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Bill

AB 1166

Fair Debt Settlement Practices Act.

2025-2026 Regular Session Introduced by Avelino Valencia

AB 1166 requires California debt settlement companies to obtain licenses and restricts upfront fee collection to protect consumers from predatory industry practices.

In committee: Held under submission.
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WeVote Research Nonpartisan
Bill Summary · AB 1166

Legislative bill overview

AB 1166 establishes regulatory standards for debt settlement companies operating in California, requiring licensing, disclosure requirements, and restrictions on fee collection practices. The bill aims to protect consumers from predatory debt settlement schemes that often charge high upfront fees while delivering minimal results.

Why is this important

Debt settlement is a $10+ billion industry where consumers in financial distress are frequently exploited through deceptive practices—companies often charge 15-25% of enrolled debt before negotiating anything. This bill directly affects millions of Californians struggling with debt and the debt settlement industry's business model, potentially reducing consumer losses while increasing regulatory compliance costs.

Potential points of contention

  • Industry opposition: Debt settlement companies will likely argue licensing requirements and fee restrictions increase operational costs and reduce service accessibility, potentially limiting options for consumers who cannot afford bankruptcy.
  • Fee structure disputes: Defining "reasonable" fees and whether settlement agencies can charge based on results versus upfront payments creates competitive and definitional challenges across different debt scenarios.
  • Scope limitations: The bill may not address other predatory lending practices or overlaps with existing federal regulations (FDCPA), raising questions about redundancy or enforcement coordination gaps.

Compiled from official sources — confirm details with the bill’s official record.

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