Perspectives

At Wagner, Falconer and Judd, we spend a lot of time helping construction professionals navigate change. Two new California laws taking effect January 1, 2026 will significantly impact how private construction projects handle claims, payments, disputes, and retention.

If you own, manage, or work on private construction projects in California, now is the time to prepare.

Let’s break it down.

The Big Picture

What’s Changing?

Beginning January 1, 2026, most private construction contracts in California will be governed by two new laws:

Civil Code 8850- Creates mandatory claim, dispute resolution, and payment timelines

Civil Code 8811- Caps retention at 5% on most private projects

Why it matters:

These laws cannot be waived, override conflicting contract terms, and carry real financial consequences for noncompliance-especially for owners.

Section 8850: New Rules for Claims, Disputes, and Payment

Who does it apply to?

Most private construction projects in California executed on or after January 1, 2026, with limited exceptions (certain residential and small mixed-use projects).

What is a “claim” under the law?

A claim includes demands for:

• Extra time (including delay relief)
• Payment for work performed
• Payment of amounts the owner disputes

Once a claim is submitted, the clock starts ticking.

The New Claim Timeline (Simplified)

1. Contractor submits a claim with reasonable supporting documentation
2. Owner has 30 days to review and respond in writing
   1. Must identify what is disputed and undisputed
3. Undisputed amounts must be paid within 60 days of the owner’s response

If the owner disputes the claim or doesn’t respond on time, the law forces the net steps.

Required Dispute Resolution Steps

If a claim isn’t resolved:

• Informal conference
  • Contractor can demand it
  • Owner must schedule it within 30 days
• Mediation (non-binding)
  • Required if disputes remain
  • Costs split evenly
  • If parties can’t agree on a mediator, the contractor chooses

Only after mediation can the dispute move to arbitration or court (as the contract allows).

The “Hammer”: What Happens if Owners Don’t Comply

Section 8850 has teeth.

Contractors Can Suspend Work

If payment is due and not made-or if the owner fails to follow the dispute process-a contractor may suspend work without penalty, after giving proper notice.

This is broader than existing prompt-payment laws and may apply even when amounts are disputed.

Interest Adds Up Fast

• Unpaid undisputed accounts accrue 2% annual interest per month (24% annually)
• Interest may apply retroactively if a disputed claim is later found valid

On large claims, this exposure can be massive.

You Can’t Contract Around It

• Any contract terms that conflict with Section 8850 are void
• Parties may agree after a claim arises to skip mediation-but no in advance

What This Means in Practice

• Owners will face strong pressure to respond quickly and pay sooner
• Contractors gain leverage-but must follow notice requirements carefully
• Subcontractor claims must be passed through in good faith

How courts interpret some of the provisions (especially interest and stop-work rights) remains an open question-but the risk is real.

Section 8811: A 5% Retention Cap on Private Projects

The Rule

For most private construction contracts entered into after January 1, 2026:

• Retention at any tier cannot exceed 5%
• Total retention over the life of the contract cannot exceed 5%

This applies to:

• Owners–>Contractors
• Contractors–> Subcontractors
• Subcontractors–> lower-tier subs

Limited Exceptions

• Certain residential projects (non-mixed use, under four stories)
• Subcontractors who fail to provide a required bond after notice

Unlike public projects, there is no exception for complex projects. 

Enforcement

If someone violates Section 8811:

• The prevailing party is entitled to reasonable attorney’s fees

That alone should get everyone’s attention.

How this Compares to Public Projects

Both laws borrow concepts from California’s public works statutes-but private projects now face:

• Higher interest penalties
• Fewer exceptions
• Greater exposure for owners
• Mandatory processes that can’t be waived in advance

In short: private projects are being regulated more like public ones-but with sharper consequences.

Action Steps:What You Should Do Now

For Owners

• Review and revise contract templates for 2026
• Train project managers on strict response and payment timelines
• Budget for faster payments and potential interest exposure
• Tighten internal claim review processes

For Contractors

• Update claim procedures and documentation standards
• Track deadlines carefully-missed steps can cost leverage
• Understand your stop-work rights (and notice requirements)
• Prepare to pass through subcontractor claims properly

For Subcontractors

• Know your rights under the new payment timelines
• Watch retention percentages closely
• Communicate claims early and in writing
• Coordinate with upstream contractors to ensure compliance

Final Takeaway

California’s new private construction laws are intended to promote timely payment and reduce disputes-but they also raise the stakes for everyone involved.

Contracts that don’t comply won’t be enforceable.

Teams that aren’t trained will be exposed.

Owners, in particular, face the greatests financial risk.

At Wagner, Falconer & Judd, we help construction professionals simplify complex rules, update contracts, and stay protected before problems arise. If your projects-or contracts-will extend into 2026, now is the time to prepare. 

Minnesota’s Paid Family & Medical Leave (PFML) program is no longer theoretical. With required employee notices already behind us, employers should be shifting their focus from planning to execution, consistency, and documentation.

If your organization completed the initial notice requirements before December 1, 2025, the following steps will help ensure you remain compliant throughout 2026.

Confirm Payroll is Working Exactly as Intended

At this stage, payroll deductions and employer contributions should already be determined. Now is the time to verify accuracy.

Double-check that:

• Employee PFML deductions are being withheld correctly each pay period
• Employer contributions match the required rate
• Contributions stop at the applicable wage cap
• Your payroll system clearly separates PFML from other deductions

Ensure Quarterly Reporting is Accurate and On Time

PFML requires ongoing reporting, not just payroll deductions.

Make sure your team has:

• Established responsibility for submitting quarterly wage detail reports
• Confirmed reporting aligns with existing unemployment insurance filings
• Calendarized quarterly payment deadlines
• A process for correcting errors quickly if discrepancies are identified

Late or inaccurate reporting can result in penalties-even if deductions were taken correctly.

Align Leave Administration with PFML Rules

Now that employees can actively use PFML benefits, internal processes must align with state administration.

Confirm your team understands:

• Employees apply for PFML benefits through the state, not the employer
• PFML runs separately from employer-paid benefits, but may run concurrently with:
  • FMLA
  • Employer PTO
  • Short-term disability (if applicable)
• Job protection requirements, including reinstatement obligations
• Health insurance continuation during PFML leave

Clear internal workflows prevent delays, inconsistent approvals, and employee frustration.

Update and Enforce Written Leave Policies

If it hasn’t been finalized already, it is critical now.

Your handbook and internal policies should:

• Reference Minnesota PFML specifically
• Clarify whether PTO must, may, or may not be used concurrently
• Outline employee responsibilities for notice and documentation

Policies should reflect what your team is actually doing in practice-not aspirational language written months ago.

Maintain Proof of Required Notices

Although the December 1, 2025 notice deadline has passed, employers should still maintain documentation.

You should retain:

• Copies of employee notices
• Acknowledgments of receipt
• Records showing notices were provided to new hires within required timelines
• Proof that workplace posters remain displayed and accessible

If questioned later, documentation-not intent-will matter.

Reevaluate Private Plan Status (If Applicable)

If your organization opted for a private plan:

• Confirm the plan remains approved and active
• Ensure benefits still meet or exceed state requirements
• Monitor renewal dates and state reporting obligations
• Communicate clearly with employees about how benefits are accessed

If you are in the state plan, ensure leadership understands there is no “opt-out” after the fact without proper approval.

Prepare for Employee Questions and Edge Cases

As PFML becomes more widely used, questions will increase.

Be prepared to address:

• Partial leave or intermittent leave scenarios
• Coordination with remote or multi-state employees
• Return-to-work timing and reinstatement issues
• Overlapping medical and family leave situations

Having clear internal guidance now will prevent reactive decision-making later.

Final Compliance Check: What Should Be True Right Now

At this point, compliant employers should be able to say:

• Payroll deductions and contributions are accurate
• Reporting deadlines are assigned and tracked
• Leave policies reflect PFML realities
• Manager know when to escalate issues
• Documentation is organized and retained
• Employees know where to apply and what to expect

Bottom Line

Minnesota’s Paid Family & Medical Leave program is now an operational requirement-not a future project. Employers who focus on accuracy, consistency, and documentation will be best positioned to avoid compliance issues while supporting employees through qualifying leave.

If you need help reviewing policies, auditing payroll setup, or navigating complex leave coordination issues, working with experienced legal and compliance professionals can help ensure nothing is overlooked as PFML continues to roll out.

Current through June 1, 2025

Whether you’re a subcontractor, supplier, or equipment rental provider working on commercial or public projects in Wisconsin, understanding your lien and bond rights is essential for protecting your bottom line. While Wisconsin has not introduced substantive statutory changes in the past year, the state’s lien and bond laws include some of the strictest—and most technical—notice rules in the region. Missing even one deadline can eliminate your right to recover payment.

This guide breaks down the current Wisconsin lien, bond, and “lien against funds” laws in a straightforward way so you can stay compliant and get paid.

Private (Commercial) Projects: Mechanic’s Liens in Wisconsin

Who Has Lien Rights?

You may assert a mechanic’s lien if you contract with:

• The owner

• The prime contractor

• A subcontractor

Wisconsin statutes also strongly suggest that claimants contracting with sub-subcontractors may preserve lien rights.

No Preliminary Notice Required

Thanks to the 2006 statutory updates, Wisconsin eliminated the 10-day and 60-day preliminary notice requirements for commercial projects.

That means:

• No early notice to owners or prime contractors is required.

• Your lien rights remain intact without any preliminary notice—with one exception involving private payment bonds (more on that below).

Mechanic’s Lien Filing Deadlines

Wisconsin has a two-step process:

 Serve Notice of Intent to File a Lien

• Must be sent to the owner by certified mail

• Must be served at least 30 days before filing your lien

• Must be served no later than 5 months after your last furnishing date

 File the Mechanic’s Lien

• Must be filed within 6 months after your last furnishing date

• After filing, you must serve a copy of the lien on the owner via certified mail within 30 days

Because the Notice of Intent requires specific title information and strict timelines, claimants should start this process shortly after month four.

Foreclosing Your Lien

Once your mechanic’s lien is filed:

• You have two years from the filing date to commence a foreclosure lawsuit.

This is longer than many states, but delays can complicate recovery efforts—starting earlier is always safer.

Wisconsin’s “Double Jeopardy” Lien Rule

Wisconsin is extremely claimant-friendly here:

Your lien remains valid even if the owner already paid the prime contractor in full before you filed.

This protects subcontractors and suppliers from upstream payment issues.

Private Payment Bonds: Special Rules Every Claimant Should Know

Payment bonds on private projects are not mandatory—but when a bond is issued, Wisconsin law becomes more complex.

Why? Because the bond terms control.

Even though Wisconsin statutes don’t require notice, the bond itself may require a 90-day notice. Courts have enforced this—even when the claimant never received or saw the bond.

Key Action: Determine early if a bond exists

You have the right to request a copy of the bond from:

• The owner, and

• The prime contractor

Use certified mail and request the bond within 90 days of your first furnishing date.

If a Valid Payment Bond Is Furnished

The bond may:

• Eliminate mechanic’s lien rights, and

• Replace them with rights against the bond instead

But only if:

• The bond includes the statutory language

• It is approved by the owner

• It is approved by the mortgage lender

If any of these elements are missing, you still retain your mechanic’s lien rights.

Preliminary Notice Requirement for Private Bonds

If a proper private payment bond exists, you must:

• Serve a 60-day preliminary notice

• On the prime contractor via certified mail

• Within 60 days after your first furnishing date

If the notice is late, the law says it is invalid—but you should still send it, as it may protect you if other statutory exemptions apply.

Lawsuit Deadline for Private Bond Claims

A lawsuit must be started within one year after the project’s completion.
Because completion dates are often unclear, best practice is:

Use a conservative deadline of one year from your last furnishing date.

“Lien Against Funds” Claims on Private Projects

If a valid private payment bond exists, Wisconsin allows claimants to assert a “lien against funds” claim, which attaches to any money the owner still owes the prime contractor.

Key rules:

• Available only if you contracted with the prime contractor or a first-tier subcontractor

• Not available for claimants working under a sub-subcontractor

• No formal deadline—but the claim is only effective if the owner still holds funds

• Early service increases the likelihood of success

If the prime contractor or subcontractor disputes your claim within 30 days, you must start a lawsuit within three months.

Public Projects: Payment Bonds and Claims in Wisconsin

Wisconsin requires payment bonds on public projects when:

• The contract exceeds $148,000

This applies to most public construction—but with unique exceptions for highway improvement projects.

Who Has Bond Rights?

For non-highway public projects:

• Claimants contracting with the prime contractor or subcontractor have bond rights

• Sub-subcontractors likely do not

For highway improvement projects:

• Only claimants contracting directly with the prime contractor have rights

• No bond rights exist for claimants contracting with subcontractors

• Some county-executed highway projects may not require bonds at all

If you’re unsure whether your project qualifies as a highway improvement, have the bond documents reviewed early.

60-Day Preliminary Notice Required

To preserve bond rights, you must:

• Serve a 60-day preliminary notice

• On the prime contractor by certified mail

• Within 60 days after your first furnishing date

This applies whether you contract with the prime contractor or a subcontractor.

If you miss the deadline, still serve the notice—there are narrow exceptions.

Final Bond Claim Notice

Wisconsin does not require a final notice, but sending one is often beneficial to involve the surety early.

Lawsuit Deadline

You must file suit:

• Within one year after project completion

As with private bond claims, because completion dates are often unclear:

Use a conservative deadline of one year from your last furnishing date.

“Lien Against Funds” Claims on Public Projects

Wisconsin allows claimants contracting directly with the prime contractor to assert a lien on unpaid public funds still held by the public owner.

Key points:

• Sub-subcontractors cannot use this remedy

• No strict deadline, but it only works if funds remain unpaid

• A lawsuit to enforce the lien must be filed within three months after serving the claim

Additional Wisconsin Construction Law Notes

Trust Fund Claims

Wisconsin’s trust fund statute provides powerful protection:

• Funds paid or due to the prime contractor or subcontractor become trust funds

• Misuse of funds can create civil or criminal liability

• Particularly useful in bankruptcy or insolvency situations

Equipment Rental

Wisconsin permits lien claims for equipment rental.

Attorney Fees

Wisconsin does not allow attorney’s fees in mechanic’s lien foreclosure actions.

Pay-If-Paid Clauses

These clauses are not enforceable in Wisconsin.
However, “pay-when-paid” timing provisions are allowed.

Wisconsin’s lien and bond laws offer strong protections—but only if you understand and comply with their technical requirements. From 60-day notices to multi-step lien filings, the timing and accuracy of each step has a direct impact on your ability to recover payment. The construction law team at Wagner, Falconer & Judd is here to help you navigate these rules with confidence. If you have questions about a specific project, notice requirements, payment bond concerns, or enforcing a private or public claim, reach out to WFJ. We’re here to protect your rights and ensure you get paid for the work you perform.

Big changes are coming for Minnesota Employers in 2026. Are you ready?

Beginning January 1, 2026, Minnesota’s Paid Family and Medical Leave (Paid Leave) program goes into effect. This state-mandated benefit will provide partial wage replacement for employees who need time away from work due to qualifying life events-like bonding with a new child, caring for a loved one, or managing a serious health condition.

What Employers Need to Know

Covered Employers and Employees

All private and public employers are covered under MN Paid Leave, except for the federal government. Most employees, full-time, part-time, temporary and seasonal, will qualify if they’ve earned at least $3,900 in the previous year and have performed at least 50% of their work in Minnesota.

When It Starts

Payroll deductions and benefits begin January 1, 2026.

First premium payments are due April 30, 2026.

Premiums and Contributions

The 2026 premium rate is 0.88% of wages, split even between employer and employee. Small employers (30 or fewer employees with average wages under 150% of the state average) will receive a reduced rate of 0.66%.

Qualifying Reasons for Paid Leave

• Employee’s own serious health condition
• Bonding with a new child after birth, adoption, or foster placement
• Caring for a family member with a serious health condition
• Family member’s active military duty
• Safety leave related to domestic abuse, sexual assault, or stalking

Employee can take up to 20 weeks of combined family and medical leave per year.

Action Steps for Employers

1. Set up your accounts: Create your UI/Paid Leave and Paid Leave Administrator accounts.
2. Notify Employees by December 1, 2025: Post the MN Paid Leave poster and issue written notices.
3. Decide on premium sharing: Determine your employer/employee split (default is 50/50).
4. Consider supplemental benefits: Decide whether to offer PTO or disability coverage to supplement paid leave.
5. Plan for intermittent leave: Employers must allow at least 480 hours per year.

Private Plans

Employers may opt out of the state program by offering an equivalent private plan-applications must be submitted by November 15, 2025 for coverage beginning January 2026.

Key Deadlines

• November 15, 2025: Private plan submissions due
• December 1, 2025: Employee notice and poster requirement
• January 1, 2026: Program goes live; payroll deductions begin
• April 30, 2026: First premium payments due

Need Help Getting Ready?

WFJ offers compliance support, HR consulting, and best-practice guidance to help employers prepare for MN Paid Leave.

Conducting background checks is one of the most effective ways employers can protect their business, employees, and customers-but doing so incorrectly can create costly legal risk. Between overlaping state laws, federal regulations, and applicant rights, it’s critical for employers to know how to navigate this process the right way.

At Wagner, Falconer & Judd, we help employers build compliant hiring practices that support safety and fairness while minimizing exposure to litigation. Below is a practical overview of what you need to know before your next background check.

Why Conduct Background Checks?

A well-executed background check helps employers:

• Ensure workplace safety and protect customers and employees
• Safeguard company assets from theft, fraud, or reputational damages
• Verify applicant information to confirm experience and integrity
• Reduce exposure to negligent hiring claims that can arise when an employee’s history should have raised red flags

Example: Hiring a shuttle van driver without verifying driving or criminal history can expose a company to a negligent hiring claim if that driver later causes harm while intoxicated on the job.

Key Legal Frameworkds

Minnesota Law

Minnesota’s background check requirements are detailed and unique:

Consumer Reports

• If a written employment application is used, a consumer report disclosure must accompany it.
• Employers must provide a checkbox for applicants to request a copy of the report
• If requested, the employer is required to obtain and share that copy with the applicant

“Ban the Box”

Employers cannot inquire about criminal history until:

• The applicant is selected for an interview or
• A conditional offer of employment has been made (if no interview occurs)

Appicants don’t have a private right to sue under this law, but they can file complaints with the Minnesota Department of Human Rights or under administrative procedure.

Federal Law- The Fair Credit Reporting Act (FCRA)

The FCRA governs how employers use background and consumer reports for hiring, promotion, or retention.

Key employer requirements include:

• Clear disclosure and written consent before obtaining a report
• Pre-adverse action notice if the report could lead to a negative employment decision
• Final adverse action notice after a decision is made, including the applicant’s right to dispute the report’s accuracy.

Violations can be costly-up to $1,000 per violation, plus attorney’s fees, punitive damages, and potential federal enforcement actions. 

Applicant Rights Under the Law

Applicants have the right to:

• Consent before a report is obtained
• Be informed if the report influences an employment decision
• Dispute inaccurate information with the consumer reporting agency

While having a criminal record is not a protected class under Title VII, employers can face liability if their background check policies result in disparate treatment or impact against a protected group.

Avoiding Discrimination: Title VII and EEOC Guidance

To comply with EEOC guidance, employers should:

• Conduct individualized assessments rather than automatic rejections.
• Consider:
  • The nature and gravity of the offense
  • The time elapsed since the offense or sentence
  • The relevance to the specific job
• Give applicants the chance to explain or provide context for their record
• Maintain documentation of how hiring decisions are made and train hiring staff on compliance

Best Practices for Employers

• Use a stand-alone disclosure form for FCRA compliance
• Wait at least five business days after a pre-adverse action notice before issuing a final decision
• Work only with certified consumer reporting agencies that require FCRA compliance verification
• Avoid illegal application questions, such as:
  • “Have you ever been arrested or convicted?”
  • “Have you been convicted of a felony?”
  • “Have you had any driving violations?”
• Document your decision-making process and ensure policies are job-related and consistent with business necessity.

Common Employer Mistakes

• Combining state disclosures with federal FCRA notices
• Rejecting candidates automatically due to any criminal record
• Failing to provide copies of reports when requested
• Overlooking the need for individualized assessment or applicant discussion

Even well-intentioned hiring decisions can lead to exposure if procedures aren’t compliant. 

Final Takeaway

Background checks are essential for protecting your business-but they must be handled with precision. Employers who understand the interplay between Minnesota law, the FCRA, and EEOC guidance are better positioned to hire confidently and defensibly.

At Wagner, Falconer & Judd, our Employment Law team works closely with employers to create compliant background check procedures and hiring policies that stand up to scrutiny.

Need a compliance check up? 

WFJ can help review your forms, update your policies, and train your HR staff to avoid costly missteps.

California has finally delivered the clarity trade creditors have been waiting for. With Governor Newsom’s signing of AB 1521 on October 1, 2025, California law now formally defines “trade credit” and makes clear that it is not a “covered commercial debt” under SB 1286.

What This Means for Trade Creditors

For the past year, SB 1286 created significant confusion in the credit community. The law, which took effect July 1, 2025, expanded California’s Rosenthal Fair Debt Collection Practices Act-a statute designed for consumer debt-to include certain small-business debts.

The issue? It wasn’t clear whether open-account trade credits-the type of commonly used by material suppliers, distributors, and contractors-was also included. This lack of clarity created compliance concerns and unnecessary costs for businesses whose focus is selling goods and services, not acting as lenders.

AB 1521 resolves that uncertainty by recognizing what credit professionals have long understood: trade credit is different.

Key Fixes Under AB 1521

AB 1521 amends California Civil Code and does two important things:

1. Expressly excludes trade credit from the definition of “covered commercial debt.”
2. Defines trade credit for the first time in California law as:
   • Credit extended by a business primarily engaged in providing goods, materials, equipment, or services; and
   • Credit extended in connection with those goods or services (unless structured as lease financing under the Financial Code).

This change formally separates trade credit from loans, commercial financing, and debt buying-recognizing it as its own category of credit essential to B2B commerce.

Key Dates to Know

• SB 1286 applies to covered commercial debts entered into, renewed, sold, or assigned on or after July 1, 2025.
• AB 1521 takes effect January 1, 2026, officially defining and excluding trade credit from SB 1286.

What You Should Do Now

While AB 1521 doesn’t take effect until January 1, 2026, its legislative history makes one point clear: trade credit was never intended to fall under SB 1286.

That gives trade creditors a defensible position to treat open-account credit as excluded even during the interim period between July 1, 2025, and January 1, 2026.

Still, every business is different. Now is the time to:

• Review your credit policies and agreements to ensure they align with the updated definitions.
• Confirm that your collection practices remain compliant and clearly distinguish trade credit from financing activities.
• Consult with experienced legal counsel to determine how these changes impact your specific credit operations.

Why This is a Win for Suppliers and Distributors

This legislation isn’t just a fix-it’s a recognition. AB 1521 affirms that trade credit is a vital part of doing business. By clearly defining and excluding it from SB 1286, California law now better reflects how suppliers, contractors, and distributors operate in the real world.

You can continue extending credit terms with confidence, without the concern of being subject to consumer-style debt collection rules that were never designed for B2B transactions.

How We Can Help

WFJ has been closely following SB 1286 and AB 1521 developments from the beginning. Our attorneys regularly assist clients in reviewing credit terms, contracts, and collection practices to ensure compliance while maintaining strong customer relationships.

If you have questions about how these legislative updates impact your business, we’re here to help you interpret the changes and take proactive steps to stay protected.

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.