Publication
California’s Recent Expansion of the Rosenthal Fair Debt Collection Practices Act to Commercial Debts
California legislators recently passed Senate Bill 1286, a new law which expands the scope of the Rosenthal Fair Debt Collection Practices Act.1 The new law goes into effect on July 1, 2025, and will change the landscape for commercial debt lenders operating in California.
The Rosenthal Fair Debt Collection Practices Act (Act) presently prohibits debt collectors2 from engaging in unfair or deceptive acts or practices in the collection of consumer debts only. The recently enacted legislation broadens the scope of the Act to also prohibit certain practices undertaken in the collection of commercial debts which were incurred by reason of a commercial credit transaction entered in, renewed, sold, or assigned on or after July 1, 2025, totaling an aggregate of no more than $500,000.00.3
As a result of this expansion, commercial lenders should familiarize themselves with the many requirements of the Act, which include, but are not limited to, the following:
- Prohibitions against employing certain conduct when collecting or attempting to collect commercial debt, which conduct includes:
- Threats to take action that have no colorable basis for being authorized or permitted by existing laws (i.e., criminal arrest of debtor, garnishment of assets when not appropriate to do so, use of physical force, and/or other means to cause harm to the person, reputation, or property of the debtor);4
- Harassing behaviors (i.e., use of obscene language, placing telephone calls to debtor without disclosing the caller’s identity and/or misrepresenting the identity of the caller, causing telephone to ring repeatedly to cause annoyance to the debtor, and/or otherwise communicating with debtor at such frequent intervals as to be unreasonable);5
- Communicating with third parties, or displaying information to third parties about the commercial debt in a way that is intended to embarrass debtor, including communication with debtor’s employers or members of debtor’s family (with few exceptions), and communicating to any person any list of debtors disclosing the nature of the debt (i.e., deadbeat lists);6
- Falsely representing the status of the debt collector as an attorney, or consumer reporting agency, and/or that communications are being sent on behalf of a legal department or in connection with a legal proceeding;7
- Seeking to collect amounts that the debt collector is not entitled to at law (i.e., fees and costs, time-barred debts8).
- Requirement to include in first written communication with debtor, in 12-point type font, a notice that debtor is entitled to, upon debtor’s written request and without additional charge, the following information:
- A statement that includes specified information, including but not limited to the debt balance with explanations as to interest and fees, the assignment history of the debt, the date of delinquency, and other identifying information, in connection with commercial debt;
- Where a debt collector has been assigned a debt, contracts and/or written documents evidencing debtor’s agreement to the debt;9
- Prohibitions against the collection or attempted collection of a commercial debt, other than one reduced to judgment, by means of judicial proceedings in venues other than: (1) the county where the debtor incurred the debt; (2) the county where the debtor resides at the time of initiating judicial proceedings; (3) the county where the debtor resided at the time of contracting; and (4) if the obligation arises from a guaranty, the county where the company borrower entity is located.10
- Criminalization of sending communications relating to commercial debt that give the appearance of being authorized, issued or approved by a governmental agency, or inaccurately simulate the initiation of a legal or judicial process.11
- Requirement to discontinue collection efforts with respect to commercial debt if a debtor claims to be an alleged victim of identity theft and debtor provides certain information in support of his or her claim, which information may include a written certification signed by debtor12
Understanding the foregoing key provisions of the Act will be vital to commercial lenders seeking to properly enforce their legal rights and remedies, as the provisions of the Act cannot be waived.13 Moreover, violation of the Act can subject debt collectors to suit for damages, including: (a) actual damages; (b) statutory damages; and (c) costs of action, including reasonable attorney’s fees.14
Considering the foregoing, lenders may want to proceed with caution in their efforts to collect upon commercial debts. Where appropriate, lenders should consider conferring with counsel before proceeding, and take into consideration these requirements when developing strategies for the pursuit of events of default under commercial loans that fall within the purview of the dictates discussed above.
Footnotes
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To clarify, not all requirements of the Act have been expanded to commercial debts. For instance, the Act references certain licensing requirements that presently exist under Division 25 (commencing with Section 100000) of the Financial Code. Pursuant to California Civil Code Section 1788.1(c), the Act does not expand existing licensing requirements with respect to the collection of commercial debts.
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As a preliminary matter, the definition of “debt collector” is broader under the Act than the federal equivalent, the Federal Debt Collection Practices Act (“FDCPA”). The term “debt collector” under the California statue has been deemed to include original lenders pursuing their own debts even where the original lender would not qualify as a “debt collector” under the FDCPA. See Citibank, N.A. v. Macdonald, No. H042010, 2017 Cal. App. Unpub. LEXIS 4469, at *24 (June 29, 2017).
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California Civil Code Section 1788.2(n) (2025 version).
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California Civil Code Section 1788.10 (2025 version).
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California Civil Code Section 1788.11 (2025 version).
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California Civil Code Section 1788.12 (2025 version).
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California Civil Code Section 1788.13 (2025 version).
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California Civil Code Section 1788.14 (2025 version). This provision provides detailed notices that should be included in communications.
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California Civil Code Section 1788.14.5 (2025 version).
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California Civil Code Section 1788.15 (2025 version).
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California Civil Code Section 1788.16 (2025 version).
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California Civil Code Section 1788.18 (2025 version).
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California Civil Code Section 1788.33. (“Any waiver of the provisions of this title is contrary to public policy, and is void and unenforceable.”)
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California Civil Code Section 1788.30(a) – (c).
About Snell & Wilmer
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