New California law would compensate consumer fraud victims stiffed by shady companies
In November 2022, the California attorney general’s office secured a $20 million judgment against Paul Blanco’s Good Car Co., a network of auto dealerships, over hundreds of thousands of false advertising and other consumer protection law violations.
In fall of 2016, a multistate judgment against USA Discounters for defrauding military service members with high-interest loans and hidden fees should have resulted in $7 million in debt relief for 4,000 California victims.
Earlier that year, the for-profit Corinthian Colleges was hit with a $1.1 billion judgment for its predatory marketing and lending tactics.
But in all of these cases, the actual consumers harmed by these businesses’ shady practices saw little to none of the compensation. That’s because despite the attention-grabbing numbers, oftentimes the companies in question go bankrupt, leaving people with little recourse and disappointing results.
With that in mind, California Attorney General Rob Bonta and Assemblymember Brian Maienschein, D-San Diego, on April 7 announced legislation, AB 1366, that would establish a restitution fund within the state Treasury to help pay victims when they don’t receive what they’re owed.
“True justice is not served when victims are left behind,” Bonta said in a statement.
“While our office continues to hold predatory businesses accountable for misconduct, the success feels hollow when we know that the consumers who were defrauded cannot be made whole because the business has no money left to compensate its victims for their losses.”
Advocates have criticized state consumer protection efforts for the slow pace of investigations and a lack of focus on direct compensation for those most affected.
The Victims of Consumer Fraud Restitution Fund would be financed by penalties on businesses for violating consumer protection laws and by profits made through illegal conduct.
Some other states, including Arizona and New York, allow for remediation to be funded through similar means.
On the federal level, the 2010 Wall Street reforms established the Civil Penalty Fund, administered by the Consumer Financial Protection Bureau, to pay victims who are unlikely to otherwise get their due restitution.
In 27 of 162 cases brought by the Consumer Financial Protection Bureau through 2019, defendants owed consumers more than $671 million they couldn’t repay, and, which the agency was able to entirely cover using the fund.
Despite some room for improvement, audits and studies have found it to be an effective means of putting money back in the pockets of those who most deserve and need it.
“In Your Corner” is a column that puts watchdog reporting to work for the community. If you have a concern, a tip, or a hunch, you can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or marisa.endicott@pressdemocrat.com. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.
