California Legislature Declares That Mortgage Debt Is Regulated Under State’s Debt Collection Law
For many years it was unclear whether mortgage debt was covered under the California Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”), which is California’s corollary to the federal Fair Debt Collection Practices Act (“FDCPA”). That issue was resolved on October 7, 2019, when California Governor Gavin Newsom signed into law legislation that expressly includes “mortgage debt” within the Rosenthal Act’s definition of “consumer credit.” Senate Bill 187 (“SB 187”), which is effective January 1, 2020, amends the Rosenthal Act to expressly apply to debt collection activities involving residential mortgage loans. SB 187 also amends the Rosenthal Act so that it now includes attorneys in the definition of “debt collector.” Until the amended Rosenthal Act goes into effect, attorneys are excluded from that definition. Debt collection activities in California generally are subject to the Rosenthal Act if those activities are performed by a debt collector in connection with “consumer debt” or “consumer credit.” Those terms are defined under the statute to mean “money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.”¹ SB 187 retains this definition, but adds “mortgage debt” to the definition of “consumer debt.” SB 187 states that adding “mortgage debt” to the definition of “consumer debt” is not a change in law, but is instead declaratory of existing law. It is not clear from the legislative history to SB 187 how the current legislature determined the intent of the legislature that enacted the Rosenthal Act. In fact, prior to enactment of SB 187, there were conflicting federal district court rulings on this issue. [As reported in Credit & Collection e-newsletter on 10/18/19]