California Legislation Re-Introduced

California Assemblywoman Blanca Pacheco (D) introduces AB 850, the “Increasing Institutional Debt Transparency and Protecting Students Act.” 

California Assemblywoman Blanca Pacheco (D) recently introduced AB 850, the “Increasing Institutional Debt Transparency and Protecting Students Act.” Pacheco introduced similar legislation, “Protecting Students from Creditor Colleges Act,” AB 1160 last session.

Please note, COHEAO is monitoring this closely and working with the coalition of CA HEI’s, PacWest, and ACA.

The latest version includes a somewhat friendlier title and there are several areas where AB 850 seems at least slightly more “business friendly” than its predecessor from the 2023-2024 legislative session—AB 1160. 

• AB 850 contains no prohibition of tax offsets for institutional debts
• AB 850 no longer requires the 180-day delay between “first communication requesting payment” and assigning the debt to a collection agency
• AB 850 no longer addresses civil actions for institutional debts

However, there are some areas where AB 850 appears overly consumer focused or may increase burdens for schools and their contractors. Most notably, there is a ban on credit reporting related to institutional debts. AB 1160 required a delay in reporting these debts to credit agencies, but AB 850 simply bans credit reporting outright.

Secondly, the data reporting requirements for public institutions are much more extensive AB 850 than the most recent version of AB 1160. Many of these requirements were in the initial version of AB 1160, but were later removed in the amendment process. The reporting requirements for public institutions in AB 850 are as follows:

1. The total number and dollar amount of institutional debts at each institution, including a breakdown of the institutional debts considered current and past due.
2. The total number of payment plans at each institution.
3. A breakdown of the total number and total dollar amount of institutional debts by both of the following categories:
   1. Dollar amount in increments of five hundred dollars ($500).
   2. The age of the institutional debt in increments of one year.
4. The total number and dollar amount of institutional debts owed, in whole or in part, as the result of a current or former student’s federal financial aid being returned to the federal government.
5. A description of any policies related to administrative actions or account holds imposed on current or former students with an outstanding account due to an institutional debt.
6. The number of students and accounts subject to an administrative hold at each institution.
7. The total number and dollar amount of institutional debts collected directly by the institution during the prior two fiscal years, without the use of a third-party debt collector or the Franchise Tax Board.
8. The total number and dollar amount of institutional debts sold or assigned to third-party debt collectors during the prior two fiscal years.
9. The total number and dollar amount collected on institutional debts through third-party debt collectors during the prior two fiscal years.
10. The number of institutional debts subject to collection through the Franchise Tax Board and the total dollar amount collected through the Franchise Tax Board during the prior two fiscal years.
11. The total number and dollar amount of institutional debts that are the result of a loan made by the institution.

 Beginning on or before July 1, 2029, the biennial report in subdivision (a) shall also include all of the following additional information:

1. A breakdown of the gender and racial demographics of the students with institutional debt.
2. The total number and dollar amount of institutional debts subject to a payment plan at each institution, excluding tuition payment plans, and the payments that have been made pursuant to a payment plan.
3. The total number and dollar amount of institutional debts owed by Pell Grant-eligible current or former students.
4. A breakdown of the total number and dollar amount of institutional debts by declared major and degree type being sought.
5. A breakdown of the source of institutional debts by underlying expense type, including tuition, room and board, fines, and campus fees.
6. The total number and dollar amount of institutional debts that are subject to a tuition payment plan offered by the institution.

Aside from the changes listed above, AB 850 of the 2025-2026 session is nearly identical to AB 1160 from the 2023-2024 session.

For instance, AB 850 states all institutions in California “shall establish a written policy defining standards and practices for the collection of institutional debt. That policy shall be consistent with consumer protections established in Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code, and shall be made publicly accessible on its internet website.”

AB 850 would also add requirements for institutions of higher education and their collection agency partners for the assignment of debts owed to the institution. Unlike the previous legislation, the bill no longer requires any sort of delay in the assignment of institutional debts to collection agencies, but Pacheco’s latest bill continues its call for new disclosures to students and requirements for schools and agencies alike.They are as follows: 

1. Notwithstanding any other law, an institution of higher education shall not do either of the following when collecting on an institutional debt:
   1. Engage a third-party debt collector that is not licensed pursuant to Division 25 (commencing with Section 100000) of the Financial Code.
   2. Engage a third-party debt collector to collect on an institutional debt without a written agreement with the debt collector that requires the debt collector to comply with the written policy established pursuant to subdivision (a).
2. An institution of higher education shall make reasonable efforts, in accordance with the written policy established pursuant to subdivision (a), to contact a current or former student to notify them of an institutional debt.
3. Before assigning an institutional debt to a third-party debt collector, an institution of higher education shall send a notice to the current or former student that includes all of the following information:
   1. A written itemization of charges that constitute the institutional debt that is being assigned to collections.
   2. An overview of emergency grant aid and other university resources to support students experiencing financial emergencies, if available.
   3. The date or dates the student or former student was originally sent a notice about the institutional debt.
   4. The name of the third-party debt collector to which the institutional debt is being assigned.
   5. The consequences of a defaulted institutional debt, including the risk of civil action.
   6. How to submit a complaint with the Department of Financial Protection and Innovation and how to request assistance if they are subjected to abusive debt collection practices.
4. An institution of higher education or third-party debt collector shall not report information to a consumer credit reporting agency related to any institutional debt.

Pacheco’s legislation regarding institutional debt practices continues to enjoy vocal support from outside interest groups. The press release announcing AB 850 included quotes of support from the UC Student Association and the Campaign for California Borrowers Rights, which is a coalition led by “NextGen California, Young Invincibles, Student Debt Crisis Center, Student Borrower Protection Center, and Consumer Reports.”

Additional Information

• AB 850 is available online here
• The press release from Assemblywoman Pacheco is available online here
• AB 1160 is available online here