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    AB-1166
    Consumer Protection

    Fair Debt Settlement Practices Act.

    Engrossed
    CA
    ∙
    2025-2026 Regular Session
    0
    0
    Track
    Track

    Key Takeaways

    • Expands debt settlement protections to include commercial financing recipients who borrow up to $500,000.
    • Requires debt settlement providers to give detailed disclosures and monthly account statements to all clients.
    • Mandates a 3-day review period before contracts can be signed and allows cancellation without penalties.
    • Authorizes legal action with damages up to $5,000 per violation plus attorney fees for illegal practices.

    Summary

    Assembly Member Valencia proposes expanding California's Fair Debt Settlement Practices Act to extend consumer-style protections to small commercial borrowers, while strengthening oversight of debt settlement services across both markets. The legislation would apply existing disclosure requirements, fee restrictions, and consumer safeguards to commercial financing recipients borrowing up to $500,000.

    The bill mandates that debt settlement providers furnish detailed disclosures about risks and limitations before executing contracts with either consumers or commercial clients. These must explain that results cannot be guaranteed, creditors may still pursue collection, and credit scores could be negatively impacted. Providers must also supply regular accounting statements showing all transactions, fees charged, and settlement amounts.

    Under the expanded law, both consumers and commercial borrowers could terminate debt settlement contracts without penalty at any time. Upon cancellation, providers must immediately notify payment processors to close settlement accounts and return remaining balances within seven days. The legislation preserves existing civil remedies, allowing parties to sue for statutory damages between $1,000 and $5,000 per violation, plus actual damages and attorney fees.

    The measure maintains exemptions for licensed financial institutions, nonprofit organizations providing free services, and attorneys primarily engaged in legal representation rather than debt settlement. Payment processors would face parallel requirements regarding fee disclosures, accounting statements, and prompt account closure after contract termination.

    Key Dates

    Next Step
    Referred to the Senate Standing Committee on Rules
    Next Step
    Senate Committee
    Referred to the Senate Standing Committee on Rules
    Hearing has not been scheduled yet
    Vote on Assembly Floor
    Assembly Floor
    Vote on Assembly Floor
    Vote on Assembly Floor
    Assembly Banking And Finance Hearing
    Assembly Committee
    Assembly Banking And Finance Hearing
    Assembly Banking And Finance Hearing
    Introduced. To print.
    Assembly Floor
    Introduced. To print.
    Introduced. To print.

    Contacts

    Profile
    Shannon GroveR
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Brian JonesR
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Mike McGuireD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Eloise ReyesD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    John LairdD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    0 of 6 row(s) selected.
    Page 1 of 2
    Select All Legislators
    Profile
    Shannon GroveR
    Senator
    Committee Member
    Profile
    Brian JonesR
    Senator
    Committee Member
    Profile
    Mike McGuireD
    Senator
    Committee Member
    Profile
    Eloise ReyesD
    Senator
    Committee Member
    Profile
    John LairdD
    Senator
    Committee Member
    Profile
    Avelino ValenciaD
    Assemblymember
    Bill Author

    Get Involved

    Act Now!

    Email the authors or create an email template to send to all relevant legislators.

    Introduced By

    Avelino Valencia
    Avelino ValenciaD
    California State Assembly Member
    40% progression
    Bill has passed all readings in its first house and is ready to move to the other house (5/15/2025)

    Latest Voting History

    View History
    May 15, 2025
    PASS
    Assembly Floor
    Vote on Assembly Floor
    AyesNoesNVRTotalResult
    730679PASS

    Key Takeaways

    • Expands debt settlement protections to include commercial financing recipients who borrow up to $500,000.
    • Requires debt settlement providers to give detailed disclosures and monthly account statements to all clients.
    • Mandates a 3-day review period before contracts can be signed and allows cancellation without penalties.
    • Authorizes legal action with damages up to $5,000 per violation plus attorney fees for illegal practices.

    Get Involved

    Act Now!

    Email the authors or create an email template to send to all relevant legislators.

    Introduced By

    Avelino Valencia
    Avelino ValenciaD
    California State Assembly Member

    Summary

    Assembly Member Valencia proposes expanding California's Fair Debt Settlement Practices Act to extend consumer-style protections to small commercial borrowers, while strengthening oversight of debt settlement services across both markets. The legislation would apply existing disclosure requirements, fee restrictions, and consumer safeguards to commercial financing recipients borrowing up to $500,000.

    The bill mandates that debt settlement providers furnish detailed disclosures about risks and limitations before executing contracts with either consumers or commercial clients. These must explain that results cannot be guaranteed, creditors may still pursue collection, and credit scores could be negatively impacted. Providers must also supply regular accounting statements showing all transactions, fees charged, and settlement amounts.

    Under the expanded law, both consumers and commercial borrowers could terminate debt settlement contracts without penalty at any time. Upon cancellation, providers must immediately notify payment processors to close settlement accounts and return remaining balances within seven days. The legislation preserves existing civil remedies, allowing parties to sue for statutory damages between $1,000 and $5,000 per violation, plus actual damages and attorney fees.

    The measure maintains exemptions for licensed financial institutions, nonprofit organizations providing free services, and attorneys primarily engaged in legal representation rather than debt settlement. Payment processors would face parallel requirements regarding fee disclosures, accounting statements, and prompt account closure after contract termination.

    40% progression
    Bill has passed all readings in its first house and is ready to move to the other house (5/15/2025)

    Key Dates

    Next Step
    Referred to the Senate Standing Committee on Rules
    Next Step
    Senate Committee
    Referred to the Senate Standing Committee on Rules
    Hearing has not been scheduled yet
    Vote on Assembly Floor
    Assembly Floor
    Vote on Assembly Floor
    Vote on Assembly Floor
    Assembly Banking And Finance Hearing
    Assembly Committee
    Assembly Banking And Finance Hearing
    Assembly Banking And Finance Hearing
    Introduced. To print.
    Assembly Floor
    Introduced. To print.
    Introduced. To print.

    Latest Voting History

    View History
    May 15, 2025
    PASS
    Assembly Floor
    Vote on Assembly Floor
    AyesNoesNVRTotalResult
    730679PASS

    Contacts

    Profile
    Shannon GroveR
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Brian JonesR
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Mike McGuireD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    Eloise ReyesD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    Profile
    John LairdD
    Senator
    Committee Member
    Not Contacted
    Not Contacted
    0 of 6 row(s) selected.
    Page 1 of 2
    Select All Legislators
    Profile
    Shannon GroveR
    Senator
    Committee Member
    Profile
    Brian JonesR
    Senator
    Committee Member
    Profile
    Mike McGuireD
    Senator
    Committee Member
    Profile
    Eloise ReyesD
    Senator
    Committee Member
    Profile
    John LairdD
    Senator
    Committee Member
    Profile
    Avelino ValenciaD
    Assemblymember
    Bill Author