On April 19, 2021, Assembly Bill No. 1405 (the “Bill”), which would establish the Fair Debt Settlement Practices Act (the “Act”), was heard by the Assembly Committee on Banking & Finance (the “Committee”). The Committee recommended that the Bill be passed as amended and re-referred it to the Assembly Judiciary Committee. The Bill was then read in Assembly a second time and amended as recommended by the Committee. The newly amended Bill is scheduled for its hearing with the Assembly Judiciary Committee on May 4, 2021. 

The Act, as now amended, will retain almost all of the same prohibitions and requirements as its previous version, and given that the definition of “debt settlement provider” has not been amended, frontend companies are still likely to be affected by this proposed legislation. Furthermore, the potential prohibition on the operation of frontend companies in the state remains. In the previous version of the Act, fee caps would have been imposed upon debt settlement providers who distribute consumer payments. The Act has now been amended to remove these fee caps.

If you would like to read the entire text of the newly amended proposed legislation, please click on the following link: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB1405.