Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from selling a consumer debt to a debt collector if the creditor has received notice that the debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from selling a consumer debt to a debt collector if the creditor has received notice that the debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from selling a consumer debt to a debt collector if the creditor has received notice that the debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from pursuing further collections against the consumer on the debt or selling the debt, selling a consumer debt to a debt collector if the creditor has received notice that the debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from pursuing further collections against the consumer on the debt or selling the debt to a debt collector, debt, if the creditor has received notice that the debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill bill, the Identity Theft Resolution Act, would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed as subject to identity theft or fraud, disputed, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from pursuing further collections on the debt or selling the debt to a debt collector, if the creditor has received notice that debt collector has terminated debt collection activities, as described above.

Existing law requires a debt collector that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement in which the debtor claims to be the victim of identity theft to cease collection activities until completion of a review. Existing law requires the debt collector to review and consider all of the information provided by the debtor and other available information and authorizes the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question.

This bill would require the debt collector, upon receipt of the police report and written statement described above, if it furnished adverse information about the debtor to a consumer credit reporting agency, to notify the consumer credit reporting agency that the account is disputed as subject to identity theft or fraud, and initiate a review, as specified, within 10 business days. The bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. The bill would require a debt collector that does not recommence collection activities under these provisions to notify the creditor, no later than 10 business days after making its determination, and if it furnished adverse information to a consumer credit reporting agency, to notify the agency to delete that information no later than 10 business days after making its determination. The bill would also prohibit a creditor from pursuing further collections on the debt or selling debt to a debt collector, if the creditor has received notice that debt collector has terminated debt collection activities, as described above.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1723

Author:(Dodd)

As Amended Ver:August 8, 2016

Majority vote

Original Committee Reference: B. & F.

SUMMARY: Requires a debt collector that has reported adverse information about a debtor to a consumer credit reporting agency (CCRA), upon receipt of a police report and written statement by a debtor in which the debtor claims to be a victim of identity theft, to notify the CCRA that the account is disputed and initiate a review within 10 business days. Specifically, this bill:

1. Provides that a debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding the review.
2. Specifies that if the debt collector has furnished adverse information to a CCRA the debt collector shall notify the CCRA to delete the information no later than 10 business days after making its determination.
3. Provides that a creditor shall not pursue further collections, or sell a consumer debt once debt collection activities have been terminated based upon the debtor's claim of identity theft.

The Senate amendments made technical and clarifying changes.

EXISTING LAW: Provides under Civil Code Section 1788.18:

1. Upon receipt from a debtor all of the following, a debt collector shall cease collection activities until completion of a review as specified:
   1. A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime, including, but not limited to, a violation of Penal Code Section (PEN) 530.5, for the specific debt being collected by the debt collector.
   2. The debtor's written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector.
2. The written statement shall consist of any of the following:
   1. A Federal Trade Commission's Affidavit of Identity Theft.
   2. A written statement that contains the content of the Identity Theft Victim's Fraudulent Account Information Request offered to the public by the California Office of Privacy Protection.
   3. A written statement that certifies that the representations are true, correct, and contain no material omissions of fact to the best knowledge and belief of the person submitting the certification. The statement shall contain or be accompanied by the following, to the extent that an item listed below is relevant to the debtor's allegation of identity theft with respect to the debt in question.
   4. A statement that the debtor is a victim of identity theft.
   5. A copy of the debtor's driver's license or identification card, as issued by the state.
   6. Any other identification document that supports the statement of identity theft.
   7. Specific facts supporting the claim of identity theft, if available.
   8. Any explanation showing that the debtor did not incur the debt.
   9. Any available correspondence disputing the debt after transaction information has been provided to the debtor.
   10. Documentation of the residence of the debtor at the time of the alleged debt. This may include copies of bills and statements, such as utility bills, tax statements, or other statements from businesses sent to the debtor, showing that the debtor lived at another residence at the time the debt was incurred.
   11. A telephone number for contacting the debtor concerning any additional information or questions, or direction that further communications to the debtor be in writing only, with the mailing address specified in the statement.
   12. To the extent the debtor has information concerning who may have incurred the debt, the identification of any person whom the debtor believes is responsible.
   13. An express statement that the debtor did not authorize the use of the debtor's name or personal information for incurring the debt.
3. After receipt of the complete statement and information described the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
4. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. The debt collector shall notify the debtor in writing of that determination and the basis for that determination before proceeding with any further collection activities. The debt collector's determination shall be based on all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
5. No inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review described in subdivision (d) to cease or recommence the debt collection activities. The exercise or non-exercise of rights under this section is not a waiver of any other right or defense of the debtor or debt collector.
6. A debt collector who ceases collection activities under this section and does not recommence those collection activities shall do all of the following:
   1. If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information.
7. Notify the creditor that debt collection activities have been terminated based upon the debtor's claim of identity theft.
8. A debt collector who has possession of documents that the debtor is entitled to request from a creditor pursuant to PEN 530.8 is authorized to provide those documents to the debtor.
9. A "debtor" means a natural person, firm, association, organization, partnership, business trust, company, corporation, or limited liability company from which a debt collector seeks to collect a debt that is due and owing or alleged to be due and owing from the person or entity. The remedies provided by this title shall apply equally to violations of this section.

FISCAL EFFECT: None

COMMENTS: Existing law does not include prescribed time frames for debt collectors to investigate or provide notice of investigations concerning accounts connected to identity theft. Creditors are also not prevented from selling a disputed debt even with notification that a CCRA has blocked reporting of the debt because it resulted from identity theft. Often, the crime of identity theft takes months to detect and by that time a fraudulent account or charge may already be in the collections process.

This bill requires debt collectors when informed by a debtor that a debt is the result of fraud or identity theft to engage in necessary due diligence to make a determination of whether the debt actually belongs to the debtor. It also requires that within 10 days of receiving information from the debtor that the debt is disputed the debt collector must notify a CCRA that the debt is disputed and send the debtor notice of its determination no later than 10 business days after concluding its review.

According to the Javelin Strategy & Research "2015 Identity Fraud Report", released in March 2015 there were 12.7 million United States adult victims in 2014, or nearly one victim every 2.5 seconds. That figure represents 4% of United States adults, including over a 1.5 million Californians. The number of victims declined slightly from 13.1 million in 2013.

Identity theft is also expensive. The total cost of identity theft to victims and businesses in 2014 was $16 million, down from $18 million in 2013. The decrease continues to be the result of a greater share of fraud involving existing credit/debit card accounts, which is less costly than other forms of identity theft.

Analysis Prepared by: FN:0003923

 THIRD READING  

Bill No: AB 1723

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

ASSEMBLY FLOOR: 77-0, 4/28/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill specifies that a debt collector shall initiate its review of an account within 10 business days of receiving certain information that a consumer has become the victim of identity theft and that the debt being collected is not the responsibility of the consumer. This bill requires the debt collector to notify, within 10 business days, any consumer credit reporting agency to which the debt collector furnished adverse information pertaining to a creditor’s account that the account is disputed, and requires the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. This bill also prohibits a creditor from selling the debt to a debt collector if the creditor receives notice that the debtor is a victim of identity theft, as specified.

Senate Floor Amendments of 8/8/16 correct an erroneous cross-reference.

ANALYSIS:

Existing law:

1. Requires consumer credit reporting agencies, under the California Consumer Credit Reporting Agencies Act (Civ. Code Sec. 1785.1 et seq.) and the Federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.), to adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, hiring of a dwelling unit, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information. (Civ. Code Sec. 1785.1(d); 15 U.S.C. Sec. 1681(b).)
2. Permits a consumer to place a “security freeze” on his or her credit report, prohibiting consumer credit reporting agencies from releasing the consumer’s credit report or any information contained in it unless the consumer expressly authorizes the release. (Civ. Code Sec. 1785.11.2(a).)
3. Requires a debt collector to cease collection activities until completion of a specified review upon receipt from a debtor of both of the following:

• A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime for the specific debt being collected by the debt collector; and
• A debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector, as specified. (Civ. Code Sec. 1788.18(a).)

1. Specifies that upon receipt of the information described above, the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. (Civ. Code Sec. 1788.18(d).)
2. Specifies that no inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review to cease or recommence the debt collection activities. (Civ. Code Sec. 1788.18(e).)
3. States that a debt collector who ceases collection activities and does not recommence those collection activities shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information; and
• Notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. (Civ. Code Sec. 1788.18(g).)

This bill:

1. Specifies that a debt collector shall initiate its review to consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor within 10 business days of receiving the information.
2. Specifies that within 10 business days of receiving the information, the debt collector shall notify a consumer credit reporting agency that an account is disputed if the debt collector furnished the agency adverse information about the debtor.
3. Specifies that the debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding its review.
4. States that a debt collector who ceases and does not recommence collection activities in response to debtor’s claims to be the victim of identity theft with respect to the specific debt being collected shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information no later than 10 business days after making its determination; and
• Notify the creditor no later than 10 business days after making its determination that debt collection activities have been terminated based upon the debtor’s claim of identity theft.

1. Prohibits a creditor from selling a debt for which the creditor has received a notice that the debtor is a victim of identity theft, as specified.

Background

According to the Federal Trade Commission’s (FTC) “Consumer Sentinel Network Data Book for January – December 2015,” California had more identity theft complaints—55,305—than any other state. For every 100,000 people in California, there were 141.3 identity theft complaints. Nationwide, identity theft has increased more than five-fold during the past 15 years, with the FTC receiving almost a half-million complaints from consumers in 2015 alone. (Federal Trade Commission, Consumer Sentinel Network Data Book for January – December 2015 (Feb. 2016) <https://www.ftc.gov/system/files/ documents/reports/consumer-sentinel-network-data-book-january-december-2015/160229csn-2015databook.pdf [as of June 1, 2016].)

Identity theft victims’ information can be misused in numerous ways. One of the most common is the creation of new accounts, including credit card, utility, or wireless telephone accounts. But, victims’ information can also be used in other, equally nefarious ways. As the FTC notes:

Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. An identity thief might even file a tax return in your name and get your refund. In some extreme cases, a thief might even give your name to the police during an arrest. (Federal Trade Commission, Taking Charge: What To Do If Your Identity Is Stolen (Apr. 2013) <https://bulkorder.ftc.gov/ system/files/publications/pdf-0009-taking-charge.pdf [as of June 1, 2016].)

In 2003, the Legislature passed AB 1294 (Wiggins, Chapter 287, Statutes of 2003), which required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft. This bill enhances that provision by requiring a debt collector to initiate a review of a consumer’s allegation within 10 days of receipt, and notify credit agencies that a debt is being contested. This bill also prohibits the creditor from selling the debt to another party in specified cases where the debtor is a victim of identity theft.

Comments

The author writes:

Current law does not provide any timeframes for investigations, or notification to the victim or the creditor about the outcome of the investigation. Furthermore, current law does not prohibit creditors from pursuing further collections on the debt or selling the debt to a different debt collector after debt collection was ceased by a debt collector.

AB 1723 would require debt collectors, upon receipt of appropriate documentation, to take several steps within 10 business days, including initiating an investigation of the dispute, and notifying the consumer credit reporting agency of the dispute if the account is being credit reported. This bill would require that a debt collector, within 10 business days of its determination, delete any adverse information furnished to a consumer credit reporting agency and notify the creditor that the collection activities have been terminated based upon the debtor’s claim of identity theft. This bill would require a debt collector to send notice of its determination to a consumer no later than 10 business days after concluding its review. The bill would also prohibit a creditor from selling specified debts to a debt collector when the debtor is a victim of identity theft.

Related/Prior Legislation

AB 1580 (Gatto, et. al., 2016) requires a consumer credit reporting agency to place a security freeze on the credit file of a protected consumer upon the request of, and submission of specified information by, the protected consumer’s representative. This bill defines a protected consumer as any of the following: an individual who is under 16 years of age at the time a request for the placement of a security freeze is made; an incapacitated person or a protected individual for whom a guardian or conservator has been appointed; or a person under the jurisdiction of a county welfare department or county probation department who has been placed in a foster care setting and is under 16 years of age at the time a request for a security freeze is made. The bill is pending on the Senate Floor.

SB 641 (Wieckowski, Chapter 804, Statutes of 2015) added a provision to the Fair Debt Buying Practices Act to provide consumers, in limited circumstances involving actions brought by debt buyers, extended time to file a motion to set aside a default or default judgment and for leave to defend an action relating to debt, if the service of summons did not result in actual notice to the consumer in time to defend the action.

AB 2374 (Hernandez, Chapter 645, Statutes of 2012) prohibited credit reporting agencies from charging specified consumers any fee for the initial placement of a security freeze, but authorized such agencies to charge a fee of up to $5 for lifting, removing, or replacing a security freeze.

AB 372 (Salas, Chapter 151, Statutes of 2008) permitted a credit reporting agency to charge a fee of no more than $5 to a consumer 65 years of age or older and no more than $10 to other consumers for a request for a security freeze, removal of the freeze, or temporary lifting of the freeze for a period of time or for a specific party.

AB 2043 (Banking and Finance Committee, Chapter 521, Statutes of 2006) authorized specified business entities that become the victims of identity theft to utilize debt relief protections available to natural persons who are victimized by identity theft.

AB 1294 (Wiggins, Chapter 287, Statutes of 2003) required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft, as specified.

SB 168 (Bowen, Chapter 720, Statutes of 2001) gave California consumers the right to place a freeze on their credit reports, which, while in place, prohibits a credit reporting agency from releasing the consumer’s credit report without the express authorization of the consumer.

AB 156 (Murray, Chapter 768, Statutes of 1997) formally recognized identity theft as a crime, providing that it is a misdemeanor for a person to willfully obtain personal identifying information of another and use that information to obtain, or attempt to obtain, credit, goods, or services in the name of the another person without the consent of that person.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/13/16)

California Attorney General Kamala Harris

California Association of Collectors

California Bankers Association

California Police Chiefs Association

Consumer Attorneys of California

Contra Costa District Attorney’s Office

Encore Capital Group

Los Angeles County Board of Supervisors

Napa County District Attorney’s Office

Privacy Rights Clearinghouse

Sonoma County District Attorney’s Office

Yolo County District Attorney’s Office

OPPOSITION: (Verified 8/2/16)

None received

ASSEMBLY FLOOR: 77-0, 4/28/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Daly, Mathis, Olsen

Prepared by: Tobias Halvarson / JUD. / (916) 651-4113

8/13/16 17:20:09

**** END ****

 THIRD READING  

Bill No: AB 1723

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

ASSEMBLY FLOOR: 77-0, 4/28/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill specifies that a debt collector shall initiate its review of an account within 10 business days of receiving certain information that a consumer has become the victim of identity theft and that the debt being collected is not the responsibility of the consumer. This bill requires the debt collector to notify, within 10 business days, any consumer credit reporting agency to which the debt collector furnished adverse information pertaining to a creditor’s account that the account is disputed, and requires the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. This bill also prohibits a creditor from selling the debt to a debt collector if the creditor receives notice that the debtor is a victim of identity theft, as specified.

Senate Floor Amendments of 8/8/16 correct an erroneous cross-reference.

ANALYSIS:

Existing law:

1. Requires consumer credit reporting agencies, under the California Consumer Credit Reporting Agencies Act (Civ. Code Sec. 1785.1 et seq.) and the Federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.), to adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, hiring of a dwelling unit, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information. (Civ. Code Sec. 1785.1(d); 15 U.S.C. Sec. 1681(b).)
2. Permits a consumer to place a “security freeze” on his or her credit report, prohibiting consumer credit reporting agencies from releasing the consumer’s credit report or any information contained in it unless the consumer expressly authorizes the release. (Civ. Code Sec. 1785.11.2(a).)
3. Requires a debt collector to cease collection activities until completion of a specified review upon receipt from a debtor of both of the following:

• A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime for the specific debt being collected by the debt collector; and
• A debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector, as specified. (Civ. Code Sec. 1788.18(a).)

1. Specifies that upon receipt of the information described above, the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. (Civ. Code Sec. 1788.18(d).)
2. Specifies that no inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review to cease or recommence the debt collection activities. (Civ. Code Sec. 1788.18(e).)
3. States that a debt collector who ceases collection activities and does not recommence those collection activities shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information; and
• Notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. (Civ. Code Sec. 1788.18(g).)

This bill:

1. Specifies that a debt collector shall initiate its review to consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor within 10 business days of receiving the information.
2. Specifies that within 10 business days of receiving the information, the debt collector shall notify a consumer credit reporting agency that an account is disputed if the debt collector furnished the agency adverse information about the debtor.
3. Specifies that the debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding its review.
4. States that a debt collector who ceases and does not recommence collection activities in response to debtor’s claims to be the victim of identity theft with respect to the specific debt being collected shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information no later than 10 business days after making its determination; and
• Notify the creditor no later than 10 business days after making its determination that debt collection activities have been terminated based upon the debtor’s claim of identity theft.

1. Prohibits a creditor from selling a debt for which the creditor has received a notice that the debtor is a victim of identity theft, as specified.

Background

According to the Federal Trade Commission’s (FTC) “Consumer Sentinel Network Data Book for January – December 2015,” California had more identity theft complaints—55,305—than any other state. For every 100,000 people in California, there were 141.3 identity theft complaints. Nationwide, identity theft has increased more than five-fold during the past 15 years, with the FTC receiving almost a half-million complaints from consumers in 2015 alone. (Federal Trade Commission, Consumer Sentinel Network Data Book for January – December 2015 (Feb. 2016) <https://www.ftc.gov/system/files/ documents/reports/consumer-sentinel-network-data-book-january-december-2015/160229csn-2015databook.pdf [as of June 1, 2016].)

Identity theft victims’ information can be misused in numerous ways. One of the most common is the creation of new accounts, including credit card, utility, or wireless telephone accounts. But, victims’ information can also be used in other, equally nefarious ways. As the FTC notes:

Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. An identity thief might even file a tax return in your name and get your refund. In some extreme cases, a thief might even give your name to the police during an arrest. (Federal Trade Commission, Taking Charge: What To Do If Your Identity Is Stolen (Apr. 2013) <https://bulkorder.ftc.gov/ system/files/publications/pdf-0009-taking-charge.pdf [as of June 1, 2016].)

In 2003, the Legislature passed AB 1294 (Wiggins, Chapter 287, Statutes of 2003), which required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft. This bill enhances that provision by requiring a debt collector to initiate a review of a consumer’s allegation within 10 days of receipt, and notify credit agencies that a debt is being contested. This bill also prohibits the creditor from selling the debt to another party in specified cases where the debtor is a victim of identity theft.

Comments

The author writes:

Current law does not provide any timeframes for investigations, or notification to the victim or the creditor about the outcome of the investigation. Furthermore, current law does not prohibit creditors from pursuing further collections on the debt or selling the debt to a different debt collector after debt collection was ceased by a debt collector.

AB 1723 would require debt collectors, upon receipt of appropriate documentation, to take several steps within 10 business days, including initiating an investigation of the dispute, and notifying the consumer credit reporting agency of the dispute if the account is being credit reported. This bill would require that a debt collector, within 10 business days of its determination, delete any adverse information furnished to a consumer credit reporting agency and notify the creditor that the collection activities have been terminated based upon the debtor’s claim of identity theft. This bill would require a debt collector to send notice of its determination to a consumer no later than 10 business days after concluding its review. The bill would also prohibit a creditor from selling specified debts to a debt collector when the debtor is a victim of identity theft.

Related/Prior Legislation

AB 1580 (Gatto, et. al., 2016) requires a consumer credit reporting agency to place a security freeze on the credit file of a protected consumer upon the request of, and submission of specified information by, the protected consumer’s representative. This bill defines a protected consumer as any of the following: an individual who is under 16 years of age at the time a request for the placement of a security freeze is made; an incapacitated person or a protected individual for whom a guardian or conservator has been appointed; or a person under the jurisdiction of a county welfare department or county probation department who has been placed in a foster care setting and is under 16 years of age at the time a request for a security freeze is made. The bill is pending on the Senate Floor.

SB 641 (Wieckowski, Chapter 804, Statutes of 2015) added a provision to the Fair Debt Buying Practices Act to provide consumers, in limited circumstances involving actions brought by debt buyers, extended time to file a motion to set aside a default or default judgment and for leave to defend an action relating to debt, if the service of summons did not result in actual notice to the consumer in time to defend the action.

AB 2374 (Hernandez, Chapter 645, Statutes of 2012) prohibited credit reporting agencies from charging specified consumers any fee for the initial placement of a security freeze, but authorized such agencies to charge a fee of up to $5 for lifting, removing, or replacing a security freeze.

AB 372 (Salas, Chapter 151, Statutes of 2008) permitted a credit reporting agency to charge a fee of no more than $5 to a consumer 65 years of age or older and no more than $10 to other consumers for a request for a security freeze, removal of the freeze, or temporary lifting of the freeze for a period of time or for a specific party.

AB 2043 (Banking and Finance Committee, Chapter 521, Statutes of 2006) authorized specified business entities that become the victims of identity theft to utilize debt relief protections available to natural persons who are victimized by identity theft.

AB 1294 (Wiggins, Chapter 287, Statutes of 2003) required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft, as specified.

SB 168 (Bowen, Chapter 720, Statutes of 2001) gave California consumers the right to place a freeze on their credit reports, which, while in place, prohibits a credit reporting agency from releasing the consumer’s credit report without the express authorization of the consumer.

AB 156 (Murray, Chapter 768, Statutes of 1997) formally recognized identity theft as a crime, providing that it is a misdemeanor for a person to willfully obtain personal identifying information of another and use that information to obtain, or attempt to obtain, credit, goods, or services in the name of the another person without the consent of that person.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/2/16)

California Attorney General Kamala Harris

California Association of Collectors

California Police Chiefs Association

Consumer Attorneys of California

Contra Costa District Attorney’s Office

Encore Capital Group

Los Angeles County Board of Supervisors

Napa County District Attorney’s Office

Privacy Rights Clearinghouse

Sonoma County District Attorney’s Office

Yolo County District Attorney’s Office

OPPOSITION: (Verified 8/2/16)

None received

ASSEMBLY FLOOR: 77-0, 4/28/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Daly, Mathis, Olsen

Prepared by:

8/10/16 15:53:11

**** END ****

 CONSENT  

Bill No: AB 1723

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

ASSEMBLY FLOOR: 77-0, 4/28/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill specifies that a debt collector shall initiate its review of an account within 10 business days of receiving certain information that a consumer has become the victim of identity theft and that the debt being collected is not the responsibility of the consumer. This bill requires the debt collector to notify, within 10 business days, any consumer credit reporting agency to which the debt collector furnished adverse information pertaining to a creditor’s account that the account is disputed, and requires the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review. This bill also prohibits a creditor from selling the debt to a debt collector if the creditor receives notice that the debtor is a victim of identity theft, as specified.

ANALYSIS:

Existing law:

1. Requires consumer credit reporting agencies, under the California Consumer Credit Reporting Agencies Act (Civ. Code Sec. 1785.1 et seq.) and the Federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.), to adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, hiring of a dwelling unit, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information. (Civ. Code Sec. 1785.1(d); 15 U.S.C. Sec. 1681(b).)
2. Permits a consumer to place a “security freeze” on his or her credit report, prohibiting consumer credit reporting agencies from releasing the consumer’s credit report or any information contained in it unless the consumer expressly authorizes the release. (Civ. Code Sec. 1785.11.2(a).)
3. Requires a debt collector to cease collection activities until completion of a specified review upon receipt from a debtor of both of the following:

• A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime for the specific debt being collected by the debt collector; and
• A debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector, as specified. (Civ. Code Sec. 1788.18(a).)

1. Specifies that upon receipt of the information described above, the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. (Civ. Code Sec. 1788.18(d).)
2. Specifies that no inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review to cease or recommence the debt collection activities. (Civ. Code Sec. 1788.18(e).)
3. States that a debt collector who ceases collection activities and does not recommence those collection activities shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information; and
• Notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. (Civ. Code Sec. 1788.18(g).)

This bill:

1. Specifies that a debt collector shall initiate its review to consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor within 10 business days of receiving the information.
2. Specifies that within 10 business days of receiving the information, the debt collector shall notify a consumer credit reporting agency that an account is disputed if the debt collector furnished the agency adverse information about the debtor.
3. Specifies that the debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding its review.
4. States that a debt collector who ceases and does not recommence collection activities in response to debtor’s claims to be the victim of identity theft with respect to the specific debt being collected shall do all of the following:

• If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information no later than 10 business days after making its determination; and
• Notify the creditor no later than 10 business days after making its determination that debt collection activities have been terminated based upon the debtor’s claim of identity theft.

1. Prohibits a creditor from selling a debt for which the creditor has received a notice that the debtor is a victim of identity theft, as specified.

Background

According to the Federal Trade Commission’s (FTC) “Consumer Sentinel Network Data Book for January – December 2015,” California had more identity theft complaints—55,305—than any other state. For every 100,000 people in California, there were 141.3 identity theft complaints. Nationwide, identity theft has increased more than five-fold during the past 15 years, with the FTC receiving almost a half-million complaints from consumers in 2015 alone. (Federal Trade Commission, Consumer Sentinel Network Data Book for January – December 2015 (Feb. 2016) https://www.ftc.gov/system/files/ documents/reports/consumer-sentinel-network-data-book-january-december-2015/160229csn-2015databook.pdf [as of June 1, 2016].)

Identity theft victims’ information can be misused in numerous ways. One of the most common is the creation of new accounts, including credit card, utility, or wireless telephone accounts. But, victims’ information can also be used in other, equally nefarious ways. As the FTC notes:

Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. An identity thief might even file a tax return in your name and get your refund. In some extreme cases, a thief might even give your name to the police during an arrest. (Federal Trade Commission, Taking Charge: What To Do If Your Identity Is Stolen (Apr. 2013) <https://bulkorder.ftc.gov/ system/files/publications/pdf-0009-taking-charge.pdf [as of June 1, 2016].)

In 2003, the Legislature passed AB 1294 (Wiggins, Chapter 287, Statutes of 2003), which required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft. This bill enhances that provision by requiring a debt collector to initiate a review of a consumer’s allegation within 10 days of receipt, and notify credit agencies that a debt is being contested. This bill also prohibits the creditor from selling the debt to another party in specified cases where the debtor is a victim of identity theft.

Comments

The author writes:

Current law does not provide any timeframes for investigations, or notification to the victim or the creditor about the outcome of the investigation. Furthermore, current law does not prohibit creditors from pursuing further collections on the debt or selling the debt to a different debt collector after debt collection was ceased by a debt collector.

AB 1723 would require debt collectors, upon receipt of appropriate documentation, to take several steps within 10 business days, including initiating an investigation of the dispute, and notifying the consumer credit reporting agency of the dispute if the account is being credit reported. This bill would require that a debt collector, within 10 business days of its determination, delete any adverse information furnished to a consumer credit reporting agency and notify the creditor that the collection activities have been terminated based upon the debtor’s claim of identity theft. This bill would require a debt collector to send notice of its determination to a consumer no later than 10 business days after concluding its review. The bill would also prohibit a creditor from selling specified debts to a debt collector when the debtor is a victim of identity theft.

Related/Prior Legislation

AB 1580 (Gatto, et. al., 2016) requires a consumer credit reporting agency to place a security freeze on the credit file of a protected consumer upon the request of, and submission of specified information by, the protected consumer’s representative. This bill defines a protected consumer as any of the following: an individual who is under 16 years of age at the time a request for the placement of a security freeze is made; an incapacitated person or a protected individual for whom a guardian or conservator has been appointed; or a person under the jurisdiction of a county welfare department or county probation department who has been placed in a foster care setting and is under 16 years of age at the time a request for a security freeze is made. The bill is pending on the Senate Floor.

SB 641 (Wieckowski, Chapter 804, Statutes of 2015) added a provision to the Fair Debt Buying Practices Act to provide consumers, in limited circumstances involving actions brought by debt buyers, extended time to file a motion to set aside a default or default judgment and for leave to defend an action relating to debt, if the service of summons did not result in actual notice to the consumer in time to defend the action.

AB 2374 (Hernandez, Chapter 645, Statutes of 2012) prohibited credit reporting agencies from charging specified consumers any fee for the initial placement of a security freeze, but authorized such agencies to charge a fee of up to $5 for lifting, removing, or replacing a security freeze.

AB 372 (Salas, Chapter 151, Statutes of 2008) permitted a credit reporting agency to charge a fee of no more than $5 to a consumer 65 years of age or older and no more than $10 to other consumers for a request for a security freeze, removal of the freeze, or temporary lifting of the freeze for a period of time or for a specific party.

AB 2043 (Banking and Finance Committee, Chapter 521, Statutes of 2006) authorized specified business entities that become the victims of identity theft to utilize debt relief protections available to natural persons who are victimized by identity theft.

AB 1294 (Wiggins, Chapter 287, Statutes of 2003) required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft, as specified.

SB 168 (Bowen, Chapter 720, Statutes of 2001) gave California consumers the right to place a freeze on their credit reports, which, while in place, prohibits a credit reporting agency from releasing the consumer’s credit report without the express authorization of the consumer.

AB 156 (Murray, Chapter 768, Statutes of 1997) formally recognized identity theft as a crime, providing that it is a misdemeanor for a person to willfully obtain personal identifying information of another and use that information to obtain, or attempt to obtain, credit, goods, or services in the name of the another person without the consent of that person.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/2/16)

California Attorney General Kamala Harris

California Association of Collectors

California Police Chiefs Association

Consumer Attorneys of California

Contra Costa District Attorney’s Office

Encore Capital Group

Los Angeles County Board of Supervisors

Napa County District Attorney’s Office

Privacy Rights Clearinghouse

Sonoma County District Attorney’s Office

Yolo County District Attorney’s Office

OPPOSITION: (Verified 8/2/16)

None received

ASSEMBLY FLOOR: 77-0, 4/28/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Daly, Mathis, Olsen

Prepared by: Tobias Halvarson / JUD. / (916) 651-4113

8/3/16 18:49:56

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 1723 (Author:Dodd)

Version: May 31, 2016

Hearing Date: June 28, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

Debt Collection

DESCRIPTION

Existing law requires a debt collector, upon receiving specified information that a consumer has become the victim of identity theft and that the debt being collected is not the responsibility of the consumer, to cease collection activities until reviewing the validity of the debt. In the course of its review, a debt collector must consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor as to whether the consumer is responsible for the specific debt in question.

This bill would specify that a debt collector shall initiate its review of an account within 10 business days of receiving specified information that a consumer has become the victim of identity theft and that the debt being collected is not the responsibility of the consumer. This bill would additionally require the debt collector to notify, within 10 business days, any consumer credit reporting agency to which the debt collector furnished adverse information pertaining to a creditor’s account that the account is disputed. This bill would require the debt collector to send notice of its determination to the debtor no later than 10 business days after concluding the review, and would prohibit a creditor from pursuing further collections on the debt or selling the debt to a debt collector if the creditor receives notice that debt collector has terminated debt collection activities pursuant to its review of the account.

BACKGROUND

According to the Federal Trade Commission’s (FTC) “Consumer Sentinel Network Data Book for January – December 2015,” California had more identity theft complaints—55,305—than any other state. For every 100,000 people in California, there were 141.3 identity theft complaints. Nationwide, identity theft has increased more than five-fold during the past 15 years, with the FTC receiving almost a half-million complaints from consumers in 2015 alone. (Federal Trade Commission, Consumer Sentinel Network Data Book for January – December 2015 (Feb. 2016) <https://www.ftc.gov/system/files/ documents/reports/consumer-sentinel-network-data-book-january-december-2015/160229csn-2015databook.pdf> [as of June 1, 2016].)

Identity theft victims’ information can be misused in numerous ways. One of the most common is the creation of new accounts, including credit card, utility, or wireless telephone accounts. But, victims’ information can also be used in other, equally nefarious ways. As the Federal Trade Commission notes:

Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. An identity thief might even file a tax return in your name and get your refund. In some extreme cases, a thief might even give your name to the police during an arrest. (Federal Trade Commission, Taking Charge: What To Do If Your Identity Is Stolen (Apr. 2013) <https://bulkorder.ftc.gov/ system/files/publications/pdf-0009-taking-charge.pdf> [as of June 1, 2016].)

In 2003, the Legislature passed AB 1294 (Wiggins, Ch. 287, Stats. 2003), which required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft. This bill enhances that provision by requiring a debt collector to initiate a review of a consumer’s allegation within 10 days of receipt, and notify credit agencies that a debt is being contested. If debt collection activities are terminated based upon a debtor’s claim of identity theft, this bill would prohibit the creditor from pursuing further collection of the debt or from selling the debt to another party.

CHANGES TO EXISTING LAW

Existing law, the California Consumer Credit Reporting Agencies Act (Civ. Code Sec. 1785.1 et seq.) and the Federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.), require consumer credit reporting agencies to adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, hiring of a dwelling unit, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information. (Civ. Code Sec. 1785.1(d); 15 U.S.C. Sec. 1681(b).)

Existing law permits a consumer to place a “security freeze” on his or her credit report, prohibiting consumer credit reporting agencies from releasing the consumer’s credit report or any information contained in it unless the consumer expressly authorizes the release. (Civ. Code Sec. 1785.11.2(a).)

Existing law requires a debt collector to cease collection activities until completion of a specified review upon receipt from a debtor of both of the following:

• a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime for the specific debt being collected by the debt collector; and
• a debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector, as specified. (Civ. Code Sec. 1788.18(a).)

Existing law specifies that upon receipt of the information described above, the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. (Civ. Code Sec. 1788.18(d).)

Existing law specifies that no inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review to cease or recommence the debt collection activities. (Civ. Code Sec. 1788.18(e).)

Existing law states that a debt collector who ceases collection activities and does not recommence those collection activities shall do all of the following:

• if the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information; and
• notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. (Civ. Code Sec. 1788.18(g).)

This bill specifies that a debt collector shall initiate its review to consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor within 10 business days of receiving the information.

This bill specifies that within 10 business days of receiving the information, the debt collector shall notify a consumer credit reporting agency that an account is disputed if the debt collector furnished the agency adverse information about the debtor.

This bill specifies that the debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding its review.

This bill states that a debt collector who ceases and does not recommence collection activities in response to debtor’s claims to be the victim of identity theft with respect to the specific debt being collected shall do all of the following:

• if the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information no later than 10 business days after making its determination; and
• notify the creditor no later than 10 business days after making its determination that debt collection activities have been terminated based upon the debtor’s claim of identity theft.

This bill prohibits a creditor from pursuing further collections against a consumer or selling a debt for which the creditor has received a notice from a debt collector indicating that debt collection activities have been terminated based upon the debtor’s claim of identity theft.

COMMENT

1. Stated need for the bill

The author writes:

Current law does not provide any timeframes for investigations, or notification to the victim or the creditor about the outcome of the investigation. Furthermore, current law does not prohibit creditors from pursuing further collections on the debt or selling the debt to a different debt collector after debt collection was ceased by a debt collector.

AB 1723 would require debt collectors, upon receipt of appropriate documentation, to take several steps within 10 business days, including initiating an investigation of the dispute, and notifying the consumer credit reporting agency of the dispute if the account is being credit reported. [This bill] would require that a debt collector, within 10 business days of its determination, delete any adverse information furnished to a consumer credit reporting agency and notify the creditor that the collection activities have been terminated based upon the debtor’s claim of identity theft. [This bill] would require a debt collector to send notice of its determination to a consumer no later than 10 business days after concluding its review. The bill would also prohibit a creditor, upon receiving notice that the debt collector has terminated collection activities, from pursuing further collections on the debt or selling the debt to a debt collector.

1. Protecting victims of identity theft

This bill would help victims of identity theft avoid some of the negative financial impacts associated with that crime by enhancing existing protections victims have from being subjected to collection activities based on fraudulent debt. Under existing law, a victim of identity theft can challenge the collection of a fraudulent debt by submitting specified information to a debt collector demonstrating the fraudulent nature of the debt, and existing law requires debt collectors to both investigate a debtor’s claims and cease collection activities while that investigation is underway. This bill would add specified timelines to this process by requiring a debt collector to initiate its review of the debtor’s claim and inform consumer credit reporting agencies that a debt is being contested within 10 days of receiving the substantiating information from the debtor. This bill would also require a debt collector to convey to the debtor, the creditor, and the credit reporting agencies, its findings relative to the allegations of fraud within 10 days of concluding its review, as specified. Together, these specified timeframes should help drive the review process forward, and eliminate the uncertain timing of events arguably present in existing law. As Encore Capital Group, writing in support, states, “[t]hese changes to current consumer protection laws will ensure that victims of identity theft are able to clear up their credit more quickly, and will raise collection industry standards in responding to and investigating consumer disputes of fraud or identity theft.”

1. Collection of fraudulent debt

In addition to clarifying the timeline associated with a debt collector’s investigation of allegedly fraudulent debt, this bill would restrict the ability of creditors to sell or seek future collection on debts determined to be fraudulent through a debt collector’s review process. Under existing law, debt collectors who cease collection activities of a debt alleged to be the result of identity theft must both notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft, and notify consumer credit reporting agencies to delete adverse information furnished by the debt collector pertaining to the fraudulent debt. This bill would additionally restrict creditors from both pursuing further collections against the consumer and selling the debt to another party upon receipt of notification from a debt collector that collection activities were terminated based upon the debtor’s claim of identity theft. While this would certainly help consumers avoid collection activities based upon fraudulent debt, allowing a third party debt collector to unilaterally determine the validity of a creditor’s debt without further review could infringe on that creditor’s property and due process rights. To address this concern, the Committee may wish to consider the following amendments which would strike this provision from the bill and instead prevent creditors from marketing questionable debt to other debt collectors. These amendments would not negate the property interest a creditor may have in the questionable debt.

Suggested Amendments:

On page 5, strike lines 21 through 23.

On page 5, following line 35, insert:

Sec. 3. Section 1785.16.2 of the Civil Code is amended to read:

1785.16.2. (a) No creditor may sell a consumer debt to a debt collector, as defined in 15 U.S.C. Sec. 1692a, if the consumer is a victim of identity theft, as defined in Section 1798.2, and with respect to that debt, the creditor has received notice pursuant to subdivision (k) of Section 1785.16, or subdivision (g)(2) of 1788.18.

(b) Subdivision (a) does not apply to a creditor’s sale of a debt to a subsidiary or affiliate of the creditor, if, with respect to that debt, the subsidiary or affiliate does not take any action to collect the debt.

(c) For the purposes of this section, the requirement in 15 U.S.C. Sec. 1692a, that a person must use an instrumentality of interstate commerce or the mails in the collection of any debt to be considered a debt collector, does not apply.

Support: California Association of Collectors; California Attorney General; California Police Chiefs Association; Consumer Attorneys of California; Contra Costa District Attorney’s Office; Encore Capital Group; Los Angeles County Board of Supervisors; Napa County District Attorney's Office; Privacy Rights Clearinghouse; Sonoma County District Attorney’s Office; Yolo County District Attorney’s Office

Opposition: None Known

HISTORY

Source: Author

Related Pending Legislation: AB 1580 (Gatto, et. al., 2016) would require a consumer credit reporting agency to place a security freeze on the credit file of a protected consumer upon the request of, and submission of specified information by, the protected consumer’s representative. This bill would define a protected consumer as any of the following: an individual who is under 16 years of age at the time a request for the placement of a security freeze is made; an incapacitated person or a protected individual for whom a guardian or conservator has been appointed; or a person under the jurisdiction of a county welfare department or county probation department who has been placed in a foster care setting and is under 16 years of age at the time a request for a security freeze is made. This bill is pending in the Senate Judiciary Committee.

Prior Legislation:

SB 641 (Wieckowski, Ch. 804, Stats. 2015) added a provision to the Fair Debt Buying Practices Act to provide consumers, in limited circumstances involving actions brought by debt buyers, extended time to file a motion to set aside a default or default judgment and for leave to defend an action relating to debt, if the service of summons did not result in actual notice to the consumer in time to defend the action.

AB 2374 (Hernandez, Ch. 645, Stats. 2012) prohibited credit reporting agencies from charging specified consumers any fee for the initial placement of a security freeze, but authorized such agencies to charge a fee of up to $5 for lifting, removing, or replacing a security freeze.

AB 372 (Salas, Ch. 151, Stats. 2008) permitted a credit reporting agency to charge a fee of no more than $5 to a consumer 65 years of age or older and no more than $10 to other consumers for a request for a security freeze, removal of the freeze, or temporary lifting of the freeze for a period of time or for a specific party.

AB 2043 (Banking and Finance Committee, Ch. 521, Stats. 2006) authorized specified business entities that become the victims of identity theft to utilize debt relief protections available to natural persons who are victimized by identity theft.

AB 1294 (Wiggins, Ch. 287, Stats. 2003) required a debt collector to stop collecting a consumer’s debt if an alleged debtor provides the collector with specified information showing that the debtor is a victim of identity theft, as specified.

SB 168 (Bowen, Ch. 720, Stats. 2001) gave California consumers the right to place a freeze on their credit reports, which, while in place, prohibits a credit reporting agency from releasing the consumer’s credit report without the express authorization of the consumer.

AB 156 (Murray, Ch. 768, Stats. 1997) formally recognized identity theft as a crime, providing that it is a misdemeanor for a person to willfully obtain personal identifying information of another and use that information to obtain, or attempt to obtain, credit, goods, or services in the name of the another person without the consent of that person.

Prior Vote:

Assembly Floor (Ayes 77, Noes 0)

Assembly Judiciary Committee (Ayes 10, Noes 0)

Assembly Banking and Finance Committee (Ayes 12, Noes 0)

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

ASSEMBLY THIRD READING

ATR Bill Id:AB 1723

Author:(Dodd)

As Amended Ver:March 28, 2016

Majority vote

SUMMARY: Requires a debt collector that has reported adverse information about a debtor to a consumer credit reporting agency (CCRA), upon receipt of a police report and written statement by a debtor in which the debtor claims to be a victim of identity theft, to notify the CCRA that the account is disputed and initiate a review within 10 business days. Specifically, this bill:

1. Provides that a debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding the review.
2. Specifies that if the debt collector has furnished adverse information to a CCRA the debt collector shall notify the CCRA to delete the information no later than 10 business days after making its determination.
3. Provides that a creditor shall not pursue further collections, or sell a consumer debt once debt collection activities have been terminated based upon the debtor's claim of identity theft.

EXISTING LAW: Provides under Civil Code Section 1788.18:

1. Upon receipt from a debtor all of the following, a debt collector shall cease collection activities until completion of a review as specified:
   1. A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime, including, but not limited to, a violation of Penal Code Section 530.5, for the specific debt being collected by the debt collector.
   2. The debtor's written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector.
2. The written statement shall consist of any of the following:
   1. A Federal Trade Commission's Affidavit of Identity Theft.
   2. A written statement that contains the content of the Identity Theft Victim's Fraudulent Account Information Request offered to the public by the California Office of Privacy Protection.
   3. A written statement that certifies that the representations are true, correct, and contain no material omissions of fact to the best knowledge and belief of the person submitting the certification. The statement shall contain or be accompanied by the following, to the extent that an item listed below is relevant to the debtor's allegation of identity theft with respect to the debt in question.
   4. A statement that the debtor is a victim of identity theft.
   5. A copy of the debtor's driver's license or identification card, as issued by the state.
   6. Any other identification document that supports the statement of identity theft.
   7. Specific facts supporting the claim of identity theft, if available.
   8. Any explanation showing that the debtor did not incur the debt.
   9. Any available correspondence disputing the debt after transaction information has been provided to the debtor.
   10. Documentation of the residence of the debtor at the time of the alleged debt. This may include copies of bills and statements, such as utility bills, tax statements, or other statements from businesses sent to the debtor, showing that the debtor lived at another residence at the time the debt was incurred.
   11. A telephone number for contacting the debtor concerning any additional information or questions, or direction that further communications to the debtor be in writing only, with the mailing address specified in the statement.
   12. To the extent the debtor has information concerning who may have incurred the debt, the identification of any person whom the debtor believes is responsible.
   13. An express statement that the debtor did not authorize the use of the debtor's name or personal information for incurring the debt.
3. After receipt of the complete statement and information described the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
4. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. The debt collector shall notify the debtor in writing of that determination and the basis for that determination before proceeding with any further collection activities. The debt collector's determination shall be based on all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
5. No inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review described in subdivision (d) to cease or recommence the debt collection activities. The exercise or non-exercise of rights under this section is not a waiver of any other right or defense of the debtor or debt collector.
6. A debt collector who ceases collection activities under this section and does not recommence those collection activities shall do all of the following:
   1. If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information.
7. Notify the creditor that debt collection activities have been terminated based upon the debtor's claim of identity theft.
8. A debt collector who has possession of documents that the debtor is entitled to request from a creditor pursuant to Penal Code Section 530.8 is authorized to provide those documents to the debtor.
9. A "debtor" means a natural person, firm, association, organization, partnership, business trust, company, corporation, or limited liability company from which a debt collector seeks to collect a debt that is due and owing or alleged to be due and owing from the person or entity. The remedies provided by this title shall apply equally to violations of this section.

FISCAL EFFECT: None

COMMENTS:

Existing law does not include prescribed time frames for debt collectors to investigate or provide notice of investigations concerning accounts connected to identity theft. Creditors are also not prevented from selling a disputed debt even with notification that a CCRA has blocked reporting of the debt because it resulted from identity theft. Often, the crime of identity theft takes months to detect and by that time a fraudulent account or charge may already be in the collections process.

This bill requires debt collectors when informed by a debtor that a debt is the result of fraud or identity theft to engage in necessary due diligence to make a determination of whether the debt actually belongs to the debtor. It also requires that within 10 days of receiving information from the debtor that the debt is disputed the debt collector must notify a CCRA that the debt is disputed and send the debtor notice of its determination no later than 10 business days after concluding its review.

Need for the bill.

According to information provided by the author's office this bill is necessary for the following reasons:

Identity theft is a critical issue for many California consumers. Identity thieves can do many things in a victim's name, including opening new credit accounts, taking out auto loans, and even file faulty insurance claims for medical services. The debts incurred often end up in debt collection, and victims of identity theft may be repeatedly contacted by debt collectors and have adverse information reported on their credit reports as a result of the identity theft.

Identity theft does not discriminate. Identity theft occurs every 2.5 seconds, every day. There were 12.7 million United States adult victims in 2014, or 4% of United States adults, including over a 1.5 million Californians. The Bureau of Justice Statistics reported a total of $24.7 billion worth of financial losses due to personal identity theft in 2012.

Today, many victims become aware of the crime, months later, when their accounts go into collection. Many consumers who submit a dispute to a debt collector often find that their dispute goes into a "black hole." Many victims never hear back from the debt collector, and it may take many months for the fraudulent account to be removed from the victims' credit reports. This delay causes even greater damage to a victim's credit which can prevent him or her from obtaining consumer and home loans. In addition, victims suffer needless stress endlessly trying to stop unwarranted collection.

Consumers need more certainty and information in the process of resolving disputed debts when the disputes result from identity theft. AB 1723 would establish reasonable timeframes for debt collectors to initiate investigations, update or delete adverse information on the consumer's credit report, and respond to consumers regarding the outcome of their investigation.

According to the Javelin Strategy & Research "2015 Identity Fraud Report", released in March 2015 there were 12.7 million United States adult victims in 2014, or nearly one victim every 2.5 seconds. That figure represents 4% of United States adults, including over a 1.5 million Californians. The number of victims declined slightly from 13.1 million in 2013.

Identity theft is also expensive. The total cost of identity theft to victims and businesses in 2014 was $16 million, down from $18 million in 2013. The decrease continues to be the result of a greater share of fraud involving existing credit/debit card accounts, which is less costly than other forms of identity theft.

Analysis Prepared by: Mark Farouk / B. & F. / (916) 319-3081 FN: 0002788

Date of Hearing: April 26, 2016

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 1723

Author:(Dodd) – As Amended Ver:March 28, 2016

SUBJECT: DEBT COLLECTION: IDENTITY THEFT

KEY ISSUE: IN ORDER TO STREAMLINE RESOLUTION OF IDENTITY THEFT DISPUTES, SHOULD a debt collector face tighter deadlines for investigating a debtor's claim of identity theft and for notifying the debtor and credit reporting agency of the results of the investigation?

SYNOPSIS

According to the author, identity thieves can wreak havoc on a consumer's credit profile by opening new credit accounts and taking out unauthorized loans using the consumer's stolen identity. The debts incurred in this manner often end up in debt collection, and victims of identity theft may be repeatedly contacted by debt collectors and have adverse information reported on their credit reports as a result of the identity theft. Many victims only become aware of the crime months after the crime, when their accounts go into collection. Many consumers who submit a dispute to a debt collector often find that their dispute goes into a “black hole.” They report that they never hear back from the debt collector and it may take many months for fraudulent accounts to be removed from the victims’ credit reports, causing even greater damage to their credit. This bill seeks to establish deadlines for debt collectors to investigate identity theft disputes and notify victims of identity theft, creditors, and credit reporting agencies of the outcome of the investigations. Among other things, this bill requires a debt collector that has reported adverse information about a debtor to a consumer credit reporting agency to notify the agency that the account is disputed, and initiate a review within 10 business days of receiving a written statement by the debtor and other documentation supporting a claim of identity theft. The bill also requires that a debt collector must notify creditors that debt collection activities must be terminated no later than 10 business days after making a determination to cease collection activities because of identity theft. The bill is sponsored by Encore Capital, a large debt-buying company based in San Diego, and reflective of its pro-consumer stance is supported by Attorney General Kamala Harris and the Consumer Attorneys of California. The bill has no known opposition and previously passed the Assembly Banking & Finance Committee by a 12-0 vote.

SUMMARY: Establishes firmer deadlines for debt collectors to investigate identity theft disputes and to notify victims of identity theft, their creditors, and credit reporting agencies of the outcome of the investigation. Specifically, this bill:

1. Requires a debt collector that has reported adverse information about a debtor to a consumer credit reporting agency (CCRA), to notify the agency that the account is disputed, and initiate a review within 10 business days of receiving a written statement and other documentation supporting a claim of identity theft by the debtor.
2. Provides that a debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding the review.
3. Provides that if the debt collector had furnished adverse information about the debtor to a credit reporting agency, then the debt collector must notify the agency to delete the adverse information no later than 10 business days after making a determination to cease collection activities in the case of identity theft.
4. Requires that a debt collector notify creditors that debt collection activities have been terminated no later than 10 business days after making a determination to cease collection activities in the case of identity theft.
5. Provides that a creditor shall not pursue further collections against or sell a consumer debt of a debtor once debt collection activities have been terminated based upon the debtor's claim of identity theft.

EXISTING LAW:

1. Requires a debt collector to cease collection activities, until completion of a specified review process, upon receipt from a debtor of all of the following:
   1. A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime, including, but not limited to, a violation of Section 530.5 of the Penal Code, for the specific debt being collected by the debt collector.
   2. The debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector. (Civil Code Section 1788.18 (a). All further references are to this code unless otherwise stated.)
2. Provides that the debtor's written statement above shall consist of any of the following:
   1. A Federal Trade Commission’s Affidavit of Identity Theft.
   2. A written statement that contains the content of the Identity Theft Victim’s Fraudulent Account Information Request offered to the public by the California Office of Privacy Protection.
   3. A written statement that certifies that the representations are true, correct, and contain no material omissions of fact to the best knowledge and belief of the person submitting the certification, to be accompanied by additional documentation including, but not limited to: (1) A copy of the debtor’s driver’s license or state identification card; (2) Specific facts supporting the claim of identity theft, if available; (3) Any explanation showing that the debtor did not incur the debt; (4) Any available correspondence disputing the debt after transaction information has been provided to the debtor; and (5) Copies of bills and statements showing that the debtor lived at another residence at the time the debt was incurred. (Section 1788.18 (b).)
3. Requires the debt collector to review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor, and permits the debt collector to recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. (Section 1788.18 (d).)
4. Requires the debt collector to notify the debtor in writing of that determination and the basis for that determination before proceeding with any further collection activities, and further requires this determination to be based on all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor. (Section 1788.18 (d).)
5. Provides that no inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review to cease or recommence the debt collection activities. Further provides that the exercise or nonexercise of rights under this section is not a waiver of any other right or defense of the debtor or debt collector. (Section 1788.18 (e).)
6. Requires a debt collector who ceases collection activities under these provisions and does not recommence those collection activities to do all of the following:
   1. If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information.
   2. Notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. (Section 1788.18 (g).)

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

COMMENTS: This bill seeks to streamline the resolution of identity theft disputes, in response to reports that too many consumers have difficulty getting debt collectors to investigate and respond to their documentation establishing a claim of identity theft. To accomplish this, the bill seeks to establish firm 10-day deadlines for debt collectors to investigate identity theft disputes and to notify victims of identity theft, their creditors, and credit reporting agencies of the outcome of the investigation. The author explains the need for the bill as follows:

Identity theft is a critical issue for many California consumers. [. . .] Today, many victims become aware of the crime, months later, when their accounts go into collection. Many consumers who submit a dispute to a debt collector often find that their dispute goes into a “black hole.” Many victims never hear back from the debt collector, and it may take many months for the fraudulent account to be removed from the victims’ credit reports. This delay causes even greater damage to a victim’s credit which can prevent him or her from obtaining consumer and home loans. In addition, victims suffer needless stress endlessly trying to stop unwarranted collection.

Consumers need more certainty and information in the process of resolving disputed debts when the disputes result from identity theft. AB 1723 would establish reasonable timeframes for debt collectors to initiate investigations, update or delete adverse information on the consumer’s credit report, and respond to consumers regarding the outcome of their investigation.

This bill establishes quicker timelines that streamline the process of investigating and resolving identity theft matters. According to the author, California law does not impose adequate timelines upon debt collectors to review and resolve identity theft claims, and as a result, consumers may be subject to months of improper collection and credit reporting activities that could otherwise be avoided. Current federal law effectively provides a floor by establishing a 30-day timeframe for investigations of disputed debts (15 U.S.C. 1692g). This bill improves upon this by requiring debt collectors to initiate an investigation within ten business days of receiving a report from a consumer with the identity theft information set forth in Section 1788.18. If the debt collector has furnished adverse information about the debtor to a credit reporting agency, this bill would impose a ten-business day timeline for the debt collector to notify the credit reporting agency that the account is disputed. According to the sponsor, this notification process takes some debt collectors up to 60 days, so this bill establishes a much quicker deadline for providing such notification to the credit reporting agency. Finally, this bill would require the debt collector, after concluding its review of the consumer's information, to notify the consumer of its decision about the validity of his or her claim, regardless of the outcome. Current law unfortunately only requires notification when the debt collector determines the claim is invalid and seeks to recommence debt collection activities.

This bill provides additional notification to consumers and prevents further collection by creditors when identity theft or fraud is verified. This bill also revises the process that applies when a debt collector has found merit to the debtor's claim of identity theft and ceased collection activities. First, if the debt collector had furnished adverse information about the debtor to a credit reporting agency, then current law requires the debt collector to notify the agency to delete the adverse information, but does not specify a timeline for when such notification must be made. In the meantime, the adverse credit information potentially wreaks havoc upon the victim of identity theft. (Section 1788.18 (g)(1).) To address this problem, this bill establishes that the agency must be notified to delete that information no later than 10 business days after the debt collector makes its determination. Second, current law requires only that creditors be notified that debt collection activities have been terminated based upon the debtor's claim of identity theft, but does not specify when this notification must take place. (Section 1788.18 (g)(2).) This bill would ensure that creditors receive this notification within ten business days. Finally, the bill also prohibits a creditor that has been notified that collection activities have been terminated pursuant to a consumer's claim of identity theft from pursuing further collections on or selling the debt if the consumer is a victim of identity theft.

REGISTERED SUPPORT / OPPOSITION:

Support

Attorney General Kamala Harris

California Association of Collectors

Consumer Attorneys of California

Contra Costa District Attorney's Office

Encore Capital

Napa County District Attorney's Office

Sonoma County District Attorney's Office

Yolo County District Attorney's Office

Support (if amended)

California Bankers Association

Opposition

None on file

Analysis Prepared by: Anthony Lew / JUD. / (916) 319-2334

Date of Hearing: April 4, 2016

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Matthew Dababneh, Chair

ABPCA Bill Id:AB 1723 (

Author:Dodd) – As Introduced Ver:January 28, 2016

SUBJECT: Debt collection

SUMMARY: Requires a debt collector that has reported adverse information about a debtor to a consumer credit reporting agency (CCRA), upon receipt of a police report and written statement by a debtor in which the debtor claims to be a victim of identity theft, to notify the CCRA that the account is disputed and initiate a review within 10 business days. Specifically, this bill:

1. Provides that a debt collector shall send notice of its determination to the debtor no later than 10 business days after concluding the review.
2. Specifies that if the debt collector has furnished adverse information to a CCRA the debt collector shall notify the CCRA to delete the information no later than 10 business day after making its determination.
3. Provides that a creditor shall not pursue further collections, or sell a consumer debt once debt collection activities have been terminated based upon the debtor's claim of identity theft.

EXISTING LAW: Provides under Section 1788.18 of the Civil Code:

1. Upon receipt from a debtor all of the following, a debt collector shall cease collection activities until completion of a review as specified:
   
   1. A copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime, including, but not limited to, a violation of Section 530.5 of the Penal Code, for the specific debt being collected by the debt collector.
      
   2. The debtor’s written statement that the debtor claims to be the victim of identity theft with respect to the specific debt being collected by the debt collector.
      
2. The written statement shall consist of any of the following:
   
   1. A Federal Trade Commission’s Affidavit of Identity Theft.
   2. A written statement that contains the content of the Identity Theft Victim’s Fraudulent Account Information Request offered to the public by the California Office of Privacy Protection.
   3. A written statement that certifies that the representations are true, correct, and contain no material omissions of fact to the best knowledge and belief of the person submitting the certification. The statement shall contain or be accompanied by the following, to the extent that an item listed below is relevant to the debtor’s allegation of identity theft with respect to the debt in question.
   4. A statement that the debtor is a victim of identity theft.
   5. A copy of the debtor’s driver’s license or identification card, as issued by the state.
   6. Any other identification document that supports the statement of identity theft.
   7. Specific facts supporting the claim of identity theft, if available.
   8. Any explanation showing that the debtor did not incur the debt.
   9. Any available correspondence disputing the debt after transaction information has been provided to the debtor.
   10. Documentation of the residence of the debtor at the time of the alleged debt. This may include copies of bills and statements, such as utility bills, tax statements, or other statements from businesses sent to the debtor, showing that the debtor lived at another residence at the time the debt was incurred.
   11. A telephone number for contacting the debtor concerning any additional information or questions, or direction that further communications to the debtor be in writing only, with the mailing address specified in the statement.
   12. To the extent the debtor has information concerning who may have incurred the debt, the identification of any person whom the debtor believes is responsible.
   13. An express statement that the debtor did not authorize the use of the debtor’s name or personal information for incurring the debt.
3. After receipt of the complete statement and information described the debt collector shall review and consider all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
   
4. The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. The debt collector shall notify the debtor in writing of that determination and the basis for that determination before proceeding with any further collection activities. The debt collector’s determination shall be based on all of the information provided by the debtor and other information available to the debt collector in its file or from the creditor.
   
5. No inference or presumption that the debt is valid or invalid, or that the debtor is liable or not liable for the debt, shall arise if the debt collector decides after the review described in subdivision (d) to cease or recommence the debt collection activities. The exercise or nonexercise of rights under this section is not a waiver of any other right or defense of the debtor or debt collector.
   
6. A debt collector who ceases collection activities under this section and does not recommence those collection activities shall do all of the following:
   1. If the debt collector has furnished adverse information to a consumer credit reporting agency, notify the agency to delete that information.
      
   2. Notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft.
      
7. A debt collector who has possession of documents that the debtor is entitled to request from a creditor pursuant to Section 530.8 of the Penal Code is authorized to provide those documents to the debtor.
   
8. A “debtor” means a natural person, firm, association, organization, partnership, business trust, company, corporation, or limited liability company from which a debt collector seeks to collect a debt that is due and owing or alleged to be due and owing from the person or entity. The remedies provided by this title shall apply equally to violations of this section.

FISCAL EFFECT: None

COMMENTS:

Existing law does not include prescribed time frames for debt collectors to investigate or provide notice of investigations concerning accounts connected to identity theft. Creditors are also not prevented from selling a disputed debt even with notification that a CCRA has blocked reporting of the debt because it resulted from identity theft. Often, the crime of identity theft takes months to detect and by that time a fraudulent account or charge may already be in the collections process.

AB 1723 requires debt collectors when informed by a debtor that a debt is the result of fraud or identity theft to engage in necessary due diligence to make a determination of whether the debt actually belongs to the debtor. It also requires that within 10 days of receiving information from the debtor that the debt is disputed the debt collector must notify a CCRA that the debt is disputed and send the debtor notice of its determination no later than 10 business days after concluding its review.

Need for the bill.

According to information provided by the author's office AB 1723 is necessary for the following reasons:

Identity theft is a critical issue for many California consumers. Identity thieves can do many things in a victim’s name, including opening new credit accounts, taking out auto loans, and even file faulty insurance claims for medical services. The debts incurred often end up in debt collection, and victims of identity theft may be repeatedly contacted by debt collectors and have adverse information reported on their credit reports as a result of the identity theft.

Identity theft does not discriminate. Identity theft occurs every 2.5 seconds, every day. There were 12.7 million U.S. adult victims in 2014, or 4% of U.S. adults, including over a 1.5 million Californians. The Bureau of Justice Statistics reported a total of $24.7 billion worth of financial losses due to personal identity theft in 2012.

Today, many victims become aware of the crime, months later, when their accounts go into collection. Many consumers who submit a dispute to a debt collector often find that their dispute goes into a “black hole.” Many victims never hear back from the debt collector, and it may take many months for the fraudulent account to be removed from the victims’ credit reports. This delay causes even greater damage to a victim’s credit which can prevent him or her from obtaining consumer and home loans. In addition, victims suffer needless stress endlessly trying to stop unwarranted collection.

Consumers need more certainty and information in the process of resolving disputed debts when the disputes result from identity theft. AB 1723 would establish reasonable timeframes for debt collectors to initiate investigations, update or delete adverse information on the consumer’s credit report, and respond to consumers regarding the outcome of their investigation.

According to the Javelin Strategy & Research "2015 Identity Fraud Report", released in March 2015 there were 12.7 million U.S. adult victims in 2014, or nearly one victim every 2.5 seconds. That figure represents 4% of U.S. adults, including over a 1.5 million Californians. The number of victims declined slightly from 13.1 million in 2013.

Identity theft is also expensive. The total cost of identity theft to victims and businesses in 2014 was $16 million, down from $18 million in 2013. The decrease continues to be the result of a greater share of fraud involving existing credit/debit card accounts, which is less costly than other forms of identity theft.

REGISTERED SUPPORT / OPPOSITION:

Support

Attorney General Kamala Harris

Consumer Attorneys of California

Encore Capital Group

Opposition

None on file.

Analysis Prepared by: Mark Farouk / B. & F. / (916) 319-3081