Policies surrounding the practices of debt collection are getting tougher and tougher, but it may be working to help once-troubled borrowers rebuild their credit history.
Senate Bill 426 in California just passed the Assembly Judiciary Committee this week, which would make it more difficult for credit collectors to go after any left-over debt of people who lost their home to a foreclosure or a short-sale.
The bill would make it more difficult for creditors by prohibiting non-judicial contact with the borrower. The author of the bill, Ellen M. Corbett, Senate Majority Leader, stated this will give borrowers a better chance to repair their credit and “get back on their feet as soon as possible.”
Debt collection practices is an area of legislation that is widely expanding, according to Barbara Mishkin, counsel for Ballard Spahr firm in Philladelphia, Pennsylvania, who has written extensively about the direction the CFPB and other regulatory agencies are taking to enforce stricter consumer protection laws.
She says that the current trend will require debt buyers (those who own the debt) to have more complete documentation of the original debt in order to lawfully collect. This will be difficult if the debt has been bought and sold multiple times, she said.