A California legislature bill to regulate credit repair organizations worries advocates because it triggers a federal loophole allowing debt collectors to ignore correspondence on behalf of consumers.
Under Assembly Bill 2424state credit repair organizations would be required to identify themselves in their correspondence with debt collectors when trying to help people with credit report errors or other problems.
Eric Kamerath, legal counsel for the Lexington Law Firm, which helps people with their credit reports, said that because federal law overrides California regulations when they conflict, debt collectors can ignore letters they receive lawyers.
“Under existing federal law, if Assembly Bill 2424 were passed, consumer correspondence identifying any third-party assistance, even from a non-profit organization, could be disregarded,” Kamerath explained. .
the loophole under the Fair Credit Reporting Act allows debt collectors, vendors and credit reporting agencies to disregard, without explanation, any letter sent on behalf of a consumer by a third party.
At the federal level, Rep. Maxine Waters, D-Calif., who chairs the House Financial Services Committee, called for an overhaul of the U.S. credit reporting system.
Andre Chapple, CEO of the African American Empowerment Coalition in Los Angeles, which helps communities correct mistakes on credit reports, as well as free financial workshops twice a week for 150 to 200 people, said the Federal loophole can have long term effects if people are unable to get help to repair their credit.
“We don’t tell people they can’t hire a plumber,” Chapple remarked. “We allow people from all sectors to use an expert if they wish, because it does not take away the right to do it themselves, but it does give them the opportunity to do it with someone who does. actually does it every day and has the expertise to do it.”
The bill will be the subject of a hearing before the Banking and Finance Committee of the Assembly next Monday.
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