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What Businesses and Consumers Should Know about California’s New Debt Settlement Law

Someone trying to figure out his debt after the debt settlement law

After years of economic upheaval, many people throughout California are facing significant debt and have turned to debt settlement companies for assistance. However, some debt settlement companies do not have their clients’ best interests at heart, and a new law in California seeks to protect consumers that have been preyed upon and regulate this industry. An experienced California attorney like those at the Law Offices of Andrew Ritholz can assist businesses and consumers with navigation of the new debt settlement law in order to help alleviate your debt problems. To learn more, call or contact our office today to schedule a consultation of your case.

What is AB 1405?

The new debt settlement law in California is known as AB 1405, or the Fair Debt Settlement Practices Act. The new law does not affect how debt settlement companies operate, but it does provide regulation to the industry. AB 1405 adopts some of the federal language that protects consumers who use debt settlement companies that do business over state lines, which subjects them to federal law, and applies it to companies that only do business in California. The new law applies to both debt settlement providers in the state as well as payment processors that are providing those services within the debt settlement industry.

The Fair Debt Settlement Practices Act also applies new rules that are meant to protect consumers who go to debt settlement companies for help. One new stipulation is that a debt settlement company may have to provide advice to consumers about how they can reduce their debt. The company must also fully explain the potential pros and cons of engaging with their services and be transparent about the downsides of this type of program if the customer cannot uphold their side of the agreement. A debt settlement company is also prohibited from using false, deceptive, or misleading acts or practices under the new law, and it requires debt settlement providers to send disclosures and contract information to their customers.

The Fair Debt Settlement Practices Act also allows a customer to terminate a contract with a debt settlement provider at any time, and it provides a three-day window for a customer to consider the terms of a contract with a debt settlement company. Finally, the new law provides a private right of action for customers if they believe that debt settlement companies have violated provisions of the Fair Debt Settlement Practices Act. To learn more about the new debt settlement law in California and how it may affect your situation, talk to our office today.

Call or Contact the Law Offices of Andrew Ritholz

Do you have more questions about the new debt settlement law in California and how it could potentially impact your situation as a consumer or a business? If so, the experienced and qualified attorneys at the Law Offices of Andrew Ritholz are here to help. Call the office or contact us today to schedule a consultation.

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