WBK Industry News - State Regulatory Developments

CA Laws for Debt Collection, Money Transfer Services, and Consumer Subscription Services Signed by Governor Newsom

California enacted six new laws in October expanding rights for consumers, including new disclosure and consumer notification requirements for debt collection and subscription services.  The new laws apply to subscription services, consumer warranties, money transfer services, and debt collection and settlement services, among others.

The laws expand consumer rights to receive information, including prior notice of renewed subscriptions, rights to verify debt collectors and delinquent debt information, prohibitions on the sale of consumer debt without notice to the debtor, and provide consumers a three-day period to review a debt settlement contract.  The laws were signed on October 4, 2021.  The summary below describes each law and the key provisions introduced:

  • AB 390: Advertising, Automatic Renewal and Continuous Service Offers; Notice and Online Termination.  The law revises existing provisions regarding automatic renewal offers and continuous service offers specifically targeting trial offers lasting 31 or more days.  The new law requires businesses to provide notice to the consumer at least 3 days before, but no more than 21 days after, the expiration of the time where the consumer would receive a free gift, trial, or promotional or discounted price.  Where the automatic renewal or continuous service offer involves an initial term of one year or longer, the law requires notice to be provided at least 15 days, and no more than 45 days before the renewal of the service.  The new notice has specific statutory requirements.  These provisions go into effect July 1, 2022.
  • AB 1221: Consumer Warranties; Service Contracts; Cancellation; Disclosures.  Month-to-Month or periodic service contracts must now clearly and conspicuously disclose to the buyer that the contract will continue until canceled by the buyer or the service contractor and provide contact information to cancel the service contract.  Clear and conspicuous is precisely defined in the statute.  The law also exempts vehicle service contracts from this requirement.  These provisions go into effect for service contracts entered on or after January 1, 2022.
  • AB 1320: Money transmission; Customer Service.  Money transmission licensees will be required to display a toll-free telephone number to address customer service issues and provide live customer service assistance to consumers starting July 1, 2022.  The law requires licensees to operate the customer service line 10 hours per day Monday through Friday, excluding federal holidays, and disclose those dates and times to the customer.  Specific receipt language is now also required, including displaying the telephone number on the receipt to the customer at the time of the money transmission transaction.
  • AB 1405: Fair Debt Settlement Practices Act.  The new law applies to debt settlement providers who provide debt settlement services, which may include providing advice to a consumer to reduce debt.  Payment processors providing payment processing services are also subject to the Act.  It prohibits false, deceptive, or misleading acts or practices in connection with debt settlement services and requires providers to send disclosures and contract information to consumers.  Among other items, the law authorizes a consumer to terminate a contract for debt settlement services at any time, allows the consumer three days to consider the contract terms, and provides a private right of action.
  • SB 531: Consumer Debt.  Under the law, debt collectors assigned delinquent debt are required to provide general information regarding the debt to the debtor upon request.  In addition, the debt collector is required to provide a specified notice in its first written communication with a debtor and requires the debt collector to maintain an active postal address.  A debt buyer who complies with the Debt Collecting Licensing Act is deemed to comply with these provisions.  Failing to comply with the notice provisions prohibits written statements seeking collection of the delinquent debt.  The law becomes effective on July 1, 2022.
  • AB 1177: California Public Banking Option Act.  The Act creates a Commission to determine whether a federally insured transaction account could be created for California Consumers using a commission of relevant experts to conduct a market analysis.  The Act is not operative until appropriations are made by the Legislature, but requires the market analysis to be completed by July 1, 2024.