SAN DIEGO — California Attorney General Rob Bonta and Assemblymember Brian Maienschein announced new legislation on Friday that they say would protect victims of predatory businesses found to have violated California consumer protection laws. According to Bonta, current state law allows victims to be eligible for restitution after a judgment has been reached, in many cases of successful prosecutions by the Attorney General, these businesses collapse or become insolvent, leaving no resources to compensate victims for their losses.
The legislation would establish a new “Victims of Consumer Fraud Restitution Fund” in the state Treasury that would be funded by the penalties paid by businesses that violate the law, and would be used to help make victims whole. “True justice is not served when victims are left behind,” said Attorney General Rob Bonta. “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.”
Under AB 1366, the restitution would be funded from the businesses that violate California’s consumer protection laws, rather than through taxes or fees charged to law-abiding businesses.
Attorney General Bonta cited instances where the California Department of Justice successfully obtained judgments against a company where victims were unable to obtain restitution due to insolvency or collapse of the company after prosecution:
- In March 2016, the California Department of Justice obtained a $1.1 billion judgment against Corinthian Colleges, Inc., a predatory chain of for-profit schools. That judgment ordered Corinthian to pay $820 million in restitution to tens of thousands of defrauded students in California, which went unpaid by the company following Corinthian’s bankruptcy filing and liquidation.
- In September 2016, the California Department of Justice secured a multistate judgment against USA Discounters, which had defrauded and illegally discriminated against servicemembers at stores outside military bases across the country. While the Attorney General’s Office secured $7 million in debt relief for more than 4,000 California victims through the bankruptcy, the company — which had closed and liquidated in bankruptcy — had insufficient assets left to make all of its victims whole.
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