Starting Today, Debt Collectors Can No Longer Empty Californians’ Bank Accounts

September 1, 2020

As of September 1, 2020, debt collectors are no longer allowed to completely empty a person’s bank account. Governor Newsom signed the new law — SB 616 — in October of last year. The law requires debt collectors to leave at least $1,788 in the account (an amount that will increase with the cost of living), and not to take any money from accounts that contain less than that amount. The law is designed to ease the financial shock of having an account cleaned out, which leaves people with no money to pay for critical expenses like food and rent. Authored by Senator Bob Wieckowski (D-Fremont),SB 616 was supported by a large coalition of legal aid providers and advocates for low-income consumers, and sponsored by the Center’s colleagues at the California Low-Income Consumer Coalition, the Western Center on Law & Poverty, and the East Bay Community Law Center.  

SB 616 provides that a debt collector must leave a borrower with at least the Minimum Basic Standard of Adequate Care, the monthly amount that the California Department of Social Services determines each year as the minimum for a family of four to survive in urban California.

The new law will provide desperately needed relief and peace of mind to hundreds of thousands of Californians each year – and especially this year. The automatic protection is far more effective than the claim-of-exemption process that individuals have had to use until now. The current, inefficient process is cumbersome, time-consuming, and only protects funds after the money has been levied – when people might already have been evicted, missed payments, or incurred late charges. 

“Other types of assets are protected under California law, from wages to jewelry to art. The one that isn’t – or wasn’t until today – is bank accounts,” noted Ted Mermin, the Center’s Executive Director. “This bill will encourage low-income Californians to keep their money in the financial system rather than enduring the dangers of becoming ‘unbanked.’” 

The law also gives consumers the chance to go to court to get back any seized money beyond the cap that they need in order to survive. Debt collectors often time account seizures to occur when consumers have just been paid, or have just received their federal earned income tax credit. SB 616 will help to limit the damage that occurs when debt collectors game the system.

“SB 616 is an example of what California can do when it plans for the future,” said Mermin. “When this law was signed last year, we knew that it would be a crucial safeguard for the tens of thousands of Californians each year whose lives are turned upside-down when debt collectors suddenly seize every penny in their bank accounts. But now we are staring at an unprecedented economic crisis brought on by a pandemic and wildfires. Millions of Californians face extended unemployment, and are taking on more and more debt. Thank goodness Senator Wieckowski and the legislature had the foresight to pass a law that makes sure – when a bank levy happens – that there is some money left to pay the rent or the grocery bill.”