Member login
American Financial Services Association

Letter on CA Small Business Debt Collection

Letter on CA Small Business Debt Collection

AFSA’s State Government Affairs team recently sent a joint comment letter to the California State Senate regarding Senate Bill 1286 and small business debt collection in the state.

In the letter AFSA expresses concern with SB 1286’s inclusion of business debts within the scope of the Rosenthal Act, which is enforced based on the standard of the least sophisticated consumer. According to its definition, a business isn’t classified as a consumer. Since both the Fair Debt Collection Practices Act (FDCPA) and Rosenthal regulate the collection of consumer debts and adhere to the least sophisticated consumer standard, it might be better to explore other approaches to establish additional criteria for collecting commercial debts owed by small businesses.

AFSA also highlights the bill’s definition of “small business,” which encompasses annual gross receipts calculations spanning three years, amounting to $15 million. This appears excessive for defining a “small business” and may not be appropriate for various industries. Additionally, a creditor might lack access to gross receipts to verify this criterion. By integrating small businesses into the Rosenthal Act, SB 1286 implies that the financial sophistication of a small business aligns with the “least sophisticated consumer” standard. However, managing $15 million in gross receipts and employing 100 individuals suggests a significantly higher level of expertise and involvement.

This letter, along with SGA’s other recent letters, can be found on the direct advocacy section of AFSA’s website.

April 18th, 2024

Recent Posts