As of July 1, 2025, a new bill in California could impact businesses that sell into the region. So, what is California Senate Bill 1286 and what does it have to do with your business? We have everything you need to know and how you can prepare your business to roll with the changes.
What is California Senate Bill 1286?
The bill expands the scope of the Rosenthal Fair Debt Collection Practices Act (RFDCPA). The purpose of the original bill was to set regulations about how debt collectors are allowed to recover debt and communicate with debtors. It states that debt collectors are forbidden from “engaging in unfair or deceptive acts or practices in the collection of consumer debts.” The RFDCPA is similar to the Fair Debt Collections Practices Act (FDCPA), but the RFDCPA applies to both third-party collectors and businesses collecting debts in their own name.
Bill 1286 expands upon that act. Now, credit managers and third-party debt collectors in California or selling to Californian customers must follow the same regulations for commercial debts that they already do for consumer debts. The new law also provides further protection for small businesses, which supporters of the law say are very needed. “They say that small business owners are being unfairly harassed and threatened by debt collectors, preventing them from achieving success in their business,” says Ash Arnett, NACM’s Washington Representative.
How California Senate Bill 1286 Could Impact Your Business
"Businesses selling into California may become more wary of doing business in the state,” shares Creditsafe’s Maureen Brennan. “The law regulates the collections process in a way that can make it more difficult for small businesses to collect debts.”
Bad actors could take on debt fraudulently, with no intention of ever paying their bills. If a company doesn’t have the resources to properly litigate the debt collection process, they may be forced to write off the debt. Bad debt could rise and those small businesses could see a crushing impact on cash flow. On the other side of things, businesses in California could potentially see issues with suppliers. A supplier could become wary of working with Californian businesses, knowing that there are heavier regulations on the debt collection process. If the supplier needed to collect a debt, they may have a more difficult time under the new law. In extreme cases with especially risk-adverse suppliers, they could avoid working with Californian businesses altogether.
How to Protect Your Business
You should always check a customer’s business credit report before you sign a contract. But when you’re working with small businesses, it can be difficult to access enough data to make a smart choice.
Where possible, pull business principal reports for the owners of companies you’re considering working with. A business principal report is a “soft search” on the owner of a company’s personal credit report that gives you key information you can use in your decision. For example, you can learn how well the company owner manages their personal credit or whether there are any red flags on their report. From there, you can decide if you need to offer more strict terms, such as cash only, or be more lenient.
Reduce the risk of bad debt
Check your customers’ payment behaviors with Creditsafe.
About the Author
Yesinne Alvarez, Manager of Partnerships and Alliances, Creditsafe
Yesinne is a leadership professional with diverse discipline expertise in Relationship Management, Project Management, Business Development and Talent Acquisition. Prior to joining Creditsafe, Yesinne was Chief Development and Strategy Officer for the Credit Research Foundation, a not-for-profit association focused on education to the Credit to Cash community.
Chapter 1