California Proposed Prorater Bill No. 2524, Amended on May 12, 2020.


*Hearing on Proposed Prorater Bill No. 2524 Still Scheduled in California State Assembly, Banking and Finance Committee for Tuesday, May 19th at 11:30 am PST. 

Procedural Summary:

On May 5, 2020 Bill No. 2443 (Amending the Consumer Protections Act) went to the Committee on Privacy and Consumer Protection and a vote was held, the Committee members decided that the related legislation currently pending in the CA Assembly needed to be amended before its hearing on May 19th. “6) Related legislation: AB 2524 (Wicks) would amend the Check Sellers, Bill Payers and Proraters Law to, among other things, clarify the definition of “prorater” to include all of the entities engaged in debt settlement, create a private right of action for consumers to sue proraters and debt settlement companies for damages, and require regular reporting of information by proraters. This bill is currently in the Assembly Banking & Finance Committee.” Therefore Bill No. 2524 has been amended and contains a few language changes and revisions from what we first discussed on April 28th during our Webinar. 

Synopsis of Bill No. 2524 as it Currently Stands with Amendments:

  • Proposed bill applies to persons who engage in this conduct on behalf of a debtor and applies to persons who solicit money or evidence thereof, or who process related payments.
  • Proposed bill exempts attorneys if the attorney or law firm is retained by the debtor primarily for purposes other than the settlement of consumer debt. 
  • Proposed bill would also exempt certain nonprofit business organizations.
  • Proposed bill would require a statement listing each civil or criminal case or administrative action relating to financial fraud or misuse brought against the applicant or any of its officers, directors, or owners and, 
  • Proposed bill would require an applicant to submit a full set of the applicant’s fingerprints for purposes of obtaining national criminal history records from the FBI.
  • Proposed bill would set fee caps at 5% of the savings from a completed settlement, calculated as the difference between the amount of debt at enrollment and the settlement amount. 
  • Proposed bill would void the contract if a debtor is sued by a creditor for a debt that is included in the contract with the prorater. 
  • Proposed bill would also authorize a debtor to terminate a contract with a prorater at any time, subject to a certain notice requirement.
  • Proposed bill would require that a contract between a debtor and a prorater comply with existing requirements and contain additional disclosures including that:
    • despite the best efforts of the prorater, there is no guarantee that any particular debt or all debt will be reduced or eliminated, 
    • a statement of accounting to the debtor containing specified information at least once a month while a contract is in effect, and on or before the 5th business day after a debtor requests a statement of accounting, 
    • authorize a debtor to bring a civil action for a violation of those contractual disclosure and other requirements; and  
    • require a prorater to make a specified annual report to the department and would require the commissioner to suspend the license of a prorater during any period of noncompliance with that reporting requirement.
  • Proposed bill would prohibit a prorater from engaging in posting, or directly or indirectly causing to be posted, an online review or ranking on an internet website if the prorater or its agent provided anything of value in exchange for favorable treatment in that review or ranking.

On May 13th Bill No. 2524 was re-referred to the Committee on Banking and Finance with these amendments included before its scheduled committee hearing on May 19th. Bill No. 2525 has not been heard in Committee yet, therefore, as we have mentioned in previous regulatory updates, if you believe that your business will be negatively impacted if this bill passes as it is currently written, the California State Legislature recommends that you send letters of opposition outlining your position. 

We will continue to update you on how this bill continues to move through the California State Legislature.

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