Credit cards
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We write in response to the May 13 opinion piece by Nestor Valencia about Assembly Bill 1405, which would protect millions of Californians who have had to take on credit card debt during the pandemic. 

AB 1405 will provide desperately needed guardrails for the “debt settlement” industry. Legal aid providers — the sponsors of the bill — have seen a worrying increase in the number of low-income clients who have become victims of debt settlement companies that have failed to save them money and made their financial situations worse. Almost all of these clients are from low income communities and communities of color. 

In 2019, the National Black Caucus of Legislators issued a “Resolution to Protect Minority Communities from Debt Settlement Companies.” Signed by legislators from around the nation, the resolution calls upon states and the federal government to review and adequately regulate the industry’s practices. 

A debt settlement program is a risky proposition for any consumer. The Federal Trade Commission warns that many people are unable to complete programs, that enrolling in programs generally results in damage to your credit score, and that enrollees are frequently sued by their creditors. And because many companies charge high fees, there is no guarantee that even someone who completes the 3-4 year program actually saves money.

The federal Consumer Financial Protection Bureau and the California Department of Financial Protection and Innovation have both recently brought cases against debt settlement companies that were ripping off consumers. 

Our legislature needs to lay down some rules for debt settlement companies in California. Fortunately, AB 1405 will do this by requiring debt collectors to disclose the risks of the program. People will be informed of the actual costs of enrolling and be given a chance to hold debt settlement companies accountable if they act badly. That’s the kind of law that’s already in place in dozens of other states, and it’s exactly the law California needs. 

Ted Mermin
California Low-Income Consumer Coalition

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