Debt settlement practices.

Existing law regulates various practices related to debt, including its sale and collection. Existing law, for purposes of debt collection, defines "consumer debt" as, among other things, money due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction. Existing law, the Check Sellers, Bill Payers and Proraters Law, prohibits a person from engaging in the business of acting as a prorater without first obtaining a license from the Commissioner of Financial Protection and Innovation and defines a "prorater" as, among other things, a person who, for compensation, engages in the business of receiving money for the purpose of distributing the money among creditors in payment or partial payment of the obligations of the debtor. Under existing law, the Consumers Legal Remedies Act, specified unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or that result in the sale or lease of goods or services to any consumer are unlawful. This bill would enact the Fair Debt Settlement Practices Act. The bill would define "debt settlement provider" as a person who, for compensation and on behalf of a consumer, provides debt settlement services, as defined. The bill would define a payment processor as a person who provides payment processing services, as defined. This bill would prohibit a debt settlement provider from engaging in false, deceptive, or misleading acts or practices, as specified, when providing debt settlement services. The bill would require 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. The bill would prescribe requirements for the contents of these contracts. This bill would prohibit certain unfair, abusive, or deceptive practices in connection with debt settlement provider and payment processor activities, some of which would apply to both a debt settlement service provider and a payment processor, and some of which would only apply to a debt settlement service provider, or a payment processor. The bill would authorize 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. The bill would make the notice of termination effective immediately when the notice is made electronically or orally. The bill would make the notice effective upon receipt if the notice is sent via certified mail and would make the notice effective 7 calendar days from the date of mailing if the notice is sent by noncertified mail. The bill would specify requirements for the debt settlement provider upon effective notice of termination, including immediately canceling the contract and notifying the payment processor, as provided. The bill would require a payment processor, upon notice of cancellation from the consumer or debt settlement provider, to stop accumulating service fees, close the settlement account, and deliver to the consumer the balance of the settlement account within 7 days. The bill would require the debt settlement provider to immediately forward any notice of a lawsuit or settlement agreement to the consumer, as provided. The bill would specify the application of its provisions, excluding certain parties. This bill would authorize a consumer to bring a civil action for violation of these provisions. The bill would authorize statutory damages of not more than $5,000, actual damages, injunctive relief, and other relief the court deems proper. The bill would require that a court award costs of the action and reasonable attorney's fees for any successful cause of action. The bill would specify that reasonable attorney's fees may be awarded to a prevailing debt settlement provider or prevailing payment processor upon a finding by the court that the consumer's prosecution of the cause of action was not in good faith. The bill would specify that a debt settlement provider or a payment processor would not be civilly liable under specified circumstances. The bill would require a cause of action to be brought within 4 years of specified dates. The bill would provide that a waiver of its provisions is contrary to public policy and that its provisions are severable.