Perspectives

Compliance Best Practices, Prohibited Conduct, and the High Cost of Getting It Wrong

In Part 1, we explained the key changes brought by California’s SB 1286, including which debts and debtors are now covered, the new notice requirements, how to respond to debtor requests, and how to handle identity theft claims.

In Part 2, we’ll cover the next critical pieces:

• What conduct is now prohibited
• What information you should have at intake
• Practical compliance recommendations
• Legal gray areas
• And the risks of noncompliance under Rosenthal

Let’s get into it.

Prohibited Conduct Under Rosenthal (As Amended by SB 1286)

SB 1286 reinforces and expands the types of conduct debt collectors must avoid when collecting covered debt. Violations-even if unintentional-can lead to serious legal consequences.

Prohibited actions include:

• Threatening or harssing language
• False or misleading statements
• Obscene or profane language
• Calling excessively or at unreasonable times
• Communicating with third parties, including employers
• Adding unauthorized fees or interest
• Collecting time-barred debt without proper disclosures
• Recording phone calls without the debtor’s consent
• Abuse of legal process (e.g., improper lawsuits)
• Failing to provide required disclosures

WFJ Tip: Follow Regulation F guidelines under the FDCPA to remain in compliance:

• “No more than 7 calls in 7 days”
• “No more than 1 live conversation within that timeframe”
• “Contact only between 8 am and 9 pm (debtor’s local time)”
• “Don’t send emails or texts at odd hours-or if the debtor says it’s inconvenient”
• “If the debtor asks you to stop contacting them-stop”

What to Have Ready at Intake

Before starting collection efforts, make sure your file includes:

• A copy of the contract, if one exists
• If no contract, all documents that support the existence of the debt
• For credit accounts, the most recent statement showing the last purchase or payment

Being prepared upfront can help you comply quickly if the debtor makes a written request-and reduce the risk of having to stop collection midstream.

Compliance Recommendations from WFJ

To stay ahead of the July 1, 2025 enforcement date, we recommend making the following updates:

Update Your Process

• Implement a system to track written requests and disputes
• Update phone scripts, letters, and templates with new required language

Review Your Intake and Documentation Procedures

• Require all supporting documents from creditors efore initiating collection
• Confirm that charges like interest, late fees, and penalties are clearly documented.

Educate Your Clients

• Make sure your clietns understand what information is required
• Share the updated procedures and expectations

Train Your Team

• Create or update training programs for staff
• Emphasize communication do’s and don’ts under Rosenthal

Conduct Regular Internal Audits

• Tailor the frequency to your organization’s size, volume, and past audit results
• Use audits to ensure compliance across all active accounts

Legal Gray Areas to Watch

Some parts of SB 1286 leave unanswered questions. Until further legal guidance or case law emerges, WFJ recommends erring on the side of caution.

Are Sole Proprietors Covered?

Likely, yes. Treat them like individual guarantors.

Is Real Estate-Secured Debt Covered?

Probably. Best to treat it as covered unless clearly executed.

Where Can You File Suit?

Even if there is a contractual venue clause, Rosenthal may require you to sue in:

• The ounty where the debtor currently lives
• The county where the debt was incurred
• The county where the debtor lived when the debt was incurred

WFJ Recommendation: Until these gray areas are litigated, assume coverage. Treating a debt as if it’s covered does not make it covered, but failing to do so when it could cost you.

The Cost of Noncompliance

California has an active consumer litigation bar-and SB 1286 is likely to increase enforcement and lawsuits. If you violate Rosenthal (even unintentionally), the consequences can be serious:

• Costly legal defense
• Settlements
• Attorney’s fees awarded to the debtor
• Ongoing litigation exposure

Remember, Rosenthal is a strict liability statute. That means intent doesn’t matter in most cases. The only real defense is the bona fide error defense, which requires proof that your procedures were designed to prevent the mistake.

Final Thoughts from WFJ

The best protection is preparation. Here’s what you can do now:

• Update your processes before the law takes effect
• Train your staff and inform your clients
• Conduct audits and stay ahead of compliance risks
• When in doubt, treat the debt as covered
• Work with experienced counsel to develop compliant systems

A Friendly Legal Reminder from WFJ

This blog is for educational purposes only and does not constitute legal advice. For guidance on how SB 1286 applies to your organization, consult with an attorney experienced in debt collection and Rosenthal compliance.

California’s SB 1286, effective July 1, 2025, expands the Rosenthal Fair Debt Collection Practices Act to include certain commercial debts. For businesses and law firms involved in debt collection, understanding these changes is critical to staying compliant and avoiding costly legal issues.

Which Debts Are Covered?

SB 1286 appies to “Covered Commercial Debt” or “Covered Commercial Credit” entered into, renewed, sold, or assigned on or after July 1, 2025.

A debt is considered covered if:

• It is owed by a natural person (not an LLC or corporation)
• The cummulative debt is $500,000 or less
• The debtor is either the primary obligor or a guarantor of a covered commercial debt

Covered debt can include money owed to:

• Lenders
• Commercial financing providers
• Debt buyers

In short, individual guarantors of commercial debt are now protected under Rosenthal if the debt is $500,000 or less.

Who Must Comply?

SB 1286 applies to:

• Original creditors
• Assigneeds
• Debt buyers
• Collection agencies
• Law firms regularly engaged in debt collection

Notice Requirements

Debt collectors must provide a specific notice in their first written communication with a debtor. This notice must clearly explain the debtor’s right to request records that include:

• Authorization to collect the debt
• The debt balance, including interest and fees
• Dates of delinquency or last payment
• Creditor name and account number
• Debtor’s last known address from the creditor’s records
• Names and addresses of any other parties that debt was assigned to

If the debt arises from an oral contract in a language other than English, the notice must be provided in that language. Additionally, if the collector primarily used a non-English language during the initial contact, the written notice must be delivered in that language within 5 business days.

Responding to Written Requests

If a debtor submits a written request for more information, collectors must provide:

• Proof of authority to collect the debt
• A breakdown of the debt balance, interest, and fees
• Dates of delinquency or last payment
• Creditor name, address, and account number
• Debtor’s last known address
• Names and addresses of any other assignees
• Debt collector’s California license number, if applicable

This information must be provided within 30 calendar days, and if it cannot be produced within that timeframe, all collection activity must stop until it is available.

| WFJ recommends treating any dispute or request for additional information as a formal “written request” to ensure compliance.

Identity Theft Claims

If a debtor claims identity theft, whether orally, in writing, or via police/FTC report, all collection activity must stop until a good faith determination is made that the debtor is responsible for the debt.

If collection continues, the debtor must be notified of the results of the investigation. If reporting to credit bureaus, any account under investigation must be removed if collection ceases.

Up Next: Part 2- Compliance, Conduct, and Consequences. Stay tuned for Part 2, where we will break down the steps you should take now to comply and protect your organization from risk.

Background

Assets:

• Checking and savings accounts (~$5,000)
• A car (fully owned)
• Personal belongings, including a laptop, furniture, and jewelry
• A modest life insurance policy through work

Emily always assumed esate planning was something she could address later in life-after marriage, buying a home, or building significant wealth. Like many young professionals, she believed she simply didn’t have “enough” to justify creating a will.

The Turning Point

After attending a friend’s funeral where no estate plan was in place, Emily witnessed firsthand the confusion and family conflict that followed:

• Family members didn’t agree on who should receive personal belongings
• The bank account was frozen, delaying access to funds for funeral expenses
• Friends were unsure of what Emily’s friend would have wanted for the distribution of items with sentimental value. 

Emily realized that without a will, even a modest estate can cause major complications for love ones.

What Emily Did

Emily worked with an attorney to put the following in place:

• Last Will and Testament: To ensure her assets would go to her younger sister and close friends.
• Healthcare Directive: Appointing her mother to make medical decisions if she was ever incapacitated.
• Power of Attorney: Naming her father to handle financial affairs in an emergency.

The Unexpected

Just two years later, Emily was involved in a serious car accident. While she eventually recovered, she was temporarily unconscious and unable to make medical or financial decisions. Because she had completed her estate plan:

• Her mother could immediately step in to make medical choices
• Her father was able to access her accounts to pay her rent and other bills
• Her wishes regarding her personal property were clearly documented, giving peace of mind to her family

The Takeaway

Emily didn’t have significant wealth-but she had enough to matter.

Without her estate plan:

• Her family would have had to go through the courts to gain decision-making authority
• Her accounts could have been locked
• Her loved ones may have faced conflict and uncertainty about her wishes

Estate planning isn’t just for the wealthy or the elderly-it’s for anyone who wants to protect their voice, their assets, and their family.

Even a simple will and basic documents like a Power of Attorney and Healthcare Directive can make a world of difference in an emergency.

Final Thought

The best time to create a will is before you think you need it. 

Planning ahead gives you control and protects the people you care about from legal headaches during already difficult times.

Catch Part 1 here.

If 2024 was the year of emerging compliance trends, 2025 is the year of enforcement-level specificity. Employers are facing new laws that regulate everything from how to write a job posting to how quickly you must deliver a personnel file. Below, we go beyond the headlines and into the weeds on state laws that will affect your team’s procedures, documentation, and legal exposure.

Sick Leave Laws are No Longer Optional-They’re Complex

Forget the “one-size-fits-all” paid sick leave policies. States are now layering in nuanced rules that make multi-jurisdicitonal compliance a challenge.

Minnesota (ESST Updates)

• Effective July 1, 2025, the standarad for notice changed from “as soon as practicable” to “as reasonably required by the employer.”
• Employers may now require reasonable documenation after just 2 consecutive missed days (down from 3).
• Clarified that employees may voluntarily trade shifts to cover ESST balances.

Michigan (Earned Sick Time) 

• Accrual: 1 hour per 30 hours worked.
• Caps:
  • Small employers (fewer than 10 employees): 40 hours/year
  • Larger employers: 72 hours/year
• Carryover allowed, but capped by employer size.
• Effective: February 21, 2025 (most employers); October 1, 2025 (small employers)

Nebraska (Amended June 2025)

• Applies to employers with 11+ employees and those working 80+ hours/year in NE.
• Accrual: 1 hour per 30 hours worked
• Caps: 40 (for 11-19 employees) or 56 hours  (20+ employees)
• Unlimited carryover is permitted, but employers may limit usage annually.

✅ Compliance Tip: You must track hours worked by location if employees across state lines, especially in remote or hybrid work arrangements.

Pay Transparency Laws are Rewriting Job Postings

Employers in multiple states must now treat job postings as legal documents-with specific, required disclosures.

Illinois

• Must list wage/salary range and benefits in job postings (15+ employees)
• Must notify employees of internal promotion opportunities within 14 days of an external posting.

Massachusetts

• Starting February 1, 2025, employers with 100+ employees must report race, gender, and pay data under wage reporting rules.
• October 29, 2025: Employers with 25+ employees must disclose:
  • Pay range in job postings
  • Pay range upon request

New Jersey (June 2025)

• Applies to employers with 10+ employees
• Job postings must include:
  • Wage or wage range
  • List of all benefits and compensation programs available within the first 12 months.

✅ Audit Action: Do your job posting templates meet the strictest state requirements? If not, your risk increases every time a position is advertised.

Whistleblower, “Captive Audience”, and Political Neutrality Protections are Expanding

Sates are implementing laws that prohibit employers from influencing employee political or religious views.

California

Employers may not require attendance at meetings promoting religious or political views.

New laws require posting of whistleblower rights-model notice available from the state.

Rhode Island

Effective July 2, 2025: Employers may not retaliate against employees who refuse to attend meetings focused on employer opinions related to religion or politics.

Illinois

Employers may not:

• Discriminate against employees for their reproductive health decisions.
• Discriminate based on family responsibilities, including caring for ill family members.
• Retaliate against employees for disclosing saftey or legal concerns in good faith.

✅ Training Update: Managers need to be trained to avoid language or behavior that could trigger claims under these new categories of protected rights.

Personnel Records Access, Posters, and Pay Stub Disclosures

States are adding detailed administrative and notice requirements that can result in penalties if missed.

Washington

• Personnel file access: Employers must provide copies within 21 days upon request-free of charge.
• Definition of personnel file incudes:
  • Job applications
  • Performance Reviews
  • Disciplinary records (even if closed)
  • Reasonable accommodation records
  • Payroll and employment agreements

Ohio

Pay Stub Protection Act (April 8, 2025): Must include net/gross pay, hours worked, deductions, and more in written or electronic statements.

Pennsylvania

Employers with 50+ employees must physically or electronically post a new veteran’s rights notice by January 1, 2026.

✅ Poster & Recordkeeping Audit: Make sure posters are updated by state and confirm your HRIS system can fulfill document requests quickly.

AI Regulations and Automated Hiring Tools

Employers are being held responsible for discriminatory outcomes even if they use third-party AI tools.

California

Final employment regulations prohibit use of automated decision systems that result in protected class discriminationincludes tone of voice, facial recognition, or other biometric tools.

New Jersey

Clarifies that liability exists even if the employer did not build the AI tool. The key factor is how the AI was used and whether it created disparate impact.

Texas

Texas Responsible Artificial Governance Act (January 1, 2026): Explicit ban on intentional AI-driven discrimination. 

✅ Policy Alert: Companies must create an AI usage policy, train HR teams, and review third-party vendor tools.

Wrapping It Up: It’s Time to Shift from Reactive to Proactive Compliance

The pattern is clear: states are stepping into legislate where federal law is silent, often with specific deadlines, disclosures, and technicalities that trip up even well-meaning employers.

Your best protection in this landscape?

• Audit your policies.
• Update your employee handbooks.
• Track state-specific implementation dates.
• Train managers, HR, and compliance teams regularly.
• Partner with legal counsel who can interpret and implement these changes for your unique workforce.

Need Help Untangling This Web?

Our legal and compliance teams are ready to help you:

• Conduct a multi-state compliance audit
• Draft new policies to reflect paid leave and posting requirements
• Review AI and hiring practices for bias and exposure

Reach out to us for a consultation today!

When extending credit, protecting your rights as a secured party is critical. One of the most effective tools for doing so is the Uniform Commercial Code (UCC) Financing Statement-commonly referred to as a UCC-1. This legal document serves as a public notice of your security interest in debtor’s personal property and is essential for preserving priority if a debtor defaults.

Below is a breakdown of the UCC-1 process that every finance and credit professional should understand. 

Step 1: Secure a Signed Security Agreement

Before filing a UCC-1, you must have a security agreement in place-this document proves that the debtor has agreed to give you a security interest in their collateral.

Where this agreement may appear:

• As a standalone security agreement signed by both parties.
• Included in the terms and conditions of a credit application-many credit professionals include a security clause in their standard application.
• Embedded in a promissory note or other loan-related documentation.

Be sure the agreement clearly identifies the collateral and is signed by the debtor.

Step 2: File the UCC-1 Financing Statement

Once you’ve secured the agreement, the next step is filing the UCC-1 to perfect your interest. This filing is typically done with the Secretary of State in the Debtor’s state of incorporation (for business) or residency (for individuals).

A valid UCC-1 must include:

1. Debtor’s full legal name and address
2. Creditor’s (secured party’s) name and address
3. A description of the collateral

Sample Language: 

“Debtor’s inventory, including all documents, books and records related to the inventory, now owned or herafter acquired by Debtor from Secured Party or its successors and/or assigns, and the proceeds therefrom, including all proceeds from any insurance payable by reason of loss, damage, or destruction of any item of the inventory.”

The collateral description can be general but must be specific enough to reasonably identify the property.

Step 3: Know the Filing Duration and Renewal Rules

A UCC-1 filing does not last forever. Here’s what you need to know about maintaining it:

• Initial filing is valid for five years from the date of filing.
• To keep your security interest active, you must file a continuation statement no earlier than six months and no later than the expiration date.
• Failure to renew within the window results in laps of your perfected security interest-leaving you exposed to risk.

Note: The exact filing process and renewal requirements may vary slightly by state, so always confirm with the appropriate Secretary of State. 

Why It Matters

If your customer files bankruptcy, defaults on payment, or liquidates assets, having a perfected UCC-1 filing could be the difference between being repaid-or not. As a secured creditor, you stand in a stronger position to recover what you’re owed.

Final Thoughts

Finance professionals should view UCC filings as a core part of risk management. Whether your security interest is part of a loan, a credit sale, or a consignment agreement, the steps above ensure you’ve taken proactive measures to protect your company’s financial position.

Need help reviewing your credit documents or drafting a security agreement that holds up in court? Don’t hesitate to consult your legal team or trusted legal partner.

The 2025 Minnesota legislative session brought a range of important updates to employment laws, focusing on rest and meal breaks, Earned Sick and Safe Time (ESST), and Minnesota Paid Leave. While these changes may not be sweeping, they significantly impact employer responsibilities and workplace policies. HR professionals and employers should take note and prepare to update their practices accordingly.

Rest and Meal Breaks: More Structure, More Liability

Starting January 1, 2026, Minnesota’s rest and meal break laws will have stricter requirements and new penalties.

Rest Breaks

Employers must now provide:

• At least 15-minute rest break for every four consecutive hours worked, or
• Enough time to access the nearest convenient restroom, whichever is longer.

What’s Changing?

Previously, employers were only required to give employees “adequate time” to use the restroom. The new rule sets a clear minimum of 15 minutes, offering more definitive protection for employees.

Meal Breaks

Employers must now allow a 30-minute meal break for employees who work six or more consecutive hours.

What’s Changing?

The old rule required employers to “permit” meal breaks after eight hours, without specifying the length. The new law lowers the threshold to six hours and requires employers to actively allow a 30-minute break.

New Penalties

If an employer violates these break requirements, the employee is entitled to:

• Back pay for the missed break time at their regular rate of pay, plus
• An additional, equal amount in liquidated damages

In other words, employers could face double the liability if they fail to comply.

🗓 Effective Date: January 1, 2026

Earned Sick and Safe Time (ESST) Updates

Several employer-friendly adjustments to ESST went into effect on July 1, 2025.

Notice for Unforeseeable Leave

Employees must now give advance notice as “reasonably required by the employer” for unforeseeable absenses, replacing the former standard of “as soon as practicable”.

Documentation Timeline

Employers can now request reasonable documentation after two consecutive scheduled workdays of ESST use. The previous rule allowed requests only after three consecutive days.

Shift Replacements

Employers remain prohibited from requiring employees to find a replacement worker, but the law now clarifies that employees can voluntarily trade shifts if they choose.

ESST Advancement

🗓Effective January 1, 2026:

Employers may advance ESST hours based on anticipated hours the employee will work for the remainder of the accrual year. If the advanced amount is less than what the employee would earned based on actual hours, employers must make up the difference.

MN Paid Leave: Premium Adjustments

The legislature made made a technical update to the maximum premium cap for Minnesota Paid Leave:

• 2026 premium rate: Remains at 0.88% of employee wages.
• Future cap: The annual premium cap may now be adjusted up to 1.2% (increased from the original 1.1%).

The Minnesota Department of Employment and Economic Development (DEED) can adjust future premiums based on the program’s financial performance and actuarial principles.

Key Takeaways for Employers

• Review and update rest and meal break policies by January 1, 2026.
• Update ESST policies now to reflect the July 1, 2025 changes.
• Stay informed on future premium adjustments under MN Paid Leave.

Although these changes may seem incremental, noncompliance-especially regarding rest and meal breaks-could lead to significant penalties.

Stay Ahead of Compliance

WFJ is here to help you review your policies, update your handbooks and ensure you’re fully prepared for these changes. Reach out to our team for support in navigating Minnesota’s evolving employment laws.

California has taken a significant step in debt collection regulation by expanding the Rosenthal Fair Debt Collection Practices Act (RFDCPA) to cover specific commercial debt obligations. This move introduces a new layer of legal exposure for creditors, lenders, and collection professionals involved in commercial finance-particularly those engaging with individual borrowers and personal guarantors.

As of July 1, 2025, covered commercial debts in California will be subject to the same strict collection practices previously reserved for consumer debts.

This includes avoiding:

• Harassment or abusive collection practices
• Contacting a debtor’s employer without authorization
• Communicating with a represented debtor
• Any deceptive or misleading collection tactics

Key Legal Update: What Senate Bill 1286 Changes

Traditionally, the RFDCPA applied only to consumer debts-obligations incurred primarily for personal, household, or family use. Now, the law will include:

• “Covered commercial credit” and “covered commercial debt”- defined as debts owed by natural persons, including personal guarantors, for commercial purposes, if the total transactional value is $500,000 or less.
• Types of debt affected include:
  • Commercial loans
  • Accounts receivable financing
  • Factoring and asset-based lending
  • Lease financing
  • Open-end credit lines

This means any individual-whether acting as a direct borrower or as a personal guarantor of a business obligation-will receive protections under the RFDCPA, provided the transaction meets the dollar threshold.

Effective Date and Scope

• Applies to commercial debt entered into, renewed, sold, or assigned on or after July 1, 2025
• Does not apply retroactively to prior transactions
• Applies to original creditors as well as third-party debt collectors and debt buyers

Implications for Credit and Finance Professionals

Violations of the RFDCPA can result in:

• Actual and punitive damages
• Attorney’s fees and costs awarded to the debtor
• Reputational and legal risk to your organization

Best Practices: Preparing for Compliance

 To position your business for regulatory readiness, we recommend the following steps:

Audit Your Commercial Collections Process

Review your current collection protocols, especially those involving personal guarantors or individual borrowers in California. Ensure all communications and outreach methods meet RFDCPA standards.

Implement Training for Staff and Third Parties

Educate internal collections teams, customer service representatives, and any third-party collection vendors on the new legal requirements. Emphasize prohibited conduct, including harassment, unauthorized employer contact, and deceptive communications.

Update Commercial Loan Documentation

Revisit your loan agreements and guaranty language to align with anticipated enforcement risks. Ensure clear delineation between business and personal obligations.

Strengthen Recordkeeping and Communication Controls

Ensure you have robust documentation of all borrower communications and can demonstrate compliance if challenged.

Partner with Legal Counsel Proactively

Engage experienced counsel to review your California-based commercial lending and collections operations. WFJ can help you identify exposure areas and implement changes before the law takes effect.

This new bill represents a growing trend of consumer-style protections being extended into the commercial finance space. For credit and finance professionals managing portfolios with individual guarantors or natural-person borrowers, this is the time to act.

WFJ is here to help you navigate this shift with clarity and confidence. Reach out to us today to learn how this new law may impact your business.