Num>
<ns0:LawSectionVersion id="id_F12323E1-AE86-446A-8751-C394034BCF50">
<ns0:Content>
<html:p>This title does not apply to any of the following:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
Any person, or the person’s authorized agent, doing business under license and authority of the Commissioner of Financial Protection and Innovation under Divisions 1.1 (commencing with Section 1000), 2 (commencing with Section 5000), and 5 (commencing with Section 14000) of the Financial Code or under any law of this state or of the United States relating to banks or credit unions.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Any nonprofit business organization that is certified as tax-exempt by the Internal Revenue Service and that does not receive compensation from the consumer for providing debt settlement services.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
Attorneys and law firms that meet all of the following criteria:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The attorney or law firm does not charge for services regulated by this title.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The fees and disbursements are not charges or costs shared, directly or indirectly, with a debt settlement provider.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Any of the following is true:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The attorney or law firm is retained by a consumer for the purpose of legal representation in consumer debt litigation or by a commercial
debtor for the purpose of legal representation in debt litigation.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The attorney or law firm provides debt settlement services pursuant to representation by retainer for a debt collection matter that does not involve consumer debt or debt incurred by a commercial debtor.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The attorney or law firm is retained by the consumer primarily for purposes other than the settlement of consumer debt or by the commercial
debtor for purposes other than the settlement of debt incurred by the commercial debtor.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
A merchant-owned credit or creditors association, or a member-owned, member-controlled, or member-directed association whose principal function is that of servicing the community as a reporting agency.
</html:p>
</ns0:Content>
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</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_FBA0F46C-C2FE-4466-99E6-186D6BE1835F">
<ns0:Num>SEC. 4.</ns0:Num>
<ns0:ActionLine action="IS_AMENDED" ns3:href="urn:caml:codes:CIV:caml#xpointer(%2Fcaml%3ALawDoc%2Fcaml%3ACode%2Fcaml%3ALawHeading%5B%40type%3D'DIVISION'%20and%20caml%3ANum%3D'3.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'PART'%20and%20caml%3ANum%3D'4.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'TITLE'%20and%20caml%3ANum%3D'1.6C.17.'%5D%2Fcaml%3ALawHeading%5B%40type%3D'CHAPTER'%20and%20caml%3ANum%3D'3.'%5D%2Fcaml%3ALawSection%5Bcaml%3ANum%3D'1788.305.'%5D)" ns3:label="fractionType: LAW_SECTION" ns3:type="locator">
Section 1788.305 of the
<ns0:DocName>Civil Code</ns0:DocName>
is amended to read:
</ns0:ActionLine>
<ns0:Fragment>
<ns0:LawSection id="id_9E2ACFDA-44B3-4C91-A0AF-5B1F1F1A3AA0">
<ns0:Num>1788.305.</ns0:Num>
<ns0:LawSectionVersion id="id_D326B078-36D5-4EAA-95CB-61D8F9278BFF">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
A debt settlement provider and a payment processor shall comply with this title.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
A consumer or commercial debtor may bring a cause of action against a debt settlement provider and a payment processor for violation of any provision of this title in order to recover or obtain any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Damages in an amount equal to the sum of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Statutory damages in an amount to be determined by the court of no less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) per violation of this title.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Any actual damages sustained by the consumer or commercial debtor as a result of the violation.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Injunctive relief.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Any other relief that the court deems proper.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In the case of any successful cause of action under this section, the court shall
award costs of the action, together with reasonable attorney’s fees as determined by the court.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Reasonable attorney’s fees may be awarded to a prevailing debt settlement provider and a prevailing payment processor upon a finding by the court that the consumer’s or commercial debtor’s prosecution of the cause of action was not in good faith.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
A debt settlement provider or a prevailing payment processor shall have no civil liability for damages under this section if the debt settlement provider or a prevailing payment processor shows by a preponderance of evidence that the violation
was not intentional and resulted from a bona fide error, and occurred notwithstanding the maintenance of procedures reasonably adopted to avoid any error.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
A cause of action brought under this section shall be brought within four years of the latter of the following dates:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The last payment by or on behalf of the consumer or commercial debtor.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The date on which the consumer discovered or reasonably should have discovered the facts giving rise to the consumer’s or commercial
debtor’s
claim.
</html:p>
</ns0:Content>
</ns0:LawSectionVersion>
</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
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</ns0:MeasureDoc>
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