Under existing law, in any action on a contract based on a book account, as defined, that does not provide for attorneys fees and costs, the prevailing party on the contract is entitled to reasonable attorneys fees and costs, and the court is required to fix the attorneys fees in an amount that does not exceed the lesser of $960 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,200 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

This bill would increase these maximum attorneys fees to an amount not to exceed the lesser of $1,200 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,600 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

Under existing law, in any action on a contract based on a book account, as defined, that does not provide for attorneys fees and costs, the prevailing party on the contract is entitled to reasonable attorneys fees and costs, and the court is required to fix the attorneys fees in an amount that does not exceed the lesser of $960 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,200 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

This bill would increase these maximum attorneys fees to an amount not to exceed the lesser of $1,200 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,600 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

Under existing law, in any action on a contract based on a book account, as defined, that does not provide for attorneys fees and costs, the prevailing party on the contract is entitled to reasonable attorneys fees and costs, and the court is required to fix the attorneys fees in an amount that does not exceed the lesser of $960 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,200 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

This bill would increase these maximum attorneys fees to an amount not to exceed the lesser of $1,200 for book accounts that are maintained for personal, family, or household purposes of a natural person, and $1,600 for book accounts that are maintained for all other purposes, or 25% of the principal obligation owing on the contract, as applicable.

 CONSENT  

Bill No: AB 78

Author: Chen (R)

Introduced: 12/18/24

Vote: 21

SENATE JUDICIARY COMMITTEE: 12-0, 6/24/25

AYES: Umberg, Niello, Allen, Arreguín, Ashby, Caballero, Durazo, Laird, Stern, Wahab, Weber Pierson, Wiener

NO VOTE RECORDED: Valladares

ASSEMBLY FLOOR: 72-0, 3/10/25 (Consent) - See last page for vote

SUBJECT: Attorney’s fees: book accounts

SOURCE: California Association of Collectors

DIGEST:

This bill increases the maximum attorney’s fees available to a prevailing party in any action on a contract based on a book account that does not provide for attorney’s fees and costs.

ANALYSIS:

Existing law:

1. Provides that the term “book account” means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner and is (1) in a bound book, or (2) on a sheet or sheets fastened in a book or to backing but detachable therefrom, or (3) on a card or cards of a permanent character, or is kept in any other reasonably permanent form and manner. (Code Civil Procedure (Civ. Proc.) § 337a(a).)
2. Excludes “consumer debt” from the above definition. “Consumer debt” means any obligation or alleged obligation, incurred on or after July 1, 2024, of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes and where the obligation to pay appears on the face of a note or in a written contract. (Code Civ. Proc. § 337a.)
3. Provides that, except as otherwise provided by law or where waived by the parties to an agreement, in any action on a contract based on a book account, which does not provide for attorney’s fees and costs, the party who is determined to be the party prevailing on the contract shall be entitled to reasonable attorney’s fees, as provided, in addition to other costs. The prevailing party on the contract shall be the party who recovered a greater relief in the action on the contract. The court may determine that there is no party prevailing on the contract for purposes hereof. Fees for a prevailing party bringing the action shall not exceed the lesser of: (1) $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes; and $1,200 for all other book accounts to which this applies; or (2) 25% of the principal obligation owing under the contract. If the defendant is found to have no obligation owing on a book account, the court shall award that prevailing party reasonable attorney’s fees not to exceed $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes, and $1,200 for all other book accounts to which this section applies. These attorney’s fees shall be an element of the costs of the suit. (Civil (Civ.) Code § 1717.5(a).)
4. Clarifies that the above does not apply to any action in which an insurance company is a party nor shall an insurance company, surety, or guarantor be liable thereunder for the attorney’s fees and costs, except as provided. It also does not apply to any action in which a bank, a savings association, a federal association, a state or federal credit union, or a subsidiary, affiliate, or holding company of any of those entities, or an authorized industrial loan company, a licensed consumer finance lender, or a licensed commercial finance lender, is a party. (Civ. Code § 1717.5(c).)

This bill raises the above fees available in actions on a contract based on a book account from $960 and $1,200 to $1,200 and $1,600, respectively.

Background

The term “book account” means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of either a contract or a fiduciary relationship, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner, as provided. It does not include “consumer debt,” as defined.

Civil Code section 1717.5 establishes the right to recover attorney’s fees in contract actions based on a book account where the underlying contract does not contain an attorney’s fees provision. Currently the base amounts set by statute are $960 and $1,200, depending on the type of obligations upon which the book account is based.

This bill raises those amounts to $1,200 and $1,600, respectively.

This bill is sponsored by the California Association of Collectors. No timely support or opposition has been received by the Committee.

Comment

According to the author:

The intent of AB 78 is to ensure that prevailing parties receive fair compensation for attorney fees in actions based on book accounts. Attorney fees can present a significant financial burden, particularly for individuals who are not in breach of contract yet must hire legal representation. This bill aims to ensure that the prevailing party in such actions is appropriately compensated for attorney fees. Our goal is to increase the compensation amount, as attorney fees have risen in recent years. The current compensation rate has not kept pace with economic changes, and it has been nine years since this system was last updated to reflect the current economy.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 6/25/25)

California Association of Collectors (source)

OPPOSITION: (Verified 6/25/25)

None received

ARGUMENTS IN SUPPORT: The California Association of Collectors, the sponsor of this bill, writes:

California law established statutory attorneys’ fees for the prevailing party in any action on a contract based on a book account. Because the amount is fixed in statute it can only be increased by a bill.

The last bill to increase the set fees was SB 363 (Morrell) 2015. It has been ten years since the amount was adjusted.

AB 78 simply increases the established fee based on the CPI over ten years.

ASSEMBLY FLOOR: 72-0, 3/10/25

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Essayli, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Lackey, Lee, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Wallis, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Bryan, Gallagher, Krell, Lowenthal, Muratsuchi, Ramos, Valencia, Ward

Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113

6/27/25 15:57:28

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2025-2026 Regular Session

Bill No: AB 78 (Author:Chen)

Version: December 18, 2024

Hearing Date: June 24, 2025

Fiscal: No

Urgency: No

Consultant: CK

SUBJECT

Attorney’s fees: book accounts

DIGEST

This bill increases the maximum attorney’s fees available to a prevailing party in any action on a contract based on a book account that does not provide for attorney’s fees and costs.

EXECUTIVE SUMMARY

The term “book account” means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of either a contract or a fiduciary relationship, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner, as provided. It does not include “consumer debt,” as defined.

Civil Code section 1717.5 establishes the right to recover attorney’s fees in contract actions based on a book account where the underlying contract does not contain an attorney’s fees provision. Currently the base amounts set by statute are $960 and $1,200, depending on the type of obligations upon which the book account is based.

This bill raises those amounts to $1,200 and $1,600, respectively.

The bill is sponsored by the California Association of Collectors. No timely support or opposition has been received by the Committee.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Provides that the term “book account” means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner and is (1) in a bound book, or (2) on a sheet or sheets fastened in a book or to backing but detachable therefrom, or (3) on a card or cards of a permanent character, or is kept in any other reasonably permanent form and manner. (Code Civ. Proc. § 337a(a).)
2. Excludes “consumer debt” from the above definition. “Consumer debt” means any obligation or alleged obligation, incurred on or after July 1, 2024, of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes and where the obligation to pay appears on the face of a note or in a written contract. (Code Civ. Proc. § 337a.)
3. Provides that, except as otherwise provided by law or where waived by the parties to an agreement, in any action on a contract based on a book account, which does not provide for attorney’s fees and costs, the party who is determined to be the party prevailing on the contract shall be entitled to reasonable attorney’s fees, as provided, in addition to other costs. The prevailing party on the contract shall be the party who recovered a greater relief in the action on the contract. The court may determine that there is no party prevailing on the contract for purposes hereof. Fees for a prevailing party bringing the action shall not exceed the lesser of: (1) $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes; and $1,200 for all other book accounts to which this applies; or (2) 25 percent of the principal obligation owing under the contract. If the defendant is found to have no obligation owing on a book account, the court shall award that prevailing party reasonable attorney’s fees not to exceed $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes, and $1,200 for all other book accounts to which this section applies. These attorney’s fees shall be an element of the costs of the suit. (Civ. Code § 1717.5(a).)
4. Clarifies that the above does not apply to any action in which an insurance company is a party nor shall an insurance company, surety, or guarantor be liable thereunder for the attorney’s fees and costs, except as provided. It also does not apply to any action in which a bank, a savings association, a federal association, a state or federal credit union, or a subsidiary, affiliate, or holding company of any of those entities, or an authorized industrial loan company, a licensed consumer finance lender, or a licensed commercial finance lender, is a party. (Civ. Code § 1717.5(c).)

This bill raises the above fees available in actions on a contract based on a book account from $960 and $1,200 to $1,200 and $1,600, respectively.

COMMENTS

1. Common counts and book accounts

The term “book account” means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of either a contract or a fiduciary relationship, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner, as provided.

Last session, AB 1414 (Kalra, Ch. 688, Stats. 2023) prohibited the use of common counts in actions for collection of consumer debt. It also excluded consumer debt from the definition of “book account.” “Consumer debt” for these purposes is defined as any obligation or alleged obligation, incurred on or after July 1, 2024, of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes and where the obligation to pay appears on the face of a note or in a written contract.

Currently, in any action on a contract based on a book account that does not provide for attorney’s fees and costs, the party who is determined to be the party prevailing on the contract is entitled to reasonable attorney’s fees, in addition to other costs. The prevailing party on the contract is the party who recovered a greater relief in the action on the contract. The court may determine that there is no party prevailing.

For the prevailing party bringing the action on the book account, fees are not to exceed the lesser of: (1) $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes and $1,200 for all others; or (2) 25 percent of the principal obligation owing under the contract. Similarly, if the prevailing party is the one against whom the obligation on the book account was asserted, the court shall award that prevailing party reasonable attorney’s fees not to exceed $960 for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes, and $1,200 for all others.

The $960 and $1,200 amounts were raised last by SB 363 (Morrell, Ch. 80, Stats. 2015) in 2015 from $800 and $1,000, respectively.

This bill again raises these amounts significantly to $1,200 and $1,600, respectively.

1. Stakeholder positions

According to the author:

The intent of AB 78 is to ensure that prevailing parties receive fair compensation for attorney fees in actions based on book accounts. Attorney fees can present a significant financial burden, particularly for individuals who are not in breach of contract yet must hire legal representation. This bill aims to ensure that the prevailing party in such actions is appropriately compensated for attorney fees. Our goal is to increase the compensation amount, as attorney fees have risen in recent years. The current compensation rate has not kept pace with economic changes, and it has been nine years since this system was last updated to reflect the current economy.

The California Association of Collectors, the sponsor of the bill, writes:

California law established statutory attorneys’ fees for the prevailing party in any action on a contract based on a book account. Because the amount is fixed in statute it can only be increased by a bill.

The last bill to increase the set fees was SB 363 (Morrell) 2015. It has been ten years since the amount was adjusted.

AB 78 simply increases the established fee based on the CPI over ten years.

SUPPORT

California Association of Collectors (sponsor)

OPPOSITION

None received

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

AB 1414 (Kalra, Ch. 688, Stats. 2023) See Comment 1.

SB 363 (Morrell, Ch. 80, Stats. 2015) See Comment 1.

PRIOR VOTES:

Assembly Floor (Ayes 72, Noes 0)

Assembly Judiciary Committee (Ayes 12, Noes 0)

**************

Date of Hearing: March 4, 2025

ASSEMBLY COMMITTEE ON JUDICIARY

Ash Kalra, Chair

ABPCA Bill Id:AB 78

Author:(Chen) – As Introduced Ver:December 18, 2024

PROPOSED CONSENT

SUBJECT: Attorney’s fees: book accounts

KEY ISSUE: Should the statutory cap on recoverable attorney’s fees in actions on book accounts under Civil Code section 1717.5 be increased to reflect inflation and the rising costs of legal representation, while maintaining the existing limitation of 25% of the principal obligation?

SYNOPSIS

Under existing law, Civil Code Section 1717.5 allows for the recovery of reasonable attorney’s fees in actions on book accounts where the contract does not provide for such fees. These fees are currently capped at $960 for debts owed by natural persons for personal, family, or household purposes; and $1,200 for all other book accounts, or 25% of the principal obligation, whichever is lower. These caps were last adjusted in 2015. AB 78 proposes to increase the statutory caps to $1,200 and $1,600, respectively, to account for inflation and rising litigation costs. The bill does not modify the existing 25% limitation on the principal obligation or alter judicial discretion in awarding reasonable fees. This measure is sponsored by the California Association of Collectors and has no known opposition.

SUMMARY: Increases attorney’s fees awardable in contract actions based on a book account where the contract does not include an attorney’s fees provision. Specifically, this bill:

1. Increases the maximum allowable attorney’s fees from $960 to $1,200 for book accounts based on obligations owed by a natural person for personal, family, or household purposes;
2. Increases the maximum allowable attorney’s fees from $1,200 to $1,600 for all other book accounts.

EXISTING LAW:

1. Defines “book account” as a detailed, regularly maintained record of transactions between a debtor and creditor arising from a contract or fiduciary relationship. It tracks debits and credits, identifies the parties, and is kept in the ordinary course of business in a reasonably permanent form, such as a bound book, loose-leaf sheets, cards, or another durable format. (Code of Civil Procedure Section 337a.)
2. Provides that in any action on a contract based on a book account which does not provide for attorney’s fees and costs, the prevailing party is entitled to reasonable attorney’s fees, in addition to other costs. The prevailing party on the contract is the party who recovered a greater relief in the action on the contract. (Civil Code Section 1717.5(a).)
3. Provides that reasonable attorney’s fees awarded to the prevailing party, as specified, shall be fixed by the court in an amount that shall not exceed the lesser of: (1) $960 for book accounts based on an obligation owed by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes; and $1,200 for all other book accounts; or (2) 25% of the principal obligation owing under the contract. (Id.)
4. States that if there is a written agreement between the parties signed by the person to be charged, the above fees may not be imposed unless that agreement contains a statement that the prevailing party in any action between the parties is entitled to the fees above. (Id.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: This non-controversial bill would raise the statutory cap on attorney’s fees in a book account action for only the fourth time in nearly 40 years. The author explains the need for adjusting the cap:

The intent of AB 78 is to ensure that prevailing parties receive fair compensation for attorney fees in actions based on book accounts. Attorney fees can present a significant financial burden, particularly for individuals who are not in breach of contract yet must hire legal representation. This bill aims to ensure that the prevailing party in such actions is appropriately compensated for attorney fees. Our goal is to increase the compensation amount, as attorney fees have risen in recent years. The current compensation rate has not kept pace with economic changes, and it has been nine years since this system was last updated to reflect the current economy.

What is a book account? A book account is generally understood to be a detailed statement that is the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation. In some cases, the obligation between the parties does not arise under contract. For example, many small businesses extend credit to customers, patients, and homeowners through an open book account, whereby a small business provides services and bills monthly.

History of attorney’s fee cap. Originally enacted in 1986 through SB 1934 (Deddeh, Chap. 884, Stats. 1986), Civil Code section 1717.5 establishes the right to recover attorney’s fees in contract actions based on a book account where the underlying contract does not contain an attorney’s fees provision.

The law was originally sponsored by the California Association of Collectors, which argued that the high cost of collection actions—especially for small debts—was prohibitive without an attorney’s fees provision. SB 1934 established a statutory attorney’s fees award capped at $500 or 25% of the outstanding debt, whichever was lower. The law applied equally to prevailing debtors, allowing them to recover up to $500 in attorney’s fees as well. The statutory cap has been adjusted periodically to account for inflation and rising litigation costs. In 1991, SB 182 (Lockyer, Chap. 406, Stats. 1991) raised the limit to $660, primarily as an inflationary adjustment that also enabled collection agencies to recover more of their expenses. In 2004, AB 2347 (Maddox, Chap. 328, Stats. 2004) further increased the cap to $800 for book accounts maintained by a natural person for personal, family, or household purposes, and $1,000 for all other book accounts. The caps were last adjusted in 2015 to $960 and $1,200. (SB 363, Morrell, Chap. 80, Stats. 2015.)

In line with these prior adjustments, AB 78 seeks to update the statutory caps once again to reflect inflation, raising the limits to $1,200 and $1,600, respectively.

ARGUMENTS IN SUPPORT: The California Association of Collectors explain the need for this measure:

California law established statutory attorneys’ fees for the prevailing party in any action on a contract based on a book account. Because the amount is fixed in statute it can only be increased by a bill. The last bill to increase the set fees was SB 363 (Morrell) 2015. It has been ten years since the amount was adjusted. AB 78 simply increases the established fee based on the CPI over ten years.

REGISTERED SUPPORT / OPPOSITION:

Support

California Association of Collectors (sponsor)

Opposition

None on file

Analysis Prepared by: Shiran Zohar / JUD. / (916) 319-2334