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Consumer Economic Protection Act of 2009 (SB 974)

October 1, 2009
Mortgage Lending
Bill Law

Full Session Law

This law, which went into effect October 1, 2009, strengthened consumer protections in the areas of foreclosure and debt buying activities.

Foreclosure Protections

Under this law, the clerk of the court may delay foreclosure hearings for owner-occupied residences by up to 60 days, if the clerk finds good cause to believe the additional time has a reasonable likelihood of allowing resolution of the delinquency without foreclosure.

If the home is owner-occupied, the clerk is to inquire about the efforts made by the mortgagee or loan servicer to communicate with the homeowner and resolve the deficiency, unless such information has been submitted in advance.

In deciding whether to postpone the hearing, the clerk may consider factors including:

  • Whether the mortgagee or loan servicer has offered an opportunity to resolve the deficiency through forbearance, loan modification or other resolution plan
  • Whether the mortgagee or loan servicer has engaged in "actual responsive communication" with the homeowner
  • Whether the homeowner has indicated the intent and ability to make future payments under a foreclosure resolution plan
  • Whether good faith voluntary resolution efforts may resolve the matter
  • Any other good cause for granting additional time

Debt Buying Protections

This law also adds consumer protections against debt buyers. Debt buyers are defined as persons engaged in purchasing delinquent or charged-off consumer loans and debts in order to collect on those debts.

Debt buyers are required to provide receipts for payments received from debtors, which must include specified information, including the original creditor's information.

In addition to the practices (previously called "unconscionable means") already prohibited by prior law, the following are added to the non-exhaustive list of unfair practices in collecting debts:

  • Attempting to collect on a debt when the debt buyer knows, or reasonably should know, that collection is barred by the statute of limitations
  • Attempting to collect on a debt without valid documentation to show the amount of the debt, and verify that the debt buyer owns the debt
  • Bringing suit or initiating an arbitration proceeding to collect on a debt without giving written notice to the debtor at least 30 days before filing

If a collection agency violates the act, it is liable to the debtor for the actual damages sustained, as well as a penalty of between $500 and $4,000 (previously the minimum and maximum were $100 and $2,000, respectively).