BILL ANALYSIS Ó
AB 1723
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Date of Hearing: April 26, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 1723
(Dodd) - As Amended 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
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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.
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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:
a) 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.
b) The debtor's written statement that the debtor claims to
be the victim of identity theft with respect to the
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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:
a) A Federal Trade Commission's Affidavit of Identity
Theft.
b) 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.
c) 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
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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:
a) If the debt collector has furnished adverse information
to a consumer credit reporting agency, notify the agency to
delete that information.
b) 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
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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
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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
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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)
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California Bankers Association
Opposition
None on file
Analysis Prepared by:Anthony Lew / JUD. / (916) 319-2334