On June 3, 2020 the California Prorater Bill No. 2524, passed the Appropriations Committee and moved to the floor of the California State Assembly for its second reading. On June 4, 2020 the Bill was amended removing the 5% fee cap that was in the original version of the proposed Bill.
At the present time, the current version of the proposed Bill includes certain disclosure requirements relating to fees, which in pertinent part include, “A copy of each form of agreement and the schedule of fees and charges that the applicant will use with debtors.”; “Disclose the amount of the prorater’s charges and fees.”; “Disclose, in terms easily understood by an unsophisticated consumer, the method that the prorater will use to calculate the charges and fees for debt settlement services.”
At the last hearing held before the Banking and Finance Committee, the sponsor of the bill, Assemblywoman Buffy Wicks, mentioned that the contract voiding provision would be taken out of the bill. Currently, the contract void provision is still within the amended Bill and reads as follows, “[p]rovides that if a debtor is sued by a creditor for a debt that is included in the contract with the prorater, the prorater’s contract with the debtor shall be void, and the prorater shall return to the debtor all charges and payments, excluding payments distributed to a creditor, received from the debtor for all debts placed with the prorater for settlement.”
As it stands today the Bill is currently on the floor of the California State Assembly for its Second Reading. We will continue to update you on its trajectory through the California Legislature.